Wall Street says Schwarzenegger is overselling lottery idea/Karla Saia

With California facing a $14.5 billion budget shortfall, Governor Arnold Schwarzenegger has espoused privatizing the state’s lottery. He proposes leasing the lottery to the highest bidder, and has projected the windfall from the lease could reach as much as $37 billion, half of which may be paid up front.

However, several Wall Street investment banks have concluded that Schwarzenegger’s estimate might be wildly optimistic. While Lehman Brothers did valuate the CA lottery at as much as $37 billion over 40 years, other firms, such as Bear Stearns, Citibank, Goldman Sachs, and others, value the lease anywhere between $7 and $29 billion, with as little as approximately $9 billion up front.

Further, legislators and citizens groups are worrying about the possibilities of having to relax state gambling laws, and that an increase in lottery ticket sales would fall disproportionately on Californians in lower-income brackets. Maximizing the lottery’s value would entail selling tickets through ATMs, cell phones, college campuses and at bus stations, thereby shifting the burden of the budget shortfall to those most financially vulnerable.

California, if it approves the plan, would be the first state to privatize its lottery.

Link: http://www.signonsandiego.com/news/state/20080219-1048-schwarzenegger-lottery.html