A contract is binding
Business was good at the Illinois Lottery, but not as good as promised.
A deal is a deal, even with the state.
That's the bottom line in a decision by state officials to impose a $20 million penalty on the private entity that is running the Illinois Lottery.
When Northstar Lottery Group won a competitive bid for the contract to run the lottery, it promised to generate $823 million in net income for the 2012 fiscal year, which ended June 30, 2012. Northstar increased state revenues by $400 million but still fell more than $60 million short of its contractual pledge of $823 million.
So the fine is fine, at least under the terms of the contract. Naturally, Northstar officials are angry, suggesting it is unfair. But their perspective is skewed. They previously suggested that not only should they not pay a penalty but that they should be paid a bonus for FY 2012.
It never hurts to ask, but the company's request was, to put it mildly, unrealistic.
Northstar won its state contract on the strength of its bid. To not hold Northstar to the contract's terms would both sell taxpayers short and double-cross Northstar's rival bidders.
The lottery is a nasty business. It feeds people's desire to get something for nothing and costs most for those who can least afford it. At the same time, it's a political no-brainer because people are voluntarily depositing their money in the state's treasury.
There is, however, nothing nasty about Northstar's penalty. It's just business.