Hoosier Lottery makes record profit, but still falls short of initial goal

The private company running most of the Hoosier Lottery's operations generated a record-setting profit this past year, earning its first incentive payment since the state decided to outsource most of its lottery operations more than five years ago.

Still the net profit was nowhere near the target amount promised in the company's initial lottery bid. 

According to unaudited, preliminary numbers released Tuesday, The Hoosier Lottery sold $1.27 billion worth of tickets in the fiscal year ending in June, resulting in a total net income of $318.2 million — $18.2 million more than the $300 million required under the state's updated lottery contract needed to avoid paying a shortfall.

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As a result, Indiana will receive $306 million, after paying for state lottery operations, while IGT Indiana will pocket a $9.1 million incentive.

The state's lottery proceeds go towards the State Teachers Retirement Fund, police and firefighters' pensions and to reduce the auto excise taxes. Prior to the outsourcing of most Hoosier Lottery operations, the lottery contributed over $205 million to the state in fiscal year 2012.

In IGT Indiana's initial contract, the company was required to bring in a net profit of $410 million by the end of June 2018. The "provider net income" still hasn't reached the $320 million goal IGT Indiana initially agreed to bring in during fiscal year 2015.

After two years of misses, that contract was thrown out and replaced in 2015 with more obtainable monetary goals, resulting in less shortfall payments from IGT Indiana to the state. 

Executive Director Sarah Taylor defended that decision during an interview with IndyStar late last year.

"The marketplace has changed some since the initial agreement was put in place and I think both parties felt that we were two years into a long-term arrangement that we thought had successes and potential for even more successes," Taylor said. 

The privatization of most of Hoosier lottery's operations hasn't been without controversy.

Even before Indiana committed to turning over most of its lottery functions to a private company, the state watched as Illinois shifted over its own lottery operations to private entity Northstar — and that company fell short of its lofty bid.

Even so, Hoosier Lottery executives chose GTECH, one of Northstar’s parent companies, to run a majority of the state’s lottery operations in 2012. 

Later Illinois ditched the private company instead of renegotiating the contract, while Indiana chose to stick with the partnership.

During fall 2017, Bill Zieke, chairman of the Indiana Lottery Commission, said he viewed the partnership as a success.

“When I compare whatever our numbers were or have been the past several years against what we believed our internal business and usual numbers would have been, I have to be very pleased with where we're at,” Zielke said. 

According to the Census Bureau's most recent data, Indiana's lottery ranked No. 19 in the country in terms of 2016 income — the same rank the lottery had in 2012 before IGT Indiana took over most operations.

Earlier this year, IndyStar also found that under IGT Indiana, the Hoosier Lottery started pulling the plug on high-prize games before about half of the tickets could be sold.

Call IndyStar reporter Kaitlin Lange at (317) 432-9270. Follow her on Twitter: @kaitlin_lange.