- Associated Press - Tuesday, November 24, 2015

TRENTON, N.J. (AP) - Revenue for the New Jersey lottery fell by $5 million in 2015, but officials said Tuesday the state’s contract with a private firm helped stop further losses.

Lottery executive director Carole Hedinger announced the figure to lawmakers during an oversight hearing aimed at probing the state’s contract with Northstar, a private firm that oversees sales and marketing at the lottery. The lower revenue, down to $960 million for the fiscal year, reflect a national trend of changes in consumer behavior, she said.

“Achieving flat revenues in the face of incredibly challenging national trends that no one foresaw when our agreement with Northstar was executed is an accomplishment nonetheless,” Hedinger said.

Gov. Chris Christie entered a 15-year contract with Northstar New Jersey Lottery Group in 2013 to oversee parts of the state lottery, a decision questioned by some Democrats, who control the Legislature.

State Sen. Bob Gordon, who chairs the legislative committee holding the hearing, said the partial privatization occurred despite a state lottery that was widely regarded as highly efficient.

“There’s a real question as to whether lottery privatization is paying off anywhere,” Gordon said. He said after the hearing he wants to wait until more revenue data is available before calling for any changes with the contract.

The hearing came as the revenue projections at the lottery have fallen recently. In 2014, the lottery was initially expected to bring in $1.04 billion in fiscal year 2015, but that figure was reduced to $955 million and later to $930 million.

Some of the value Northstar provides, Hedinger said, includes new customer-facing ticket dispensers. Northstar also expanded the number of lottery retail outlets in New Jersey from 6,378 to 7,201, said Russell Knapp, general manager of Northstar New Jersey Lottery Group.

The company also says sales are at record-high levels. Knapp said in fiscal year 2015 sales grew by $98 million, despite a sales decline in Powerball and Mega Millions games. Revenues fell despite sales gains because some games are less profitable to the state, Hedinger said.

Some of the testimony was critical of Northstar, though, particularly from labor groups. Seth Hahn, a staff representative with the Communication Workers of America, said the state would have been on track to bring in $987 million and more than $1 billion next year had it left sales and marketing under lottery control.

He said the state’s “experiment in privatization is failing.” He said one reason for the falling revenue was that thresholds for earning a share of sales were lowered under the 2013 contract and that public workers could have maintained annual growth.

Lottery revenues go toward higher education as well as the state Department of Human Services, military and veterans affairs, and a school nutrition program.

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