By Sal Risalvato
For decades now New Jersey state government and thousands of small businesses have worked hand-in-hand in creating and maintaining one of the most successful and well-run lottery programs in the country.
For more than 40 years this partnership has been one of the state’s chief producers of the income, in total more than $20 billion, which has been used to pay for various programs for education and the disabled.
Generally, I am in favor of privatization in state government. When possible I think that free enterprise is better suited to provide many services better than government bureaucracy. Despite that belief, I have some serious reservations about the current proposal to privatize the state’s lottery program.
I have great concern that a private vendor will look to increase its own revenue by taking actions that will be destructive to the thousands of small businesses who have worked so well with the state for so long. This vendor may look to increase fees on these businesses or cut their paltry commissions as a way to line its own pockets further. I also believe they will push to gamble on the risky and destructive idea of selling lottery tickets on the Internet.
To understand why Internet lottery is so damaging to lottery vendors, you must understand why the lottery is so important to them. It’s certainly not the small commission they are given for the sale of the lottery ticket itself. The value comes from the increase in traffic to the store and the high likelihood that people coming in for the purpose of purchasing a lottery ticket will also buy other items such as coffee or a sandwich.
The sale of those items are how the businesses are able to survive, and allowing people to purchase their lottery tickets from their home/work computer or their cellphone will deprive these businesses of customers by taking away the reason many of them walk into the store in the first place.
Without this walk-in traffic these businesses won’t even have the opportunity to try and make a sale. Over a year ago I asked about 15 convenience stores to keep a record of every time a customer purchased a lottery ticket, and whether or not that customer also bought something else. More than half the time the lottery ticket led to another purchase in this unscientific poll.
Minimizing lottery sales at small businesses hurts not only the small business owner, but also their employees, and all at a time when unemployment remains stubbornly high. Hurting small business revenue also hurts state government revenue. The less money a business makes, the less it pays in taxes, and when profits shrink employees may be cut and forced to start living off unemployment checks from the state.
My organization and most of the lottery agents in this state would likely welcome an effort to expand lottery tickets sales, whether it was being done by the state government or a private corporation. Nevertheless, I think we should all be able to agree that it would be harmful and unfair if revenues increased for a single massive corporation while decreasing for thousands of small businesses that have worked as loyal lottery agents for years.
There are more than 6,500 small businesses in this state for which the lottery remains a cornerstone of their business. They have taken a lot of hits over the past few years, and things are still not going well. Many are closer than they ever have been to giving up on their businesses and closing shop. If they are faced with precipitously falling lottery ticket sales due to unfair competition from the Internet, I fear they will be pushed over the edge.
Sal Risalvato is executive director of the New Jersey Gasoline, Convenience, Automotive Association (NJGCA).