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updated: 7/31/2012 5:21 PM

Lottery company falls short of promise, still breaks record

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Associated Press

SPRINGFIELD -- The Illinois Lottery's private manager fell nearly $100 million short of the profits it promised to deliver the state in its first year of operation, according to a report published Tuesday.

Northstar Lottery Group pledged to reap $825 million in profits when it took over lottery management in July 2011 and later lowered its estimate to $770 million. An analysis by the Chicago Tribune put the results at $726 million in net revenue at the end of the fiscal year.

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That's still a record profit for the lottery, which collected $690 million the year before.

The company could be penalized tens of millions of dollars for failing to keep its promise. The same month that Gov. Pat Quinn awarded Northstar the contract, in September 2010, the company sent a letter requesting its profit promise be lowered, lottery officials told the Tribune.

According to Rep. Jack Franks, a Marengo Democrat, the company has asked for $119 million in concessions and might request $19 million more. Wiping out the original goal -- and therefore penalties owed the state -- would conversely mean taxpayers would owe the company performance bonuses.

"That's a lot of schools we could pay for," said Franks, a critic of the private-management decision.

An arbitrator will decide the matter.

The lottery and Northstar refused to provide letters asking for a break on the revenue goal to the Tribune or Franks, chairman of the House State Government Administration Committee.

Franks said that in a meeting with Northstar and the governor this month, the company blamed losses partly on the state for missed deadlines, delayed online sales and undelivered advertising money. Illinois became the first state to sell lottery tickets via the Internet in March after the U.S. Justice Department approved the idea in December.

Northstar spokeswoman Elizabeth Leonard did not respond to questions about the company's request for concessions. She would not comment on the lottery's performance until a final audit is completed but said Northstar stands by its May estimate.

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