November 1, 2014

GOP says "backroom deal" on lottery linked to campaign cash

Republican legislative leaders are raising questions about what they call a possible "backroom deal" among top statehouse Democrats and casino interests. Senate Republican Leader Paul McKinley of Chariton says it appears "the fix is in" and the Iowa Lottery will be sold or leased to casino interests in an act of "cronyism."

"I believe in privatization…where it is useful in saving taxpayers’ money," McKinley says. "But it this is only a scheme to get some very shortterm financial gain for some longterm budget pain."

McKinley and other critics of the idea of selling the lottery question whether there’s a link to the sizable campaign contributions top statehouse Democrats, including Governor Culver, have received from casino interests that hope to buy or lease the lottery. Dan Kehl, an Iowa casino operator who is heading a consortium that hopes to lease the Lottery, donated $25,000 to Culver in 2007.  "If this sale is going to happen, Iowans expect that the transaction be done in an honest, open and transparent fashion," McKinley says. "We believe that this sale should be open to everyone and not already in the bag for big Democratic donors."

McKinley says he believes the sale is almost a foregone conclusion and today he proposed an alternative buyer — the Iowa Public Employees Retirement System, known as IPERS. IPERS manages a multi-billion dollar investment portfolio that finances the retirement benefits of thousands of Iowans. McKinley suggests the lottery deal which appears to be in the works for casinos would yield a 17-and-a-half percent return, and perhaps the IPERS system should get in the game and snap up the lottery as an asset instead. "Selling the lottery to IPERS would continue to help with our budget crunch, it would get necessary cash to state government and it would also provide support for many of Iowa’s retirees," McKinley says.

McKinley points to campaign contribution records which indicate individuals connected to casinos donated more than $300,000 to Democratic leaders in the Iowa House and Senate, and hints there’s a link to this year’s discussion of selling or leasing the Iowa Lottery. "We should not rush into selling this under a cloud of suspicion," McKinley says.

House Republican Leader Kraig Paulsen of Hiawatha will meet privately next week with a lawyer to review some of the legal issues that are raised by the proposal to sell or lease the lottery for a one-time payment of $200 million, and annual payments in each following year. "I’m not an expert on selling something like this, but I will say this: if you look through the numbers that I’ve seen…the numbers don’t add up," Paulsen says.

McKinley, the Republican leader in the senate, suggests selling the lottery won’t be popular with most Iowans. "The people I’ve heard from are in no mood to sell off this asset," McKinley says.

Spokesmen for Democratic legislators were not immediately available. Governor Culver’s communications director issued the following statement, via email, without directly addressing the "cronyism" charge leveled by Senator McKinley.

"Given that the entire nation is in the midst of the most serious economic recession since the great depression, the Governor is looking at options to lessen the impact of reduced revenues and further budget cuts. One idea he wants to at least consider is leasing state assets, and whether or not it makes economic sense to do so," Roeder said.  "If approved by the legislature and the Governor, the leasing of the lottery or any state asset would be done in an open and competitive process, and so for anyone to suggest that anything is final on this issue is, in a word, wrong.  We hope to spend more time working with Republicans in a bipartisan fashion in order to respond to the national economy’s impact on Iowa and less time responding to tired, old political attacks."

AUDIO: GOP leaders news conference. 16:00 MP3