Rauner administration reaches agreement to terminate Illinois Lottery manager Northstar

The state of Illinois reached an agreement to terminate the contract of Northstar Lottery Group, the private company managing the state's lottery, the governor's office said Friday.

A new private manager will take over day-to-day operation of the lottery by Jan. 1, 2017, under a pact disclosed by Gov. Bruce Rauner's general counsel Jason Barclay. The move comes after a legislative report earlier this month revealed the Lottery lost money last year for the first time since 2009, reducing the amount of money it generates for state programming by $125 million.

Barclay said in a news release that the deal is an instant win for taxpayers because it immediately saves them $22 million, the amount Northstar would have received in an exit deal negotiated a year ago by former Gov. Pat Quinn's administration and rejected by Attorney General Lisa Madigan.

The new agreement allows the private manager to select its own suppliers, Barclay said, a change from the Quinn administration's deal that would have forced to give option rights to Northstar's parent companies, GTech and Scientific Games.

"This is a new day for the Illinois Lottery," Lottery acting director B.R. Lane said. "This agreement will save the taxpayers hundreds of millions of dollars while allowing the Lottery to select a new partner that will help the agency grow and better serve its customers."

Northstar, which was hired in 2010 to increase sales and profits, has been criticized for several years over its management style of the Lottery. The legislative report painted a grim picture of the state's relationship with Northstar, saying it has consistently failed to meet profit targets, gone to arbitration with the state numerous times, repeatedly paid penalties for not meeting targets and failed to expand the number of lottery retail outlets as promised.

"The future of the lottery is expected to be turbulent in the coming months," the report said.

The Illinois Lottery isn't paying out winnings of more than $25,000 due to a state budget crisis. Winners have filed a lawsuit asking the state to stop selling lottery tickets until the winners are paid.