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In conjunction with his May Revision to the 2007-08 Proposed Budget, the Governor proposes to privatize the California lottery. The Governor suggests that the lottery could be leased on a long-term basis to a private contractor for a one-time payment of up to $37 billion. Documents prepared by investment bankers suggest that the state could receive $13 billion to $18 billion from a long-term lease. In addition to promising that public education would receive, at a minimum, “the same dollar level of funding that it received in the highest year of lottery funding,” the Governor states that proceeds from the lease should be used to pay down the state’s debt. The Governor’s proposal assumes that a private contractor could signifi cantly increase lottery ticket sales. This Budget Brief examines whether the California lottery is, in fact, underperforming; whether privatization is necessary to increase lottery sales; and policy issues raised by the Governor’s proposal.