Every time we see him in the papers or on TV, lottery czar Ernie Passailaigue bears a baffled expression as if he’s thinking, “What in the world is going on?”
Why shouldn’t he think that?
Passailaigue was hired away from South Carolina at the highest salary paid a lottery employee anywhere in the world and told that the Arkansas lottery was a kingdom separate and apart from all the other agencies of government. It was his to run as he saw fit.
The lottery, though it would produce only $100 million for the government in a $24 billion budget, was the most important undertaking in Arkansas public life. It was so important that its revenues, unlike the rest of government, would not be subject to appropriation like every other expenditure of public funds, and its cash would not be deposited in the state treasury and subjected to the usual restraints on the spending of government funds.
The constitutional amendment that authorized the legislature to establish a lottery, which the voters approved overwhelmingly in 2008, decreed that the lottery would have that special place in the government. You would have thought that, given the trouble lotteries have everywhere, there would be greater, not weaker, restrictions on how it would be run. But that is not what the amendment said.
So only a year into Passailaigue’s reign—there is no other word for it—he is being savaged in the media and by a few lawmakers for the cavalier way that he has run the lottery shop: lavish spending without proper documentation, lavish benefits for himself and the top and extremely well paid aides whom he brought with him from South Carolina, and other financial peccadilloes, all documented by legislative auditors.
The cruelest blow came Wednesday, when a reporter for the Arkansas Democrat-Gazette stopped Gov. Beebe, whose words actually count for something, as he was entering the Capitol. He was asked if Passailaigue ought to be fired for the fiscal mess the lottery was in. Beebe said the lottery chief was getting pretty close to needing firing. Beebe can’t fire him like he can others in the executive branch. Only the handpicked state Lottery Commission can do that, and the commission loves him.
Beebe was pretty blunt about Passailaigue’s failures.
“I don’t know how it works in South Carolina,” Beebe said. “You would think that somebody who has been in the public eye, who is subject to public scrutiny, would be knowledgeable about things like documenting travel and about ensuring that there are no questions in terms of expenditures. I don’t know how they got off on this comp time for somebody with that kind of salary.” Passailaigue had allotted himself and each of his two top aides 200 hours of compensatory time off for their hard work in setting up the lottery. Beebe said extremely high-salaried officials should not be getting compensatory time.
Before he became head of the South Carolina lottery, Passailaigue was a state senator and a businessman and he ran his own certified public-accounting firm. You might expect that he would understand general accounting principles and expense documentation, the things Arkansas auditors said were missing at the lottery.
Passailaigue’s explanation is always the same. He came here with one overriding objective, which was to set up a lottery as quickly as possible, and that other matters took a back seat. Thanks to their hard work, there are 30,000 kids in college this fall, he says.
Well, not quite. Nearly all of those kids would be in college if there were no lottery. When the lottery began to sell its first scratch-off tickets last fall, the state was appropriating $47 million every year for academic scholarships at Arkansas schools and it had a reserve of $53.7 million in unclaimed scholarship funds. What the lottery did was raise far more money than was needed to provide scholarships for those whose family incomes were low enough to need them and who met the academic standards, a B average in high school or a 19 on the ACT. The lottery lowered the standards so that weaker students could qualify, and it took away the financial-need requirement so that the children of even the richest families qualified for a scholarship. That accounts for the 30,000.
We cannot say whether Ernie Passailaigue should be fired. If he were running any other executive office he would be, or should be. But the far more serious blunders were made before he was hired, by the people who crafted the constitutional amendment authorizing the lottery and the statute that implemented it. The statute, by the way, cleverly authorized the Lottery Commission to hire a director at the salary of $324,000 a year, more than twice the pay of directors of departments of far more importance with budgets many times the lottery’s, and to hire two cronies from South Carolina at $224,000 each, salaries that are much greater than the chief justice of the Arkansas Supreme Court and nearly every department of government.
The people who did that are the 135 members of the legislature, the governor who signed the legislation (albeit with some misgivings) and the Lottery Commission. They said, “Come on, Ernie.
You’ve got carte blanche. All we want is a lottery like South Carolina’s.”
Who gets to fire them?
