PRIVATIZING THE PA. LOTTERY: Corbett Seeks To Sell It Despite Its Ace Service To Seniors

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A management agreement  for an outside firm to manage the Pennsylvania Lottery could be made any day now and a contract could be executed in early January, according to Gov. Tom Corbett’s administration.

This doesn’t make sense, according to Lottery executives and its rank-and-file employees, who for years have labored to make it one of the more-successful state lotteries in the nation.

State Sens. Vincent Hughes (D-W. Phila.) and LeAnna Washington (D-Northwest) have voiced their concerns as well as those of many other elected officials.

Hughes said, “There are so many unanswered questions about this plan and how it impacts senior programs. The Lottery is a well-run, highly efficient agency, nationally recognized for its success and has been counted on to fund key senior programs for years. It should not be threatened with privatization.”

In a letter to State Secretary of Revenue Dan Meuser and Secretary of Aging Breian Duke, Washington expressed concerns of senior citizens around the state over Corbett’s move.

“Only one company, this one owned by an English firm, submitted a final bid to run the Pennsylvania Lottery. Despite this, the Corbett Administration seems determined to turn the most-successful Lottery operation in the nation over to a private management firm.

“I am seriously concerned about the openness of the contract-bidding process and the negative consequences privatizing the lottery could have on Pennsylvania’s senior population. I am alarmed only one firm submitted a bid and we members of the General Assembly were not made aware of the details,” said Washington.

Hughes, who serves as the Democratic chair of the Senate Appropriations Committee, called for greater legislative transparency of this process, stating he was “deeply concerned this Private Management Agreement for the Pennsylvania Lottery is being proposed when the General Assembly is not in session” and legislators have been kept in the dark about the aspects of the proposal.

He also said the speed with which the Governor is considering this change is astounding.

“We were only made aware of the Governor’s plans during a telephone conference call involving staff,” Hughes added. “When the Governor raised the possibility of considering privatization alternatives, we thought there were assurances no steps would be taken without further input and consultation with the General Assembly,” he said.

Hughes declared, “The plan to turn over the management of this valuable asset without any real scrutiny by the legislature and without public meetings is a real problem.”

The Lottery presently has just over 237 employees, of which 160 are union members. The privatization led to the dismissal of all but 70, a mix between union and non-union. The bidders must keep those. The rest will have to reapply with the private operator.

A similar bidding effort in Indiana was open. Understanding Corbett’s process, by contrast, is “like trying to penetrate the machinations of the Chinese politburo,” in Hughes’ words. He insisted, “There is no rationale that makes sense for converting the Lottery operation into a privately run operation.”

The sole bidder is a Canadian Teachers Union which owns Camelot Global Services. CGS runs the National Lottery in the United Kingdom. It was the sole bidder, with two others reportedly dropping out. This pits an out-of-the-country union against Pennsylvania’s AFSCME, a union cutting another union’s members.

Hughes pointed proudly to the fact the Pennsylvania Lottery continues to produce record profits while maintaining one of the lowest-cost operations of any state lottery nationally. He added, “It is ironic we are promoting Christmas Lottery Cards as gifts. The only gift Lottery employees now face is a pink slip in their Christmas stocking for their efforts which have made the Pennsylvania Lotteries success the envy of other state lotteries.”

Hughes believes the transfer could have a damaging effect on Pennsylvania’s senior programs and homeowner property-tax relief by pitting funding for senior programs against gaming revenues that are used for property-tax relief. The Governor’s plan includes the introduction of internet-based lottery products, which will compete with gaming dollars now generated at gaming facilities.

“We have very serious concerns regarding any changes for the management and oversight of such an important agency that has consistently provided to Pennsylvania’s senior citizens,” Hughes said. “Our lottery earmarks all profits for seniors. Every dollar in profit that would now go to a private operator would not go for these essential senior programs.”

The Pennsylvania Lottery generated $3.48 billion in sales last year and slightly more than $1 billion in profit – all of which went to fund key programs for seniors.

Hughes added he is also concerned with the duration of the contract, which may bind programs for seniors into a private, unproven approach for a generation.

“There are ways to expand Pennsylvania’s Lottery, if needed, without resorting to privatization, including adding games, changing current games and adding kiosks to more locations,” Hughes said. “As evidenced by the robust revenues that the lottery has brought in over the years, the Lottery isn’t broken and doesn’t require privateers to fix.”

Camelot estimates it would bring annual profit commitment of $12.1 billion in the first 10 years. Projections for a 20-year period, assuming a 27% mandated rate of return, would yield more than $34 billion in profits, according to the official bid tabulation.

Dept. of Rev­enue Press Secretary Elizabeth Brassell said the State had three qualified bidders in May. But two dropped out since then. One was interested in pursuing other commercial opportunities. She said the other left the process because it felt the contract was “was too one-sided” for the Commonwealth.

She stated the State will compare Camelot’s projections to its own to see if the agreement would be worth the revenue. It will also pursue an investigation into Camelot’s criminal history, business practices and contract integrity.

Brassell added the State will also sit at the table with unionized Lottery employees, represented by AFSCME, which is required by the process.

The Commonwealth is reported ready  to sign an management agreement as early as January 2013. Adminstration officials have maintained the State needs to find a way to boost lottery returns in the face of a growing senior population. Lottery revenue funds programs like free transit, rent and property-tax rebates, senior centers and prescription drug assistance programs.

The State’s Independent Fiscal Office reports from 2010 through 2020, the state’s population of residents between the ages of 70 and 79 would grow by 34.6%. The population aged 95 and older would grow by 139%. Brassell said the State had no target figures for how much it needs to sustain Lottery-funded programs in the face of the growing senior population, but believes exploring a private manager will end up with higher overall net revenue.

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5 Responses to PRIVATIZING THE PA. LOTTERY: Corbett Seeks To Sell It Despite Its Ace Service To Seniors

  1. I was a friend and neighbor of Gov. Milton Shapp when he inaugurated the fantastic the idea of a lottery to help the seniors of the Commonwealth. It has been one of the success stories in government, run by the government, without a profit motive.

    Now … a desire for private enterprise to start making money off our backs.

    When will this irresponsible Governor decide to turn over our birth certificates, wedding licenses, public parks, public libraries, the earth, the trees, the sun and moon to corporations to turn over profits that will enhance their own lives? They might even share their ill-gotten gains with Gov. Corbett to help his reelection bid.

    Barbara Blum
    November 29, 2012 at 7:03 pm

  2. I think we no longer have rights. Seniors can’t live now on SSA.

    We take all the money and send it to another country, when all people in the USA are struggling. No jobs or low-paying jobs; the cost of living up — then they blame it on the President. But it is the people in the Senate. They are all crooked.

    I don’t vote anymore. I know it doesn’t mean anything, just writing this, but at least I feel better.

    mary wheatley
    November 29, 2012 at 11:13 pm

  3. If you really want to see what is going on everyone should read this report.

    Seems that expenses are going up, but most of it is due to advertising. I do not play the lottery that much, but if people really want to send a message to Harrisburg, all they need to do is boycott buying tickets. Vote with your money. No outside lottery company will want to manage the PA lottery system if no one is buying tickets.

    Besides, most people lose anyways. Therefore not buying tickets for a week or two is not going to hurt anyone buying them, but it will be a setback for the senior citizens that depend on it.

    But if you want to save PA jobs, you have to send a message.

    Charles P
    February 14, 2013 at 12:36 pm

  4. Shame on an elected official to take something that works and try to get rid of it. Must be Republican…. No matter. They all have their own agendas, Rep and Dem. They all have their heads up their rear ends.

    My Info
    February 15, 2013 at 9:12 am

  5. Gosh, government unions are bankrupting most States and Cities with their extravagant pensions, but most of the comments concerning this article say: Everything is wonderful and the State of Pennsylvania should continue to employ an an army of bureaucrats and pay them extravagant salaries and pensions.

    January 20, 2014 at 8:41 pm

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