HARRISBURG, Pa. (AP) — With challenges mounting to the proposed privatization of the Pennsylvania Lottery’s management, Gov. Tom Corbett’s administration is trying to counter negative publicity and make the case that a British firm’s $34 billion bid is the best option to satisfy growing demand for state services for the elderly.
The firm, Camelot Global Services, which runs the official lottery in the United Kingdom, has submitted the sole bid to manage the $3.5 billion lottery system, pledging at least $34 billion in profits over 20 years.
Camelot’s bid over the contract’s first 10 years adds up to an estimated $500 million to $1 billion more than what could be achieved by the state employees who currently run the lottery, Secretary of Revenue Daniel Meuser said Tuesday.
“Our official projections over the course of the next 10 years, are far less — I mean, $1 billion less — than what this procurement would yield,” Meuser told The Associated Press.
Camelot’s bid expires Dec. 31 and Corbett is considering delaying the deadline if necessary to answer questions about the move and to allow unionized employees time to offer a competitive alternative, which is guaranteed in their contract.
A Camelot spokeswoman would only say Tuesday that the Dec. 31 bid expiration date has not been postponed. If Corbett accepts the bid, Pennsylvania would become just the third state to privatize lottery management after Illinois and Indiana.
Corbett faces a lawsuit filed Monday by the employees’ union — Council 13 of the American Federation of State, County and Municipal Employees — four lottery employees, seven Democratic lawmakers and two senior citizens. It challenges the Republican governor’s authority to award the contract and expand the scope of lottery gambling.
Auditor General Jack Wagner, a Democrat, has raised questions over the wisdom of awarding such a large contract to a sole bidder and state Treasurer Rob McCord, also a Democrat, has said he might not authorize payments to Camelot unless its plans to expand lottery gambling are clearly legal under state law. McCord’s staff said Tuesday that Corbett administration officials have not approached him to discuss Camelot’s plans or make the case for its legality.
Meanwhile, Democratic lawmakers question why the state should pay hundreds of millions of dollars to a private firm when the lottery is coming off one of its best years, and is on track to exceed that performance in this fiscal year.
The 41-year-old Pennsylvania Lottery is one of the nation’s largest. It recorded $3.5 billion in sales for the year that ended June 30 and contributed more than $1 billion in profits that went to benefit programs for the elderly, including transit, rent and property tax rebates, prescription drug assistance, senior centers and long-term care services.
Meuser countered that the lottery has had several down years recently — sandwiched around the recession — and a repeat will be unaffordable while the state’s already considerable elderly population is on course to increase 25 percent by 2025.
“The way the governor has got to look at it is it will be broken in five to 10 years, so what are going to do about it?” Meuser said.
The value of the contract to Camelot will be hundreds of millions of dollars over 20 years, and it could earn extensions by meeting performance benchmarks. If Camelot were to fall short of an annual profit guarantee, the state could dip into a Camelot cash reserve to offset it, but only up to 5 percent of the annual profit.
The drive to expand lottery profits would herald an expansion of lottery gambling, such as the addition of online ticket sales or games, keno terminals in bars or restaurants and an aggressive new search for more lottery retailers.
Keno terminals should add as many as 1,500 new lottery outlets, and Camelot believes it can increase the state’s 9,100 other lottery retailers, such as convenience stores and groceries, by 10 percent over five years, Meuser said.
Also, the state would like to increase lottery gambling by people in certain demographics where there is substantial room to grow, including people in households earning over $70,000 a year and young adults, Meuser said.
