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Written by Nell McCormack Abom | Jan 16, 2013 10:30 AM

Pennsylvania could have a new private manager of the Pennsylvania Lottery by the end of this week. Gov. Tom Corbett is poised to sign a 20-year, $34.6 billion agreement with United Kingdom-based Camelot Global Services PA, LLC to operate the 41-year-old PA Lottery. We’ll explore what the change means for players, lottery employees and older Pennsylvanians on Smart Talk, Thursday night at 8 on witf TV. Join the conversation live at 1-800-729-7532, post a comment here, or to Facebookand Twitter.

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Gov. Corbett ran for office on a platform promising to privatize state services that could be better and more lucratively managed by the private sector. However, few expected him to turn the tables on the lottery. For the past two years, the lottery has earned record profits that fund a variety of programs for older Pennsylvanians. Those services include in-home meals, transportation, senior centers, discounted prescription drugs, and property tax and rent rebates. Pennsylvania is the only state that devotes its lottery profits entirely to programs benefitting senior citizens.

So, it was somewhat of a surprise when the Corbett administration announced its intention to solicit bids for the lottery last April. It was even more of a surprise when it announced late last Friday a “notice of award” for a multi-decade, multi-billion-dollar deal to the sole bidder, Camelot, after two other bidders had dropped out. Camelot operates the National Lottery in the U.K. The governor’s rationale for privatization is that our senior population is projected to grow and their demand for lottery-funded services will swell far beyond the currents bounds of lottery profits. Camelot promises to deliver $34 billion in lottery profits to the state over the next 20 years, to expand the number of players, and to do so by moving away from instant games and introducing new options like keno, as well as online- and terminal-based gaming.

"We're treating the Lottery as a consumer good. We want to get a lot of people playing a little instead of a few people playing a lot," said Alex Kovach, president of Camelot Global Services PA, LLC at the Senate Finance Committee hearing earlier this week. Camelot’s backing the deal with $150 million cash collateral and a $50 million letter of credit. State Revenue Secretary Dan Meuser said Camelot’s “world-class expertise” will deliver $50 million more in lottery profits in the coming fiscal year and $460-$530 million more over the next five years. Camelot’s deal is predicated, though, on lawmakers extending the minimum profit percentage requirement of 27% for 20 years. It is scheduled to jump to 30% in July 2015.

The private agreement raises a bevy of questions. Does the governor have the authority to issue such an agreement? He says yes. AFSCME Council 13, which represents the roughly 176 unionized employees of the lottery, says no, and has gone to court to block the contract. It filed an unfair labor practice grievance that will be heard in Commonwealth Court next month. Democratic State Treasurer Rob McCord, who must sign off on payments to Camelot, has said he would not do so if the company expands gaming without legislative approval. New Democratic State Auditor General Eugene DePasquale, the state’s top fiscal watchdog, questions the deal. In addition, new Democratic Attorney General Kathleen Kane must approve the contract for “form and legality” before it becomes binding. She has not commented on where she stands on the issue.

After the Senate Finance Committee hearing this week, Peter Tartline, the administration’s top negotiator on the contract, reportedly reassured jittery lottery workers about their job security. “We would commit to any employee who doesn’t want to take a job with the private manager. We would find another place for them in commonwealth employment,” Tartline pledged, according to the Patriot News. He did not specify the kinds of jobs and paygrades for those positions.

AFSCME Council 13 made a counter offer, pledging to best Camelot’s profits by 10 to 30 percent. It claims that under public management the lottery can make $799 million more in profit than Camelot over the next six years. AFSCME would not put up cash or a line of credit to back up its profit claims. However, like Camelot, the union would expand gaming by adding keno in bars, restaurants and other venues, and would introduce other popular electronic games for players. The Corbett administration rejected the deal. AFSCME and the AARP, which hasn’t taken a stand on the deal, urges lawmakers to stop the practice of draining money from the Lottery Fund to cover Medicaid costs. Those charges were borne typically by the General Fund but lawmakers and Gov. Corbett have “raided” the lottery over the last five years during the recession.

Our panel features PA Department of Revenue Secretary Dan Meuser and Kristie Wolf-Maloney, director of AFSCME Council 13 Grievance and Arbitration Department. She co-authored the union’s offer.  Be sure to join the conversation Thursday night at 8 by calling 1-800-729-7532 or post a comment to this article. 

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