State House Sound Bites

Capitol reporter Mary Wilson covers Pennsylvania politics and issues at the Pennsylvania state capitol.

Lawmakers lean in at hearing on Lottery deal with Camelot

Written by Mary Wilson, Capitol Bureau Chief | Jan 14, 2013 2:04 PM
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Photo by www.palottery.state.pa.us

We knew things would be tense at this hearing.

State lawmakers on the Senate Finance Committee spent Monday morning and midday grilling Corbett administration members and executives from the Britain-based company poised to take over management of the Pennsylvania Lottery.

The Senate hearing was the first public forum on the deal between the administration and Camelot Global Services, which could be finalized this week.

Sen. John Blake, the ranking Democrat on the panel, perhaps set the tone of the forum, explaining his concern that the expansion of gaming and leasing of Lottery operations has been pursued solely by the executive branch, without legislative input or approval.

“The Lottery is not the Governor’s Lottery. It’s not the Revenue Secretary’s Lottery,” said Blake. “It’s the commonwealth of Pennsylvania’s Lottery. It’s the people’s Lottery. It’s the people’s asset.”

Republican Sen. Pat Vance, of Cumberland County, said she’s suspicious of any agreement where only one company makes a bid. Two bidders other than Camelot dropped out of the bidding process, and their names were disclosed publicly for the first time today: Tatts Group, an Australian company, and GTECH, based in Rhode Island.

Vance asked short, specific questions about where Camelot would base its operations, how it would grow the Lottery’s customer base, and whether such a business plan would have other societal costs in Pennsylvania.

“I think some of these questions come about because of the lack of transparency,” she said. “It’s very difficult to know what’s in a contract. Is it going to be made public?”

That last question wasn’t answered by Corbett officials (they later said Camelot's contract has been public, although more information will be added to it later about the terms of terminating the contract).  But it was revealed that Camelot will be required to base 80 percent of its operations in Pennsylvania, “specifically for taxation purposes,” and in incorporated in the commonwealth. As far as office space goes, an executive deputy from the Corbett Budget Office said the commonwealth would be charging Camelot for the use of office space where the public management is currently located in Middletown, Dauphin County, if the contract is finalized.

The administration maintains it has been transparent in pursuing a privatization deal, citing things like meetings with more than 150 state lawmakers. Last month, when asked to produce a list of those lawmakers, the state Revenue secretary said it would be too difficult. Today, another Corbett administration official held up a printed list he said included the names of those people. The meetings, however, have been held in private.

Corbett administration officials said at least one of those companies dropped out due to its objections to the commonwealth’s terms of agreement, which it called unbalanced.

Vance wasn’t the only one who appeared eager to pursue a line of inquiry.

Democratic Sen. Rob Teplitz of Dauphin County, attempted to separate two issues that have so far been intertwined in explanations from the Corbett administration: privatizing Lottery operations and expanding Lottery games.

“Isn’t it true that the administration does not need to sign this or any other agreement with an outside contractor in order to expand the Lottery into keno and online ticket sales?” said Teplitz.

“We believe that’s true,” said Pete Tartline, an executive deputy in the governor’s Budget Office, and a “chief negotiator” during the bidding process with Camelot.

Tartline said the administration believes expanding gambling requires neither legislation nor privatization. But he said his office has already looked at how much the Lottery could make in profits if it were able to expand gambling and still be run by its public management. The annual growth rate, he said, would be seven percent. Camelot is committing to a nine percent growth rate every year.

State Revenue Secretary Dan Meuser said the Lottery, under Camelot, could make between $1.3 and $1.8 billion more in the next ten years, provided available games could be expanded to include keno drawings and online gaming.

David Fillman contests such projections with some numbers of his own. As director of the American Federations of State, County, and Municipal Employees Council 13, the union representing some Lottery employees, Fillman said the Lottery could do just as well, if not better, under the current public management than it would under Britain-based Camelot Global Services.

“Given the opportunity to operate the lottery under the same expansion provided Camelot, we would beat their projected profits for our growing senior population by at least 10 to 30 percent without padding the pockets of corporate executives and CEOs at the expense of our seniors,” said Fillman.

Other lawmakers questioned the fate of Lottery employees, between 160 and 170 of whom could be laid off within a year after Camelot takes over as manager. Camelot did not provide a firm number of how many employees it intends to keep on, and Fillman stressed that he hasn’t heard which workers (manager, members of his union) could expect to keep their jobs.

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