The Corbett administration's approach uses "managed competition," requiring the public and private sectors to compete with one another. Consider what has happened since this competitive dynamic was introduced by the state and its advisers.
First, the lottery has been pushed into high gear, as evidenced by its record results in the second half of 2012. Second, the competition allowed the state, through the bidding process, to hear the best ideas of industry experts. Third, the state received a $34 billion offer from Camelot, the company that manages Britain's National Lottery. That could allow more than 5,000 Pennsylvania seniors now on waiting lists to get benefits.
Finally, the process showed that the best bids involve more than money; service levels and social responsibility must be addressed as well. A lottery should not, for example, encourage reckless spending by problem gamblers and the poor. Pennsylvania required vendors to seriously address such issues.
Pennsylvania is not alone is pursuing private lottery management. Last year, my home state, Indiana, executed a lottery management contract for up to 25 years. In New Jersey, Gov. Christie's administration solicited bids for a 15-year lottery contract.
Each of these contracts improves on those that preceded it, starting with the first lottery privatization, in Illinois. Pennsylvania's mix of up-front cash, performance-based contract extensions, and tightly drafted legal provisions are the right ingredients for a successful long-term partnership with the private sector. The competitive process and resulting innovations promise billions of dollars in additional value for seniors, guaranteeing at least 5.8 percent annual growth in profits over the next 10 years, or more than twice the lottery's growth rate over the past 20 years.
In the past, Pennsylvania has shunned some attractive public-private partnerships due to entrenched political interests. With this transaction, the Corbett administration has the opportunity to put the past aside, show the state can embrace innovation, and produce a jackpot for the nearly one million seniors who benefit from the lottery.
Stephen Goldsmith is a former mayor of Indianapolis, a professor of government at Harvard, and the director of the university's Innovations in American Government Program. He can be reached at firstname.lastname@example.org.