Corbett challenged on speed of Pa. Lottery move

Posted: January 16, 2013

HARRISBURG - Stung by the speed of the state lottery deal, lawmakers from both parties on Monday pointedly challenged Corbett administration officials and executives of the British firm awarded a 20-year contract to run Pennsylvania's $3.5 billion gaming operation to defend the transaction.

"This is not the governor's lottery or the secretary's lottery, it's the people's lottery, established by an act of the General Assembly," said Sen. John Blake of Lackawanna County, the ranking Democrat on the Finance Committee, which held a hearing on the deal.

Blake said he had deep concerns about "unilaterally outsourcing of such a major asset," protection of funding for seniors, and a lack of transparency of the bidding process.

"It appeared to be heavy-handed," Sen. Pat Vance (R., Cumberland) said of the way the deal was rushed through with little outside input.

Corbett formally announced Friday that he would award Camelot Global Services the contract to run the lottery in exchange for $34 billion in profits over 20 years. Camelot was the sole bidder for the contract.

Corbett initially signaled shortly before Thanksgiving that he was planning to award Camelot the contract. That generated widespread opposition from unions, senior citizens groups, and lawmakers who were caught off guard by the pending deal.

The opposition was still hot Monday when company and administration officials appeared before the Finance Committee.

While lawmakers said they were pleased to have a chance to question key players about issues like the fate of 240 current lottery employees and whether profits under Camelot were guaranteed, they left wishing they had been given a chance to get answers before the bid was awarded.

Vance said she remained concerned about the legality of expanding gaming - as called for in Camelot's contract - without the consent of the legislature.

She's not the only one angry about Camelot's plan to add keno and online gaming as a way to generate new revenue.

The three Democrats who now hold the state's row offices - attorney general, treasurer, and auditor general - said they did not appear at the hearing but would be scrutinizing the terms of the contract.

And AFSCME Council 13, the union that represents most of the lottery workers, has filed multiple suits seeking to block implementation of the contract.

The lottery last year generated more than $1 billion for programs for the state's seniors. Camelot is promising to increase that amount by 10 percent.

In exchange, Camelot will receive a management fee worth hundreds of millions of dollars over the duration of the contract. It also stands to receive bonuses if it exceeds its annual profit commitments.

Revenue Secretary Dan Meuser told the committee that the purpose of seeking a private manager was to increase funding for programs for Pennsylvania's growing senior population through a more predictable source of revenue.

"What you saw today is a very credible plan to meet that demand," Meuser said.

The contract hinges on guaranteed growth projections with the addition of keno machines at bars and restaurants, online lottery ticket sales, and the expansion of the lottery-playing public to include more middle- and upper-income people, company executives said.

If profits dip below their mark, the company has set aside a $200 million reserve to cover the shortfall.

Council 13 executive director David Fillman said current lottery management could have produced more money for seniors as well if given the same expanded gaming opportunities provided Camelot. And, he said, the state would not "be padding the pockets of foreign executives."

Camelot president Alex Kovach told the committee the company would like to retain current workers who "shared their vision," but it did not guarantee to protect any jobs.

Meuser said he expected to finalize the lottery contract later this week, which would make Pennsylvania the third state - after Illinois and Indiana - to privatize its lottery.

Newly elected Attorney General Kathleen Kane must sign off on the contract and will have 30 days to review it for legality, Corbett officials said.

State Treasurer Rob McCord is already saying that expansion of gaming does not appear to be allowed by state law. McCord has threatened not to pay Camelot's bills until he is satisfied that its plans to expand gambling are legal.

Newly elected Auditor General Eugene DePasquale said he, too, questioned Corbett's authority to enter into such an extensive contract without consulting the legislature.

"If Gov. Corbett actually goes through with this sole-bid contract, I will do everything within my power as auditor general to shed light on the entire selection process," DePasquale said. "And make sure every penny possible is going to fund senior programs."


Contact Amy Worden at 717-783-2584 or aworden@phillynews.com or follow @inkyamy on Twitter.

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