Critics deride Corbett's Pa. Lottery scheme

Posted: February 15, 2013

FEW PEOPLE IN America know more about compulsive gambling than Dr. Timothy Fong, co-director of the Gambling Studies Program at the University of California-Los Angeles.

Fong says that folks would be surprised by how many problem gamblers who pass through his UCLA clinic report that lottery tickets are a big part of their addiction - 23 percent, or nearly one in four.

And most of these clients are hooked on electronic gaming action - either Internet lottery games or Keno machines usually found in bars - which are at the core of a scheme to raise hundreds of millions in new revenue in Pennsylvania.

"It's a matter of access and availability," Fong said. "If you have a lottery that has a game you can play online, or repetitively, or over and over again, that's going to lead to a greater likelihood of problem gambling."

Late last year, Gov. Corbett unveiled a plan to turn over the management of Pennsylvania's 41-year-old lottery to the British-based company that runs the United Kingdom's National Lottery. He insisted that it was a win-win for Pennsylvania that would bring in at least $130 million annually over the next 20 years for senior-citizen programs without raising taxes.

But critics say that raising extra money for older Pennsylvanians from the lottery is actually the most regressive tax around, because studies have shown that growing ticket sales usually means tapping lower-income players hoping to strike it rich, or compulsive gamblers who end up costing the state millions for added social services.

On Thursday, the Corbett administration lost Round 1 of the privatization battle when new Democratic Attorney General Kathleen Kane ruled that the takeover by Camelot Global Services was unconstitutional. Kane argued that the state Gaming Control Board would be required to sign off on such a large-scale expansion of gambling in the state.

No one expects the administration to give up easily, though. Corbett issued a statement that not only is he "deeply disappointed" in Kane's ruling but that "we will review our legal options," foreshadowing what most expect will be a protracted court battle. What's more, even under continued public management the Pennsylvania Lottery eventually might look to the Internet or electronic games like Keno to bring in more cash.

The Pennsylvania Lottery raises roughly $1 billion a year for senior programs, or about 30 percent of the $3.5 billion in cash that it takes in from players. For a private manager like Camelot to bring even more money into the state coffers while also making a profit, it needs to do one of two things: Cut costs or get more people to buy lottery tickets.

But advocates of the current lottery structure have noted that Pennsylvania's administrative costs are just 2.5 percent, among the lowest in the nation, leaving virtually no fat to cut. Instead, Camelot's proposal has been solely to boost revenue, and the two ideas that it has mentioned are Internet lottery games and Keno.

Officials with Camelot insist that the goal would be not to create a new generation of compulsive gamblers but simply to get more Pennsylvanians who don't play the lottery now to buy a few tickets every week. The firm claims that it's achieved that in Great Britain, where nearly half the public plays the lottery but average weekly spending is just $3.50.

A Camelot spokeswoman said that the company would work hard to combat problem gambling if the Corbett administration successfully appeals Kane's decision and carries out its plan. The firm's Laura Pearson said by email from London that Camelot "has played a pioneering role in developing programmes to address the social impacts of gambling worldwide."

Others are not so convinced.

"When you have people sitting at the bar and they're drinking alcohol and they're gambling, that is not a good mix," said state Sen. Paul Clymer, a Bucks County Republican who is highly dubious of the lottery-privatization gambit, especially the push for Keno machines.

Research backs up Clymer about the addictive nature of lotteries. Surveys in the last two decades have shown that as many as 44 percent of addicted patients or calls to problem-gambler hot lines involve lottery players, although sometimes in combination with other types of betting.

Other critics of increasing lottery sales to pay for government programs note that beyond the problem of addicted players, the cost falls heavier on those farther down the socioeconomic ladder. One study found that, on average, households earning less than $12,400 a year spend 5 percent of their income on lotteries; another revealed that 30 percent of people without a high-school diploma consider the lottery a wealth-building strategy.

"It's a regressive tax, really," said the Rev. Sandra Strauss, director of public advocacy for the Pennsylvania Council of Churches, which has opposed the expansion of gambling. Pennsylvania is typically already ranked among the bottom 10 states for progressive tax policies that go easier on poorer citizens.

Of course, critics found other reasons to oppose Corbett's privatization plan, including questions about Camelot's management in England - where several executives received big bonuses after ticket prices went up. There also would be big paydays for several politically connected lobbying and consulting firms, including Greenhill & Co., which could make as much as $50 million if Kane's ruling is overturned and the deal goes through.

If so, that would be a first for the lottery: A guaranteed multimillion-dollar winner. Ask Pittsburgh's Lou Sander, who, for six years, has run a lottery-playing consortium of alums of the Navy's USS Rankin. They've bought a whopping $46,186 in lottery tickets, but won back only $5,633 - a loss rate of 88 percent.

"Anyone who thinks they're doing it to hit the big one . . . ," Sander said Thursday, laughing, "they're crazy."

On Twitter: @Will_Bunch


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