Corbett considers revising lottery contract with Camelot

Posted: March 14, 2013

HARRISBURG - The Corbett administration is poised to revise its contract with Camelot Global Services in an effort to salvage its deal to privatize the management of the Pennsylvania Lottery.

London-based Camelot's bid to run the lottery was rejected last month by Attorney General Kathleen Kane, whose office reviews all state contracts for legality. Kane ruled that parts of the deal violated the state constitution.

Corbett, according to legislative leaders briefed on the matter, is leaning toward making changes in the contract, which he would then resubmit to Kane's office. The governor also could appeal Kane's decision, and has until Saturday to decide whether to do so.

Administration officials would not say Tuesday whether they had decided on their next move.

"We're still working on it," Corbett told reporters after an appearance at the State Museum of Pennsylvania. "Obviously, we have been talking with Camelot about whether we go forward with the contract in the form that it's in now, or whether we revise the contract."

Senate President Pro Tempore Joe Scarnati (R., Jefferson) told the Associated Press that the administration was looking to limit the scope of gambling that would be allowed under Camelot's contract. Senate Republicans, including Scarnati, had asked the administration this year to make it clear that the lottery could not compete with casinos through online gambling.

Among other things, Kane and lawyers on her staff determined that the contract with Camelot, which runs Britain's national lottery, usurped the authority of the legislature to regulate and manage the lottery. She also said that by allowing the lottery to add electronic games such as keno, the contract would exceed what is authorized under state law.

The contract's rejection by Kane, a Democrat, struck down months of work by Corbett, a Republican, to seal the deal with Camelot and fulfill his campaign promise to privatize certain services.

The administration has said it began exploring the possibility of hiring a company to manage the lottery because of concerns that the state-run system, while profitable, would not be able to keep up with projected growth of the state's senior population. In the last fiscal year, the Pennsylvania Lottery recorded $3.5 billion in sales and sent more than $1 billion in profit to state programs that help the elderly.

Under the proposed contract, Camelot would make annual guaranteed payments, and if lottery profits fell short of those amounts, the firm would reimburse the state for the shortfall - up to 5 percent of profits - from cash required to be held as collateral.

Camelot would guarantee a profit of $34 billion over the 20-year contract.

The state-run system offers no similar guarantees, the administration has argued. The Department of Revenue, which oversees the lottery, estimates the lottery would generate roughly $30 billion over the same 20 years.

Even if the administration gets the Camelot deal back on track, another challenge awaits in court - from Democratic legislators and the union that represents lottery employees.


Contact Angela Couloumbis at 717-787-5934 or acouloumbis@phillynews.com, or follow on Twitter @AngelasInk.

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