Lottery ready to bet on keno
HARRISBURG - Tucked into Gov. Tom Corbett's proposed 2014-15 state budget is $20 million in new Pennsylvania Lottery revenue, mostly from the addition of keno to the agency's game portfolio.
Lottery officials believe they have the statutory authority to introduce keno without legislative approval but still want to engage lawmakers in the process, Revenue Department spokeswoman Elizabeth Brassell said Wednesday.
"We are very interested in educating stakeholders about what keno is and is not and sort of getting some buy-in and some consensus on when and how it is introduced," she said.
Corbett did not mention keno in his budget address Tuesday, but Revenue Secretary Dan Meuser told the Senate Finance Committee last week the game would help lottery revenues keep pace with the demand for services by older Pennsylvanians, whom the lottery benefits.
Keno is a fast-paced, terminal-based game popular in social settings, such as bars and restaurants, where lottery officials believe they can make inroads with younger adults, Brassell said.
The $20 million in revenue in Corbett's budget reflects a partial-year projection, she said. The lottery believes it could get keno to the marketplace within six months after the execution of a contract with a vendor to supply the game.
Once fully implemented, keno is expected to generate at least $40 million and possibly as much as $180 million to $200 million annually in profit, Brassell said. The broad range reflects what she called "a lot of unknowns at this point."
"It's sort of unknown how taverns and bars are going to react to small games of chance, which could be a competitive product. Maybe there are bars that would prefer only small games of chance. Maybe there are bars that would prefer keno. Maybe there is a contingent of bars and social clubs that do both," she said.
The revenue growth in the governor's budget also assumes the General Assembly will continue to provide the lottery with relief from mandatory return requirements, Brassell said.
When the lottery was created, the enabling legislation required the agency to return 30 percent of sales as net revenue to programs for seniors. In 2008, presented with evidence that a smaller return margin would produce more profit, the Legislature temporarily lowered the margin to 27 percent. It extended the relief in 2011.
With the latest extension set to expire in 2015, Brassell said legislators will be asked to take a fresh look. The most profitable lotteries operate at a 24 or 25 percent margin, she said.
"What we need is for the Legislature to offer long-term or permanent relief from the 30 percent margin, from the 27 percent margin," she said. "We are asking them to go lower than that. Even though it is a smaller percentage, it will deliver more dollars to the lottery fund."