Legislature should pull plug on Lottery deal
There is very little to recommend in the Corbett administration's too-close-to-the-vest deal to turn over management of the Pennsylvania Lottery to a private sector British company.
The administration acted with extraordinary speed to award a 20-year contract to Camelot Global Services PA LLC, part of the company that manages the national lottery in the United Kingdom. Since the award of the contract last month, the deal has not improved with age.
Regardless of whether private management is a good idea, a fundamental problem is that the administration did not run that question past the Legislature before presenting the agreement as a fait accompli.
That is a very big deal. The highly successful lottery, now run directly by the state government, generates about $3.5 million a year in sales and $1.1 billion in profit; Pennsylvanians should have a say, through their elected lawmakers, about the lottery's future.
Legislators did conduct several hearings that included testimony by Camelot executives. Those hearings did not address the company's problems in the UK, however, where many national lottery players are dismayed by a recent doubling of prices as the company reserved the equivalent of $8 million for executive bonuses.
A Camelot spokesman said the company had no plan to raise Pennsylvania prices "at the present moment in time," and that the British executive bonuses were tied to hitting certain targets relative to the UK lottery.
The basic terms of the Pennsylvania contract are not particularly alluring for the commonwealth. The company would return $34 billion in profit over 20 years, but some lawmakers have noted that the rate of increase is roughly equivalent merely to the rate of inflation - a rate that the state-run lottery surely could match.
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Lawmakers also are deeply concerned about the prospects of Internet gambling, which is illegal in Pennsylvania, but which Camelot is expected to employ to attract new lottery players. The two most powerful members of the state Senate Republican majority, President Pro Tem Joe Scarnati and Majority Leader Dominic Pileggi, oppose Internet lottery gambling because of its potential to compete with the state's other vice-based revenue stream - casinos.
Internet gambling also has the potential to vastly expand the social dysfunction that results from widespread access to gambling. And, small retailers who rely on lottery sales could lose substantial business.
Pennsylvania is the only state that uses its lottery proceeds exclusively to fund services for older residents. That dedicated revenue stream is why the state has a substantial rosters of those services, from subsidized medicine and mass transit rides to a variety of rebates related to utility and household costs.
Corbett says his privatization effort is meant to ensure that the lottery generates enough revenue to fund those services as the commonwealth's older population grows. That goal does not supersede the need for complete transparency and legislative input. And, since generating revenue inevitably would come from enticing more people to play the lottery, there is no reason to believe that the state could not do so itself.
Newly elected Attorney General Kathleen Kane is reviewing the deal to determine its legality, which is not a simple matter given the Legislature's exclusion. State Treasurer Rob McCord also is reviewing the deal, and has said he will withhold payments to Camelot if legal issues are not resolved.
Given the secretive manner in which the deal was born and developed, it's not surprising that a poll by Franklin & Marshall College last week found a whopping 64 percent of Pennsylvanians strongly or somewhat opposed to the deal, while only 18 percent strongly or somewhat favored it.
For abundant reason, the administration should pull the plug on the deal.