Bloomberg News

Pennsylvania Considers Handing Lottery to Camelot Services

January 14, 2013

Handing the management of Pennsylvania’s $3.48 billion lottery to the company that runs Britain’s National Lottery would give the state predictable revenue and $50 million in new funds next fiscal year, said Revenue Secretary Dan Meuser.

Pennsylvania would be the third state, after Illinois and Indiana, to have its lottery privately run. The state Jan. 11 issued a notice of award to Camelot Global Services PA LLC, a precursor to a contract with the firm, which is part of U.K.- based Camelot Group Plc. Unions and some Democratic lawmakers have criticized the plan.

Meuser told legislators at a state senate committee hearing today that if the manager doesn’t achieve the annual profit guarantee from lottery sales, it will draw on a $150 million fund to make up the shortfall to the state.

Pennsylvania’s sales last fiscal year set a record for the lottery, which was created in 1971. Profits, which totaled $1.06 billion, go to services for elderly residents such as low-cost drugs and transit and senior centers.

Turning over management will ensure that funding for senior services remains secure as the population grows, said Governor Tom Corbett, a first-term Republican. By 2030, nearly a quarter of the state’s population will be over 60, according to his office.

Stressed System

Meuser said the forecast growth in sales under state management is “frankly nowhere near” what’s needed. While the lottery is not broken today, “it’ll likely be broken tomorrow.”

Camelot, operator of the National Lottery in the U.K. and a consultant to California’s game, was the sole bidder in November. It said it will guarantee $34 billion in profits over 20 years.

Two other companies that had been interested, Australia- based Tatts Group and GTECH Corp., a Rhode Island subsidiary of Italy’s Lottomatica Group, didn’t submit bids, said Pete Tartline, executive deputy secretary in the budget office. Camelot’s contract would be extended to a maximum of 30 years if it hits incentive benchmarks, he told the senators.

While about 48 percent of the British populace play the National Lottery a week, only 10 percent to 30 percent of Keystone State residents play the Pennsylvania games, said Alex Kovach, president of Camelot Global Services PA. The company plans to attract “infrequent” and “lapsed” players, he told the senators.

Organized Opposition

The proposal has been criticized by Democrats and by the American Federation of State, County and Municipal Employees, which represents most of the lottery’s 230 employees. The union, seven Democratic legislators and four lottery employees on Dec. 17 sued the governor in Commonwealth Court, saying he can’t lease the lottery without legislative approval.

The federation is the largest union in the state. representing more than 65,000 employees, according to its website.

Treasurer Rob McCord, a Democrat, said in a letter Jan. 9 to Meuser that he may block payments to Camelot if the firm’s proposed expansion of games, such as video-gaming terminals, isn’t authorized under state law.

At the hearing, Senator John P. Blake, a Democrat from Archbald, called it either “arrogant” or “political” for Corbett to lease the lottery without a vote of the legislature.

“It’s not the governor’s lottery,” he said. “It’s the people’s lottery. It’s the people’s assets.”

The case is American Federation of State County and Municipal Employees Council 13 v. Commonwealth of Pennsylvania, 706 MD 2012, Commonwealth Court of Pennsylvania (Harrisburg).

To contact the reporter on this story: Romy Varghese in Philadelphia at rvarghese8@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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