Bloomberg News

Corbett Gives U.K. Firm 20-Year Pennsylvania Lottery Deal

January 17, 2013

Pennsylvania Governor Tom Corbett handed the management of the state’s $3.48 billion lottery to the company that runs Britain’s National Lottery.

Disregarding criticism from Democratic lawmakers and a union representing lottery workers, Corbett awarded the 20-year contract yesterday to Camelot Global Services PA LLC, which is part of U.K.-based Camelot Group Plc. The attorney general’s office received the contract yesterday and will have 30 days to review it, Eric Shirk, a spokesman for the governor, said by e- mail.

“We’ve come up with a win-win scenario where we combine one of the nation’s best lotteries with one of the best private- sector lottery industry experts in the world to grow and protect Lottery profits for decades to come,” Corbett, a first-term Republican, said in a statement today.

Dennis Fisher, a spokesman for Democratic Attorney General Kathleen Kane, said in an e-mail that the office will review the contract for “form and legality.”

Pennsylvania is the third state, after Illinois and Indiana, to turn its lottery over to private operators. Corbett is also trying to sell the state’s wholesale and retail liquor business.

Sole Bidder

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

The arrangement provides $50 million in the next fiscal year, Corbett said. 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, Revenue Secretary Dan Meuser said at a senate hearing on Jan. 14.

Camelot’s contract would be extended to a maximum of 30 years if it hits incentive benchmarks, he told the senators.

Pennsylvania’s sales in the past 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, transit and senior centers.

Over 60

Turning over management will ensure that funding remains secure as the population grows, Corbett said. By 2030, almost a quarter of the state’s population will be over 60, according to his office.

Camelot’s commitment will provide $3 billion to $4.5 billion more than projections under state management, Corbett said.

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 turn over the management of the lottery without legislative approval.

“People have serious concerns regarding the transferring of a thriving state asset that generated millions of dollars for senior programs last year to a foreign private firm accountable only to profiteers with little oversight,” Representative Mike Sturla, a Lancaster County Democrat, said yesterday in a statement.

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.

The lawsuit 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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