In December, Pennsylvania's Governor Tom Corbett announced his intention to privatize the management of the State Lottery, specifically contracting with the United Kingdom-based company, Camelot Global Services. Despite opposing arguments that the move by PA's chief Executive lacked transparency and legitimacy, shortly after the turn of the new year, the Corbett Administration preliminarily awarded a privatization contract to Camelot for a 20 year management contract of the Pennsylvania Lottery.

It is the Corbett Administration's position that such a privatization deal is necessary in order to meet the growing demand for services for Pennsylvania's senior population. According to Pete Tartline, Secretary of the PA Department of Aging, currently 2.7 million State citizens are 65 and older, and it is expected that number will reach 3.6 million by 2030. Secretary Tartline stated that 75% of his department's budget is drawn from the Lottery with no money allocated from the general fund.

In order to address the assumed increased need for public services and assistance for older residents of the State, the Corbett Administration contends the contract with Camelot is not only prudent but imperative. "We believe their projections could be better than what we do," Corbett said of Camelot's proposal to strategically grow the value of the Lottery system. In fact, it's the Administration's claim that Camelot has projected a $3-4.5 billion incremental value over the next 20 years.

Per the contract, these projections are to be safeguarded by outlined guarantees. Not only have profit commitments and minimal thresholds been established, but also Camelot will put forth $150 million to set up a reserve fund that will be drawn upon if revenue projections are not met. After the third year of the contract, the State could terminate its agreement with Camelot if the performance guarantees prove to be wrong. However, if certain revenue thresholds are met, Camelot may earn up to 50% of excess revenue but not to exceed 5% of overall revenue.

Opponents on both sides of the aisle are publicly speaking out against the privatization contract, expressing concerns over the haste, the lack of competitive bidding, an infringement of existent laws, specifically related to the expansion of gaming, as well as accusing the Administration of circumventing the General Assembly. In response to objections, Corbett has maintained the process has been transparent. He also declared, "We believe we have the authority under the law to do it."

On two occasions, Dianne Thompson, CEO of Camelot Global Group made public presentations to legislators explaining her company's business model and assurances. Camelot runs the United Kingdom National Lottery as well as does consulting in California, Massachusetts, and Canada. "We see ourselves as a sales and marketing company," she said. "We are not a lottery operator." Describing the PA Lottery as well run, Thompson indicated Camelot's goal is to make improvements and get more people to play. "Millions of people playing, spending relatively small sums of money is what we believe has been the key to our success in the UK." At the same time, Thompson stressed, Camelot is committed to the social responsibility of being a lottery manager.

Camelot's representatives have not concretely answered questions about what will happen to the current union Lottery workers. According to AFSCME Council 13, 175 of its members work for the PA Lottery. "We've heard 70 employees could be kept on, but are those management positions? We don't know. At how much of a wage cut? We don't know. Is it even legal? We don't know," said David R. Fillman, Executive Director of AFSCME.

The contract waits review and comment from PA Attorney General Kathleen Kane and Treasurer Rob McCord.

Click the icon at the top to view the PA Lottery Private Management Agreement.

Videos:

8/1/2012: Frank Dermody, Minority Leader of the PA House: "This is just another solution in search of a problem."

12/6/2012: Eugene DePasquale, PA Auditor General: "Rushing to a multi-million dollar, three decade contract is not good government."

12/20/2012: Governor Corbett: "This didn't sneak up on anybody in the Legislature that was paying attention."

January 14, 2013 Senate Finance Committee Hearing:

Dianne Thompson, CEO of Camelot Global Group: "What we do is sell dreams."

Senator John Wozniak: "If this was done under Rendell's Administration, the GOP would be jumping up and down like Rumpelstiltskin."

January 16, 2013 Democratic Caucus Press Conference:

Representative Frank Dermody: "This effort to sell the State lottery is a mistake and we aren't going to stand by and let it happen."

Rosita Youngblood, Minority Chair of the PA House Gaming Oversight Committee: A drastic expansion of gaming in Pennsylvania

January 23, 2013 PA House Aging and Older Adult Services Committee Hearing:

Brian M. Duke, Secretary of PA Department of Aging "We're about prevention and we're about protection."

Dan Meuser, Secretary PA Department of Revenue: Projection of 3 to 4.5 billion dollars of incremental value over the next 20 years.

Representative Mark Gillen: "What is our saturation point?"

Dianne Thompson, CEO Camelot Global Services: "We're not coming here and saying it's broken."

Kristie Wolf-Maloney, Director, Grievance, & Arbitration Department: "Given the opportunity to operate the lottery under the same expansion provided Camelot, we would beat their projected profits."

by Tara Leo Auchey