Lottery Lawsuit Filed in Commonwealth Court

Union officials are mounting a legal challenge to the potential deal to privatize the management of the Pennsylvania Lottery.  “We feel that based on the Lottery Act passed in 1971… the privatization of the Lottery is not something the governor has exclusive jurisdiction to do.  We feel that legislative action has to be taken also,” explains AFSCME Council 13 Executive Director David Fillman, who points out that the General Assembly is currently between sessions. 

Several Lottery workers and Democratic state lawmakers have joined AFSCME in the effort to permanently block Governor Tom Corbett from entering into a deal that turns Lottery management over to a private entity.  Fillman says the Lottery is working well for government, and does not need to be privatized.    

A 20-year, $34-billion dollar bid from Camelot Global Services is currently under review, with a December 31st deadline fast approaching. 

“This is a frivolous lawsuit that’s looking out for the special interests of a union, rather than what the governor is trying to do, which is look out for the best interest of Pennsylvania’s senior citizens,” Corbett spokesman Kevin Harley tells Radio PA. 

Harley says the only reason privatization of Lottery management is being explored is to ensure revenue growth for the programs that benefit older Pennsylvanians.  He says no decision has been made.

RadioPA Roundtable

Radio PA Roundtable 11.23.12

On this week’s Radio PA Roundtable, Matt Paul brings you the latest updates on the possible privatization of Pennsylvania Lottery management. Also, Governor Tom Corbett discusses his Thanksgiving holiday and we get a preview of deer season from the Pennsylvania Game Commission.

Radio PA Roundtable is a 30-minute program featuring in-depth reporting on the top news stories of the week.

Click the audio player below to hear the full broadcast:


State Considers Bid from Potential Lottery Manager

State officials have until the end of the year to make a decision on a 20-year, $34-billion dollar bid to turn over the day-to-day operations of the Pennsylvania Lottery a private company.  After qualifying three potential bidders, the Commonwealth received one bid from Camelot Global Services PA LLC.  It’s the same company that operates the National Lottery in the United Kingdom.

Department of Revenue spokeswoman Elizabeth Brassell says the state would be well-protected by the potential private management agreement (PMA).  “There’s a profit threshold that the company has to meet in order to get paid incentive compensation,” Brassell says.  “Beyond that, if there’s any contract year where that profit threshold is not met, there are additional securities… that the state can dip into and deduct shortfall payments from to make up the difference.” 

The Corbett administration is looking to generate more money for programs that benefit senior citizens, a population that’s on the rise in PA.  The Pennsylvania Lottery is the only lottery in the nation, which generates profits solely for senior programs. 

But opponents point to last year’s record profit of more than a billion dollars at the Pennsylvania Lottery.  “There’s only 2.3% administrative costs; so it’s not only profitable, but it’s also efficient,” says AFSCME Council 13 Executive Director David Fillman. 

AFSCME represents 175 of roughly 220 Pennsylvania Lottery workers, and Fillman says they will sit down with state officials to discuss the bid next week.  “We’re confident that anything that the Commonwealth wants to do… it’s something that the current employees can do.” 

No decision has been made.  Brassell says they will evaluate Camelot Global Services and crunch the numbers determine if a PMA is in the best interest of the state.  Even if the bid is accepted, the state would maintain ownership and control of the Pennsylvania Lottery.

Pennsylvania Lottery

Another Step toward Private Management of the Pennsylvania Lottery

The Corbett administration is taking the next steps toward a Private Management Agreement (PMA) for the Pennsylvania Lottery.  Late last week the state announced the terms for a potential PMA, which include profit commitments for 20-years that would ensure growth in the programs that benefit the state’s senior citizens. 

“We are looking to privatize.  The final decision hasn’t been made yet, because we have to wait for bids and see how the bids turn out,” Governor Tom Corbett said at an unrelated event. 

“If I find that it’s going to cause us to lose money, are we going to do it?  No.” 

Pennsylvania Lottery net revenues increased by more than 10% last year and many legislative Democrats question any move toward privatization when the Lottery is producing record profits.  “No corporate operator can guarantee the same low overhead costs, and ever future dollar that goes to a private management company is a dollar taken away from critical senior programs like PACE, shared rids and rent rebates,” says House Democratic Leader Frank Dermody (D-Allegheny).    

The other terms laid out for a potential PMA include $150-million in collateral, the responsible implementation of monitor and Internet-based games and a provision that ensures ownership and control of the Lottery is retained by the Commonwealth.

Top Democrat: Private Management Agreement Unnecessary for PA Lottery

The Pennsylvania Lottery’s 2011-12 Annual Report shows a 10.4% increase in net revenues, which means a record $1.06-billion will be used for programs that benefit the state’s senior citizens.

The positive financial news comes as the state Department of Revenue continues to investigate a potential private management agreement for the lottery, and House Minority Leader Frank Dermody (D-Allegheny) believes that it’s proof no such deal is needed.

“The lottery’s doing quite well and there’s nothing that the current folks can’t do that these new people could do, other than skim profits off the top,” Dermody tells Radio PA.  “This is just another solution in search of a problem.”

But the welcome lottery growth has not turned officials off to the idea of entering into a private management agreement.  “The need for the programs is going to grow over the next ten to 20 years, and we need to be looking at every possible way to increase the funding for our seniors,” Pennsylvania Lottery Executive Director Todd Rucci said in a telephone interview.

If officials decide to take the next step toward a private management agreement, Revenue Secretary Dan Mueser says invitations for bid could go out in the fall.

Pennsylvania Lottery

PA Explores Private Lottery Management

The Corbett administration is investigating whether privatizing lottery management will improve its ability to support programs for older Pennsylvanians.  The state’s senior citizen population is projected to grow by 20% over the next decade, and Revenue Secretary Dan Meuser says they want lottery revenues to do the same.

“Keep in mind, the state of Pennsylvania maintains all full control of this lottery,” Meuser tells Radio PA.  “We are not talking about at all selling the lottery.  We are bringing on a private consultant to help us meet the growth demands of the lottery.”

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

There’s no rush.  Requests for Qualifications went out in the spring, and Meuser says they are now in their “due diligence” phase of exploration.  “We’re not there yet,” Meuser explains.  “We’re not sure if a firm out there believes they can in fact do that, or if that firm can be acceptable to us.”

Private firms have expressed interest.  Meuser, however, cannot say which ones or even how many.  He tells us that could affect the competitiveness of the procurement process.  If they decide to proceed, invitations for bid could go out in the fall.

The trail for such private management agreements has already been blazed by the state of Illinois.  The Prairie State has just wrapped up its first fiscal year under private lottery management, and Illinois Lottery Superintendent Michael Jones believes it can work.  “I absolutely believe that the amount of money they promised the state is realizable,” Jones explains.  “With good marketing and good games and good prizes this will be a big success.”

Northstar Lottery Group promised Illinois $851-million dollars in profits during year one, and $951-million dollars in profits in year two.  Under the contract, Jones says, Northstar will receive significant bonuses if they hit those targets, and will have to pay the state penalties if they fall short.  Preliminary revenue numbers for Illinois’ first fiscal year under private lottery management are expected to be released in the near future.

Supporters call it a great way to generate new revenue without raising taxes.  “[Illinois] wouldn’t have done it if they weren’t going to get a billion dollars in extra revenue over the next five years,” says Reason Foundation director of government reform Leonard Gilroy.  “It wouldn’t have happened.”  Like Pennsylvania, Gilroy says states like Indiana and New Jersey are also seriously considering privatizing their lottery management.

Some members of the state House Democratic caucus are already speaking out against the issue in Pennsylvania, however.  “Why would we pay a company millions of dollars to do the same thing we could do ourselves – especially when those millions of dollars are badly needed for programs that help older Pennsylvanians?” asks Minority Leader Frank Dermody (D-Allegheny).

Secretary Meuser says the private entities’ proposals will help them make that call.  It’s something he says they’re taking very seriously. “The lottery funds will continue and only to go to benefit older Pennsylvanians and we are working now to secure that is the case, without question, today and ten years from now.”

Administration Takes First Step Toward Privatizing PA Lottery

The state has issued a “Request for Qualifications” to pursue a private management agreement for the Pennsylvania Lottery.  It’s the first step toward privatizing one of the nation’s oldest and biggest state lotteries.  The next step would be to accept bids from qualified companies. 

“This initiative is simply part of my administrations’ efforts to tap private sector innovation to make state government work more efficiently and effective, which is precisely what taxpayers expect,” Governor Tom Corbett said in a written statement. 

The Pennsylvania Lottery would not be sold; rather it would be run by a private management firm in hopes of maximizing the revenues that are used to fund programs and services for older adults in the state. 

The Pennsylvania Lottery just celebrated its 40th anniversary last month, and has generated $21.5-billion dollars for older Pennsylvanians since its inception.  However the Lottery’s profits have only grown by an average of 0.3% a year of late, and a recent study indicates that seniors will compose 22.5% of the state’s total population by 2030. 

The state Department of Revenue oversees the lottery, and Revenue Secretary Dan Meuser says the Lottery’s ability to grow cash flow for senior programs has become uncertain.

However House Democrats have their reservations.  Democratic Leader Frank Dermody (D-Allegheny) says the current system isn’t broken, and fears that any changes could hurt the thousands of seniors who rely on Lottery-funded health and safety programs.

Mega Millions Lottery Jackpot at Historic Levels

The Mega Millions lottery jackpot has hit a record level for its  drawing on Friday, March 30th. The jackpot started building on January 27th, and will be the largest U. S. lottery Jackpot on record with an annuity value of at least 640 million dollars and tentative cash payout of 462 million. 

Pennsylvania joined the multi-state game in January of 2010 and this run has been very good for the lottery fund according to Lauren Piccolo, information specialist for the Pennsylvania Lottery. She says from the beginning of the run through the Tuesday drawing, the state lottery had already sold nearly 37.9 million dollars worth of Mega Millions tickets, translating into nearly 11.4 million dollars for programs to benefit older Pennsylvanians.

Piccolo says since the state joined Mega Millions, the game has generated about 260 million dollars in Pennsylvania sales and 80 million for programs benefitting older Pennsylvanians.

Piccolo says Mega Millions has been a great addition, allowing the state lottery to offer big jackpots four times a week. The state had already added Powerball in 2002.

The Mega Millions run marks the second big lottery jackpot so far this year. The  jackpot for the February 11th Powerball drawing was worth 336.4 million dollars, making it the third largest Powerball jackpot on record and the largest cash option payout in Powerball history.  It was the 7th largest jackpot in U. S. history.

Tickets for the Mega Millions drawing will be available until 9:59 pm on March 30th. Players select five numbers from 1 to 56 and select a Mega ball number from 1 to 46.  The lottery is making sure retailers have enough ticket stock and routine maintenance on lottery terminals have been suspended temporarily.

Bipartisan Panel Studies PA Lottery Fund

The Legislative Budget & Finance Committee has released the first comprehensive study of the Pennsylvania Lottery in 18-years.  The study focused on the relationship between the Lottery Fund and the programs it supports for older Pennsylvanians. 

The study points out the rapid growth that’s expected in Pennsylvania’s senior citizen population.  For instance, seniors are expected to compose 22.5% of the state’s total population by 2030.  Today, that number is 15.4%.  However, lottery sales are only slated for slight growth in the next five years – attributed almost entirely to the rise of instant games. 

The study raises no immediate concerns, but points out that if future lottery sales fall on the low end of projections, funding for services within the state Department of Aging may not be adequate.  The Lottery Fund currently supports a variety of programs, everything from the Property Tax/Rent Rebate to Area Agencies on Aging. 

The committee’s recommendations include the continued expansion of the Pennsylvania Lottery’s retail network, and a call for the General Assembly not to add anything to the list of programs already funded by lottery dollars. 

The study was conducted per the direction of HR 106, which passed the House unanimously back in June.  “I am pleased that there appears to be no immediate danger of senior citizens losing benefits,” says State Rep. Martin Causer, the resolution’s sponsor.  “However, our population is aging, and if lottery sales continue to stagnate, we could be faced with some difficult decisions in the next decade.”