House Democrats blast Corbett’s ‘corporate giveaway’ of Pa. Lottery

HARRISBURG, Dec. 3 – House Democratic leaders today sharply criticized Gov. Tom Corbett’s plan to hand over control of the successful Pennsylvania Lottery to a foreign corporation, which could cost older Pennsylvanians hundreds of millions of dollars in lost funding for services over the life of the contract.

“We have said for months that this process has been too secretive, and we called on Governor Corbett to shine some light and transparency on his plan for privatizing the Lottery,” said Democratic Leader Frank Dermody, D-Allegheny. “Now, when there is no General Assembly in session, he is trying to hand-deliver a lucrative contract to the lone bidder with no hearings, no legislative approval and no public scrutiny. This whole thing stinks.”

The Corbett administration announced on Nov. 20 that it was considering a bid from Camelot Global Services PA LLC for a 20-to-30-year contract to manage the Pennsylvania Lottery. The Canada-based company was the sole bidder for the lucrative contract. Camelot is owned by the Ontario Teachers’ Pension Plan and is the operator of The National Lottery in the United Kingdom.

Democratic leaders decried the lack of openness and transparency in Corbett’s privatization quest for the Lottery. Indeed, few details of Camelot’s proposal have been released, leaving many unanswered questions. Still, Democrats said the little information they’ve seen is cause for alarm.

The House Democrats revealed a list of six secrets about the Camelot proposal that the Corbett administration has not yet publicly discussed. They are:

  • Secret No. 1: The proposed privatization contract with Camelot would require the Commonwealth of Pennsylvania to pay Camelot’s operating expenses – including salaries for private executives. Those payments would be in addition to the company’s management fee – a cut of Pennsylvania Lottery profits, which otherwise would go to senior programs.
  • Secret No. 2: Camelot appears to have low-balled its performance targets for future years to guarantee it will earn more money. In fact, the better the lottery performs, the more seniors would lose because the “incentives” for Camelot are percentage-based to grow incrementally larger with better performance
  • Secret No. 3: Despite Corbett administration claims of guaranteed annual profits for the lottery, the proposal does not require Camelot to pay seniors the full difference between actual results and its projections. They may pay a portion of the difference, or they may pay nothing at all. In Illinois, private lottery manager Northstar Lottery Group is challenging that state’s financial penalties for falling short on its projected lottery profits.
  • Secret No. 4: Camelot’s bid front-loaded profit projections in the first few years of the contract, but in the last 10 years Camelot only guarantees lottery growth of 1 percent per year – at the same time the Corbett administration acknowledges there will be a spike in the number of seniors needing services through programs funded by the Pennsylvania Lottery.
  • Secret No. 5: A clause in the proposed privatization contract would grant automatic contract extensions beyond the stated 20-year term, so Camelot’s profits can continue for up to 30 years without legislative or public input.
  • Secret No. 6: Unlike the 2004 gaming law, which legalized casino gaming in Pennsylvania, the proposed lottery privatization scheme would allow Camelot, and its executives, to make generous campaign contributions in Pennsylvania.

“This is nothing short of a massive corporate giveaway,” said Democratic Whip Mike Hanna, D-Clinton/Centre. “From what we’ve seen, Camelot stands to reap hundreds of millions of dollars in profits, while Pennsylvania seniors are left with less money to help them pay for their prescription drugs, transportation, property taxes and rent and other critical needs.”

The Pennsylvania Lottery is the only lottery in the nation to exclusively dedicate all its proceeds to programs for older residents.

“Governor Corbett should be transparent with the people of Pennsylvania and show us the Camelot proposal,” said Democratic Appropriations Chairman Joe Markosek, D-Allegheny. “What we’ve seen already is truly alarming, and we still don’t even have all the details.”

Dermody noted that Corbett’s plan to privatize the Pennsylvania Lottery is based largely on projected increased profits to come from expanded gaming opportunities, including online games and Keno. He said there’s no reason to pay a private corporation to run those games when the current state employees could just as easily run them.

“The governor has not yet given a satisfactory answer to the one central question here: Why is he doing this?” asked Democratic Policy Committee Chairman Mike Sturla, D-Lancaster. “Why does he want to spend millions of dollars to fix a lottery that isn’t broken? In fact, our lottery is a shining star among state lotteries. It just makes no sense.”

The Pennsylvania Lottery had a record year in 2011-12, with sales of nearly $3.5 billion and profits of more than $1 billion. For this fiscal year, lottery sales are on pace for another record, with profits nearly 10 percent higher than they were a year ago.

Michael Hanna

76th Legislative District
Centre and Clinton counties
(717) 772-2283

Joseph Markosek

25th Legislative District
Allegheny County
(717) 783-1540

Mike Sturla

96th Legislative District
Lancaster County
(717) 787-3555

Frank Dermody

33rd Legislative District
Allegheny and Westmoreland counties
(717) 787-3566