FOR IMMEDIATE RELEASE
Pa. House Democratic Caucus
House Democrats want answers on Corbett’s lottery privatization scheme
Leaders say a private management contract would divert millions away from senior programs
HARRISBURG, June 21 – Expressing concerns about millions of dollars being diverted away from critical programs and services for seniors, House Democratic leaders are seeking answers from Gov. Tom Corbett regarding his secretive efforts to privatize the management of the Pennsylvania Lottery.
In a joint letter to Corbett from Democratic Leader Frank Dermody, Democratic Appropriations Committee Chairman Joe Markosek and Democratic chairman of the House Aging and Older Adult Services Committee Lawrence H. Curry, the leaders asked Corbett for answers regarding his true intentions with privatization and demanded transparency and openness in the process.
"It’s clear that this privatization scheme is on the fast track," the legislators wrote. "In simple terms, you’ve decided to conduct this process in secret until it’s a done deal. That is unacceptable and completely contrary to the ‘reform’ platform you campaigned on two years ago."
The Department of Revenue issued two press releases on Corbett’s plan to privatize the management of the Pennsylvania Lottery, but provided few details beyond that.
In a June 12 press release, the Department of Revenue announced that a Request for Qualifications was issued to potential bidders on April 12, and that it has received responses from interested bidders. The same press release announced the administration is "taking next steps" in the process and that it is moving into a "due diligence phase," where qualified bidders would begin discussions with the Corbett Administration. The administration has said all talks and bids are confidential.
"Beyond the complete lack of transparency in this process, there is also a glaring lack of fiscal accountability," the Democratic leaders wrote to Corbett. "Your Administration has produced no financial analysis to support your claim that turning over the management of the Pennsylvania Lottery to a for-profit company will result in significant improvements in Lottery sales and profits."
They noted that the United Kingdom-based Camelot Group has reportedly been named a leading contender for the Pennsylvania Lottery management contract. Camelot operates the UK National Lottery and expressed interest in managing the California and Texas lotteries. The company also submitted a failed bid for the Illinois Lottery management contract, in which Camelot touted its success with Internet lottery sales as a primary means of boosting state revenue in Illinois.
"So we ask you: Is this your end game? Is your intention to increase Lottery sales through online sales and/or expanded Internet-based games," the Democratic leaders asked. "If so, a private management contract is a waste of money, because that can be done right now under the current management and operational structure of the Pennsylvania Lottery.
"Why would we pay a company millions of dollars to do the same things we could do ourselves – especially when those millions of dollars are badly needed for programs that help older Pennsylvanians?"
Corbett already committed to spending millions in consulting fees to two out-of-state firms that were contracted by the administration to aid in the lottery privatization process – up to $4 million to Chicago-based Greenhill and Co. for financial advice and up to $375,000 to Baltimore-based DLA Piper for legal fees.
"That’s a total of nearly $4.4 million that should be going to programs that help Pennsylvania seniors – not to out-of-state consulting firms," the Democratic leaders wrote.
The Pennsylvania Lottery is the only lottery in the nation that designates all proceeds to programs for seniors. Programs funded through Pennsylvania Lottery include: property tax and rent rebates, prescription drug assistance through PACE and PACENET, home and community-based services through PENNCARE, free and reduced-fare transit, long-term living services and programs offered through the 52 Area Agencies on Aging.
"We agree that we must explore new ways to grow the Pennsylvania Lottery to ensure these programs have reliable and sustainable funding," wrote Dermody, Markosek and Curry. "However, we question your logic in pursuing a private management contract to achieve that. Every dollar spent on privatization is a dollar taken away from valuable programs and services for seniors."
The Democratic leaders also noted that the Pennsylvania Lottery is “consistently one of the most successful lotteries in the nation,” posting a record $3.2 billion in ticket sales last year and providing $961 million in profits that were used for programs that help older Pennsylvanians. In addition, the Pennsylvania Lottery consistently has the lowest administrative costs among the top 10 lottery states – just 2.4 percent of sales in 2010-11.
"We find it hard to believe that a private, for-profit company would be able to keep administrative costs at or below those lowest-in-the-nation levels," the Democratic leaders wrote. "With such phenomenal success, it’s fair to ask: If it’s not broken, why fix it?"
Attention Editors: The letter from House Democratic leaders to Gov. Tom Corbett can be downloaded in pdf format here.