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Pennsylvania Lottery could be run by private company if a business meets the state's terms

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By Bobby Kerlik
Friday, Nov. 9, 2012, 2:24 p.m.
 

State officials on Friday released the terms they would require for a private company to run the Pennsylvania Lottery and possibly expand to Internet games and Keno.

Gov. Tom Corbett is moving toward a plan that would hire a company to manage the lottery for 20 years with the chance to extend that for 10 years in exchange for guaranteed annual profits.

“We are looking into privatization. A final decision hasn't been made,” Corbett said.

The governor said he has believed from “day one” of his term that the state should privatize where it benefits taxpayers. If the lottery plan increases revenue, Corbett said, the state has an obligation to look into it.

“If privatization of the lottery would mean a loss of revenue, it won't be done,” said Corbett, whose discussions with lawmakers became public in April.

State Democratic leaders lined up against the plan, saying they want to see proposals and proof that such a move would benefit the state.

“We'd like to know why we're even talking about this. The lottery is making record profits. Why take those profits and give them to shareholders instead of senior citizens?” asked Frank Dermody, D-Oakmont, the House minority leader. “It's a solution in search of a problem. You have a for-profit enterprise that's going to take money off the top. The profits have to come from somewhere.”

Jay Costa, Senate Democratic leader from Forest Hills, criticized the closed-door negotiations.

“The people of Pennsylvania, especially our seniors, deserve an open and transparent process complete with legislative input and oversight,” Costa said in a prepared statement.

The lottery reported $3.48 billion in sales in the 2011-12 fiscal year, its most ever and an increase of 8.5 percent over the previous year. After prizes and expenses, net revenue was $1.06 billion, an increase of about 10.4 percent.

That money goes to programs for seniors, including a property tax and rent subsidy, transit, prescription drugs, senior centers and long-term care services.

The key terms of the state's plan require the private company to pay $150 million in upfront cash to act as a guarantee for future revenue. The contract would guarantee the state a certain amount; if the company did not meet that in any year, the state would make up the difference from the $150 million.

Elizabeth Brassell, spokeswoman for the Department of Revenue, which runs the lottery, said the plan would provide a predictable revenue stream even in years when the lottery does not meet revenue projections. The state will add Keno even if it doesn't hire a private company, she said.

“The senior population is growing and the lottery funds programs for the elderly. We need to grow the lottery funding of those programs,” Brassell said. “We're looking to what new ideas (private management) has and if they can do it better, faster and cheaper. The contract will not be entered into unless it delivers significantly higher incremental profit growth.”

Brassell declined to say how many and which businesses have submitted plans.

After the state approves the business plans, it will ask those companies for bids, she said.

Staff writer Brad Bumsted contributed to this report. Bobby Kerlik is a staff writer for Trib Total Media. He can be reached at 412-320-7886 or bkerlik@tribweb.com.

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