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Senate panel puts Pennsylvania lottery privatization under microscope

| Monday, Jan. 14, 2013, 10:22 a.m.

HARRISBURG — Pennsylvanians would be able to play lottery games in bars, clubs — even at home — within a year or two under a proposed revamp of the system, Revenue Secretary Dan Meuser said on Monday.

Growing the lottery to increase revenue is part of the plan under the contract the state tentatively awarded last week to Camelot Global Services PA, which would act as a private manager of the lottery for 20 years. Republican Gov. Tom Corbett expects to sign the contract, perhaps by the end of the week.

Camelot, which the Ontario Teachers Pension Plan owns, guaranteed the state $34.6 billion in profit over the two decades of the contract. Camelot would bring “world-class expertise” to the lottery, Meuser told lawmakers at a Senate Finance Committee hearing on Monday. He was referring to the company's 18-year management of the United Kingdom's lottery.

The deal will generate $50 million more for the state in the coming fiscal year and $460 million to $530 million more during the next five years, Meuser said.

Alex Kovach, president of Camelot, said the company's plan is to expand markets so “a lot of people play a little.” The company would look to bring back “lapsed and infrequent gamblers.” It is not a plan to cut costs or employees, he said.

Keno could be in bars and clubs by the end of the year, and residents could buy lottery tickets online in a couple of years, Meuser said.

Once Corbett signs the contract, Kathleen Kane, a Democrat who will be sworn in Tuesday as attorney general, will have 30 days to review it for “form and legality.” Her signature is required for the deal to go through.

Asked when the contract with the state will be final, Dianne Thompson, Camelot's CEO, told lawmakers that it is up to the Corbett administration. “It's slightly complicated,” Thompson told a Senate panel. “You have a new attorney general.”

She later said she did not mean she was concerned, only that the new attorney general would have to get up to speed.

Pennsylvania's lottery, established in 1971, is the only one in the nation whose proceeds exclusively benefit senior programs. They range from low-cost prescription drugs to property tax and rent rebates.

Corbett said he wants to expand lottery revenue because of Pennsylvania's growing senior population. The state has 2.7 million people 60 or older. By 2030, it will have 3.6 million.

Because Camelot would front $200 million to cover any shortfall in its revenue projections, administration officials said $75 million in a lottery reserve fund could go to programs.

Peter Tartline, executive deputy secretary in the governor's budget office, said some criticize Corbett's tentative deal with Camelot on the basis it's a lone bid. It's not.

Two other bidders dropped out, one stating it was a “one-sided” deal for the state, Tartline said.

The two other bidders were the Tatts Group of Australia and G-Tech of Rhode Island, Tartline said.

“Yes, this (contract) is a sweetheart deal,” Tartline said during the hearing. “It's a sweetheart deal for Pennsylvania seniors. It's a sweetheart deal for the commonwealth.”

Some in the Legislature might challenge the contract with legislation or litigation because of the provision allowing Camelot to add keno numbers games. Opponents say only the Legislature can approve an expansion of gambling.

The leader of a union representing state workers said using a “foreign corporation is illogical, erroneous and frankly disingenuous.” David Fillman, executive director of the American Federation of State, County and Municipal Employees Council 13, expressed disbelief that Corbett would privatize lottery management coming off record sales in 2012.

Brad Bumsted is state Capitol reporter for Trib Total Media. He can be reached at 717-787-1405 and bbumsted@tribweb.com.

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