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Pennsylvania strikes deal to privatize lottery; some lawmakers irked

| Friday, Jan. 11, 2013, 5:08 p.m.
Lottery sales were higher than usual during the day Thursday, March 29, 2012 at Pittsburgh News in Downtown as the Mega Millions jackpot soared above $540 million. Philip G. Pavely | Tribune-Review

HARRISBURG — The Corbett administration on Friday awarded a contract to a British-based firm to privatize the management of the state lottery for the next two decades, inviting a barrage of partisan criticism in the process.

The contract is slated to go to Camelot Global Services PA. Its parent company runs the United Kingdom's lottery.

The contract isn't final or signed, and some lawmakers and others could try to scuttle the deal.

“We think it is a slap in the face to the Legislature,” said Senate Minority Leader Jay Costa, D-Forest Hills.

Revenue Secretary Dan Meuser announced the “notice of award” for the 20-year deal in a news release on Friday evening, but he was unavailable for comment.

Camelot guaranteed it would earn $34 billion for the state over the course of the contract. Corbett wants to increase lottery revenue for the growing elderly population in the state, the only one in the nation that dedicates all proceeds to senior programs.

The lottery recorded $3.5 billion in sales for the year that ended June 30 and contributed more than $1 billion to programs providing low-cost prescription drugs and property tax and rent rebates.

“We know the state has placed enormous trust in giving us responsibility for its lottery, and we intend to work tirelessly to earn that trust,” said David La Torre, spokesman for Camelot.

“We are confident in our projections on growing responsibly the Pennsylvania Lottery over the next 20 years and guaranteeing the economic future for seniors programs.”

Negotiating the deal in large part when the Legislature was not in session and doing it before a Senate hearing on the plan scheduled for Monday “will cause considerable blowback in the General Assembly,” said G. Terry Madonna, a political analyst.

The timing of the late-afternoon announcement prompted Costa to call the award “extremely disappointing and disturbing.” He said it “really is appalling to me personally and many of my colleagues.”

“It shows real contempt, not just for the Legislature, but for the public,” said Sen. Rob Teplitz, D-Harrisburg.

Lawmakers acknowledged that the governor is legally entitled to enter into multimillion-dollar contracts.

Jay Pagni, a spokesman for Budget Secretary Charles Zogby, said the administration's goal is “quite the opposite” of what critics described.

Without the notice of award, the administration would have been prohibited from talking about details in the contract process with Camelot. Pagni said the administration wants to be able to answer lawmakers' questions at the hearing.

“Our goal is to be as complete and provide as much detail about this 10-month procurement as we can,” Pagni said. The lottery management privatization effort began in April.

There are legal issues, however. Camelot said it would boost revenues in part by putting keno terminals in restaurants, bars and taverns. Legislators, including some Republicans, contend an expansion of gambling cannot be done without legislative approval. Treasurer Rob McCord, a Democrat, has said he may decide not to pay Camelot if he determines keno needs such approval.

Meuser has said agency lawyers told him the department has the authority to start keno, which is similar to Pennsylvania's previous Super 7 game except that drawings occur throughout the day.

The union representing lottery workers is suing to block the deal. “It's just incredible that the governor would ignore the General Assembly and the thousands of Pennsylvanians we've heard from who understand that this is a bad deal for our seniors,” said Dave Fillman, executive director of AFSCME Council 13, which represents lottery employees.

House Democrats on Friday afternoon threatened legal and legislative action to block a deal if Corbett reached one before Monday's hearing.

State Sen. Matt Smith, D-Mt. Lebanon, and House Minority Leader Frank Dermody, D-Oakmont, said they want to put the proposal under a microscope when the Senate Finance Committee convenes.

Said Dermody, “We have the best, well-run lottery in the country. It set profit records last year. They have the lowest overhead in the country.”

He said he would introduce legislation to “take it back” if Corbett sealed the deal without a hearing.

Asked if he can round up Republican votes for such a measure, Dermody said, “I don't know, but there are Republicans against this, too.”

Brad Bumsted is state Capitol reporter for Trib Total Media. He can be reached at 717-787-1405 and bbumsted@tribweb.com. Debra Erdley is a staff writer for Trib Total Media. She can be reached at 412-320-7996 or derdley@tribweb.com.

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