Attorney General Kane rejects lottery privatization deal
By Brad Bumsted
Published: Thursday, Feb. 14, 2013, 12:27 p.m.
HARRISBURG — Attorney General Kathleen Kane on Thursday rejected Gov. Tom Corbett's contract with a Britain-based firm to privatize management of the state lottery.
Kane, a Clarks Summit Democrat, said the proposal was “unlawfully infringing on the General Assembly's power to make basic policy choices.”
Speaking in O'Hara, Corbett responded: “I'm deeply disappointed with that decision, and I disagree with it” and said his administration is “in the process of determining what our options are.”
The conflict between Kane and the Republican governor is the first official disagreement in what political observers have suggested could be a rocky relationship. Kane campaigned on a promise to scrutinize Corbett's handling, while he was attorney general, of the investigation of former Penn State University assistant football coach Jerry Sandusky on child sex-abuse allegations.
“It is our duty to defend and protect the Constitution of our commonwealth, and that is what our office has done today by declining this contract,” she said.
In a memo to the Department of Revenue, Kane said the development of monitor-based games or other electronic games such as keno is not authorized by the State Lottery Act and usurps the authority granted by the General Assembly to the Gaming Control Board.
The $34 billion, 20-year contract would allow the company that runs the United Kingdom's National Lottery to manage Pennsylvania's. One of the largest in the country, the lottery last year made $3.5 billion in sales as of June 30 — a record for Pennsylvania.
Pennsylvania's lottery is the only one in the nation that dedicates all of its proceeds to senior programs such as low-cost prescription drugs, property tax and rent rebates.
Corbett said he sought the private management agreement because the lottery won't be able to keep pace with the state's growing senior population. There are 2.7 million Pennsylvanians 60 and older. By 2030, there are expected to be 3.6 million people older than 60, according to the state Department of Aging.
“We are disappointed with Attorney General Kane's decision to reject the private management contract,” spokesman David LaTorre said on behalf of Camelot Global Services PA. “We guarantee our proposal will produce unprecedented profits for senior programs, and we have backed our investment in Pennsylvania with $200 million.”
Response from lawmakers followed partisan lines.
“She made the right decision, and I applaud her for it,” said Senate Minority Leader Jay Costa, D-Forest Hills.
House Speaker Sam Smith, R-Punxsutawney, and Majority Leader Mike Turzai, R-Bradford Woods, promised scrutiny of Kane's decision. “The Legislature passed the lottery law in 1991, giving broad powers to the secretary of Revenue to manage the operations,” they said. “Right or wrong, it's the legislative branch of government that should decide if the governor has too much say. Consequently, we expect that the Legislature will be reviewing the attorney general's determination with great interest.”
Kane's news conference was her first major public appearance since her swearing-in ceremony last month. She took no questions afterward.
The attorney general reviews about 5,000 state contracts each year for “form and legality,” Kane said. She said two top deputies with years of experience in contract reviews advised her on the Camelot contract. Both previously worked for Corbett, Kane said.
Corbett said this week he doesn't remember rejecting any contracts in his eight years as attorney general. The vast majority of contracts are repetitive and routine, he said.
The Camelot contract “is a unique and specialized agreement which deals with complicated constitutional and other issues,” said First Deputy Attorney General Adrian King. “In fact, it has been many years since a contract of similar scope and complexity has been submitted to this office for approval.”
There's no question Kane has the authority under the Commonwealth Attorney's Act to disapprove the contract, experts said.
“She definitely has the authority to do it,” said Bev Cigler, a political science professor at Penn State's Harrisburg campus.
“The attorney general would have had to defend the contract on the state's behalf based on any legal challenge,” said Bruce Antkowiak, a law professor at St. Vincent College. “For that reason, I think they'd have standing to weigh in.”
Corbett is able to appeal to Commonwealth Court under the law, said Duquesne University Law School professor Bruce Ledewitz.
Time is of the essence for Corbett, “but this will not be quick,” Ledewitz said.
Another option is for the administration to ask for immediate consideration by the state Supreme Court, using its “king's bench” power, Ledewitz said.
Corbett officials haven't specified which route they might take.
Corbett said the state would lose $50 million for this year's budget if the deal with Camelot falls through. The $50 million is the difference between Camelot's annual profit and the lottery's projected profit this year, said Department of Revenue spokeswoman Elizabeth Brassell.
Kane told people to be wary of politicians claiming a legal review resulted in the loss of $50 million to the state. That amounts to “blaming the messenger,” she said.
Staff writer Tom Fontaine contributed to this report. Brad Bumsted is state Capitol reporter for Trib Total Media. He can be reached at 717-787-1405 and firstname.lastname@example.org.
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