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A better way to 'reform' the Pennsylvania Lottery

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Saturday, Feb. 2, 2013, 9:00 p.m.

Privatization has a ring to it. It appeals to those who believe that government should be run like a business. And it has reared its seductive head once again with the pending privatization deal with the British company Camelot Global Services to manage the Pennsylvania Lottery.

But privatization is not always the lifeline politicians expect.

“The Great Bamboozle of 2010,” the proposal by Pittsburgh Mayor Luke Ravenstahl to turn over the city's parking facilities to out-of-town investors, is an example of privatization almost gone disastrously awry. City Council thankfully scuttled that deal, considering the havoc a similar misadventure has caused in Chicago.

There, parking rates continue to soar and the taxpayers are locked into a bad deal for 75 years. Worse, Chicago's inspector general has said that the city shortchanged itself around a billion dollars on the sales price. And now, the city must pay to close streets for neighborhood events and reimburse the management company for disability parking permits.

“In the Public Interest,” a resource center on privatization, says that insourcing, and not outsourcing, is now the way to go. In San Diego, public employees successfully competed with private companies to provide essential public services. By eliminating the profit required by private companies, the costs are competitive and the public employees have proven to be more responsive to public management.

This is what G. Terry Madonna and Michael L. Young described in their recent Politically Uncorrected newsletter, claiming that government “must become entrepreneurs.” The Pennsylvania political pollsters called outsourcing the “zombie-like application of yesterday's techniques to today's problems.”

There is even a promising half-step between the public and private alternatives, successfully used by the Sophie Masloff administration in the early 1990s to save the Pittsburgh Zoo, Phipps Conservatory and the city Aviary. Instead of privatizing those regional attractions, the city nonprofitized them, transferring them to nonprofit organizations composed of volunteers who embraced their missions, raising outside funding and allowing each to flourish.

Madonna and Young do credit the Camelot deal with providing a “blueprint” for how government can become more entrepreneurial. According to the pair, Camelot is owned by the Canadian Ontario Teachers' Pension Fund, which will be using the profits from managing our lottery to keep its own pension fund solvent.

Ironically, just last week, the Pennsylvania Public Employees Retirement Commission issued a serious “call to action,” providing a list of painful options to address the pension fund crisis right here. Most of them will hurt either the taxpayers or those who live on the pensions they have earned.

But if Madonna and Young are right and our own pension funds formed a management firm to run our own lottery, profits would help retire our own $41 billion pension debt. Increased revenue would still go to our senior citizens and those good jobs slated for elimination would be saved.

If it's not too late, that might be a gamble worth taking.

Joseph Sabino Mistick, a lawyer, law professor and political analyst, lives in Squirrel Hill (

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