As the General Assembly reconvenes for a new session, the Senate Finance Committee scheduled a hearing on the proposal to privatize the Pennsylvania Lottery.
A Legislative Budget and Finance Committee report released in February 2012 revealed that the state’s aging population will demand more in services than lottery revenue growth. Rather than cut critical programs or raise taxes on working Pennsylvanians, the administration has sought private experts as a means to boost essential revenues.
More than nine months ago, the Department of Revenue began to solicit potential private lottery managers. While three private bids were initially received, two companies had dropped due to the state’s robust requirements of having to pay for profit shortfalls.
The remaining bidder, Camelot Global Services, has guaranteed a minimum of $34 billion in lottery profits over the next 20 years. When compared to historic lottery performance, this amounts to an additional $2.3 billion for senior services in the first decade of the agreement alone.
The privatization proposal does not incorporate the sale of the lottery, but rather an agreement for a private manager. Pennsylvania will retain full ownership rights and the ability to inspect and audit the lottery. The contract also boasts other accountability measures such as $200 million in collateral for profit shortfalls, annual business plans and the ability to terminate the agreement after three years for any reason.
Under the current proposal, the state will retain 70 of the 230 lottery employees while the remaining 160 workers are guaranteed an additional year of employment. During transition, Camelot will offer new positions to state employees and the state will find replacement positions for those not receiving an offer. This deal requires that Camelot incorporates in Pennsylvania, paying the same taxes as other businesses and that 80 percent of lottery workers and hours be located in Pennsylvania.
The Pennsylvania Lottery’s private management agreement makes winners out of both seniors and taxpayers alike. In contrast to the current system that has missed budgeted sales in four of the last eight years, the private contract will deliver billions more in revenues for senior programs and ensure that taxpayers are not on the hook for shortfalls.