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Pennsylvania Liquor Store

Liquor Privatization Bill Introduced

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The legislation essentially puts the plan Governor Tom Corbett outlined in January into bill form, and House Majority Leader Mike Turzai (R-Allegheny) is optimistic.  “People recognize Pennsylvania needs to change in a positive direction. We’re now talking about the details of how you structure that change.”  Turzai is the bill’s prime sponsor and perhaps the legislature’s biggest proponent of liquor privatization.    

While Turzai believes the concepts and objectives of liquor privatization will remain the same, he recognizes the details could change through the legislative process.  An amendment already being explored by Liquor Control Committee Chairman John Taylor (R-Philadelphia) would reportedly allow state-run liquor stores to compete with private sector licensees. 

State Rep. Mike Turzai (R-Allegheny)

House Republican Leader Mike Turzai

Turzai suggests that sort of plan merely takes a different route toward the same destination.  “In my mind, once the private sector gets the opportunity to sell wine & spirits, the state stores are – over time – they’re not going to be able to compete.”

The bill (HB 790) appears to be on the fast track.  Turzai tells reporters he’s eying a March 18th committee vote and final House passage in late March or early April. 

The timetable should raise red flags, according to House Democratic Leader Frank Dermody (D-Allegheny).  “Most legislators want to discuss ways to improve service and convenience for customers through the normal committee process, including hearings,” Dermody says in a statement.  “The more complicated his plan becomes, the faster he wants to vote on it with not committee hearings.”

Reactions to Lottery Decision Pouring in

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The contract to privatize Pennsylvania Lottery Management has failed Attorney General Kathleen Kane’s “form and legality” test.  Reactions abound from stakeholders and elected officials, and their statements are providing a few hints as to what’s next.  Check them out for yourself:

Governor Tom Corbett:

“I’m deeply disappointed. I don’t agree with the attorney general’s analysis and decision, and we will review our legal options.

My job is to protect Pennsylvania’s seniors, and we will continue to do that.

We have a growing population where one in four Pennsylvanians will be over the age of 65 by 2017. My goal is to ensure that funding for senior programs keeps pace with that growth.”

(note that in his public comments in Pittsburgh, Governor Corbett said that one in four Pennsylvanians will be over the age of 60 in the next 17-years)

Camelot Global Services:

“We are disappointed with Attorney General Kane’s decision to reject the private management contract. We guarantee our proposal will produce unprecedented profits for senior programs and we have backed our investment in Pennsylvania with $200 million – transferring all risk from state taxpayers. Camelot has indicated it would headquarter in Pennsylvania, pay all taxes required of any commonwealth business, and keep all lottery jobs in the state. We have also publicly stated we would not oppose union organization by our employees. We have no further comment at this time.”

Speaker of the House Sam Smith / House Republican Leader Mike Turzai:  

“The administration’s interest was always about growing Lottery proceeds to increase funding for programs, thus helping the state serve its expanding senior population. We also realize many may feel this action by the attorney general ‘saves the Lottery.’ However, given that the Lottery has contracted out significant portions of its current operations, and has done so for many years, we hope the attorney general’s decision does not set the current operations back.   

“The legislature passed the lottery law in 1991, giving broad powers to the Secretary of Revenue to manage the operations. 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.”

House Democratic Leader Frank Dermody:

“The effort to outsource management of the Pennsylvania Lottery to a foreign corporation was done largely out of public view and it was wrong. In confirming the legislature’s authority in this matter, the attorney general made the right decision and followed the law.

“Because of her decision, lottery proceeds will continue to benefit older Pennsylvanians rather than being sliced up to benefit corporate shareholders.

“The governor is wrong when he claims the rejection of this improper contract will cost seniors money. I will push during the upcoming budget process to provide even more money than the governor proposed for senior programs and it can be done with the lottery’s current revenue.”

Treasurer Rob McCord:

“I commend the Attorney General for her independent review and subsequent rejection of the administration’s attempt to expand gambling through the state contracting process.

“The administration was repeatedly warned, as early as last year, that the proposed contract would permit new forms of gambling not currently authorized by the Legislature and not regulated by the Gaming Control Board

“Expanding the Lottery is a policy decision that should include the General Assembly, not be done through a closed-door contracting process.  Beyond the legal issues, this proposal also raised serious questions about how best to serve seniors efficiently with the programs that the Lottery pays for.”

Auditor General Eugene DePasquale:

“While I have not opposed all privatization, in the case of the Pennsylvania Lottery, Attorney General Kane and her team of lawyers made the right decision after identifying the legal flaws in the contract that would have led to an unprecedented expansion of gambling without legislative and public input.

“I am concerned that the benefits from the private management agreement would not meet or exceed what the current, very well run Lottery could produce in the same time frame. That concern, and the decision to expand gaming, need to be addressed with input from the public and Pennsylvania General Assembly before we go any further.

“I suspect today’s decision will not be the end of this story, but I hope Gov. Corbett will carefully weigh the cost to taxpayers before he decides to pursue this matter further. My office will continue to monitor the situation and be prepared to conduct and fair and independent audit should the contract eventually be implemented.”

 

Pension Reform Could Drive Budget Debate

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Perhaps the most controversial piece of Governor Tom Corbett’s $28.4-billion dollar state budget is the call for public pension reform.  The administration has penciled in $175-million dollars worth of savings next year, pending legislative action on the issue.  They say reforms would also free up nearly $140-million for the state’s 500 school districts. 

Charles Zogby briefed reporters on the budget just prior to the Governor's speech on Tuesday.

Charles Zogby briefed reporters on the budget just prior to the Governor’s speech on Tuesday.

“The reality is that our pension costs are taking most of our available revenue growth,” says Budget Secretary Charles Zogby.  The state’s pension obligations are expected to triple – to $4.3-billion – within the next four years.  Without reform, Zogby says deep cuts would be unavoidable.     

But legislative Democrats call it a false choice.  “We’ll work with him on [pensions], but everything he proposed today is not right, and we won’t support,” says House Democratic Leader Frank Dermody (D-Allegheny). 

The Corbett plan calls for new hires to be enrolled in a 401(k)-style defined-contribution plan and for adjustments to be made to the yet-to-be earned benefits of current state employees.  No changes would be made to retirees’ benefits or the benefits existing workers have already earned. 

The plan’s already raising legal concerns.  “He’s talking about changing future compensation for current employees, which has already been decided in the courts that is something that’s illegal, back in 1983-84,”  says AFSCME Council 13 executive director David Fillman.    

The state’s two biggest public sector unions – AFSCME and the Pennsylvania State Education Association (PSEA) – are vowing a legal fight, and that has lawmakers on both sides of the aisle concerned about balancing a budget on savings that would ultimately be in the hands of the courts. 

“The question is really, I think, what does a set of reforms look like that can secure 26-votes in the Senate and 102-votes in the House,” says Senate Republican Leader Dominic Pileggi (R-Delaware).  Pileggi has been serving in the Senate for more than a decade now, and knows that pension reform can be a profoundly difficult issue.

Corbett to Unveil Transportation Plan Soon

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As Governor Tom Corbett preps to unveil his transportation funding plan, House Democrats have already introduced a series of related bills.  They reflect the recommendations of the Governor’s Transportation Funding Advisory Committee, which released its report in August 2011.  Some of the funding streams it outlined as ways to help close the $3.5-billion dollar annual gap include: uncapping the oil company franchise tax and indexing vehicle & driver fees to inflation. 

House Democratic Leader Frank Dermody (D-Allegheny) tells Radio PA that Pennsylvanians are willing to invest in their transportation infrastructure.  “They’ll pay a little bit more knowing that it is going to improve roads and bridges and transit – make them safer – and put their families and neighbors to work again.”

Dermody says the governor needs to step up and lead on this issue, and lawmakers will get to work from there. 

One lawmaker that’s been working behind the scenes with the Corbett administration for weeks is State Senator John Rafferty (R-Montgomery), chairman of the Transportation Committee.  “The Senate will be very assertive this year in transportation funding,” Rafferty says, noting that he has legislation that’s almost ready to be introduced. 

Meanwhile, Governor Corbett has publicly said he will introduce a transportation funding plan before his February 5th budget address, meaning some much anticipated news will be made within the next two weeks.

Pennsylvania Lottery

Another Step toward Private Management of the Pennsylvania Lottery

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The Corbett administration is taking the next steps toward a Private Management Agreement (PMA) for the Pennsylvania Lottery.  Late last week the state announced the terms for a potential PMA, which include profit commitments for 20-years that would ensure growth in the programs that benefit the state’s senior citizens. 

“We are looking to privatize.  The final decision hasn’t been made yet, because we have to wait for bids and see how the bids turn out,” Governor Tom Corbett said at an unrelated event. 

“If I find that it’s going to cause us to lose money, are we going to do it?  No.” 

Pennsylvania Lottery net revenues increased by more than 10% last year and many legislative Democrats question any move toward privatization when the Lottery is producing record profits.  “No corporate operator can guarantee the same low overhead costs, and ever future dollar that goes to a private management company is a dollar taken away from critical senior programs like PACE, shared rids and rent rebates,” says House Democratic Leader Frank Dermody (D-Allegheny).    

The other terms laid out for a potential PMA include $150-million in collateral, the responsible implementation of monitor and Internet-based games and a provision that ensures ownership and control of the Lottery is retained by the Commonwealth.

At Least 25% of PSU Fine Will Stay in State

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The NCAA has tapped a task force to figure out how to administer the endowment fund to be created with a record $60-million dollar fine levied against Penn State in the wake of the Jerry Sandusky scandal.  The NCAA sanctions called for that money to be used to fund programs that help to prevent child sexual abuse and treat its victims. 

The NCAA indicates that at least 25% will be reserved for Pennsylvania organizations.  It’s a good start, according to state House Democratic Leader Frank Dermody (D-Allegheny), but not good enough. 

Frank Dermody

“We have issues in Pennsylvania.  We’ve had budget cuts for programs that work with victims of child abuse and we should keep that money,” Rep. Dermody tells Radio PA.  “That money should stay in Pennsylvania to help fund those programs.” 

Penn State forwarded the NCAA the input it received regarding the endowment.  “The NCAA has determined that at least one quarter of the annual disbursements from the endowment will be reserved for Pennsylvania organizations.  However, recognizing that child sexual abuse is a national issue, the NCAA has determined that grants from the endowment will be available in other states as well,” PSU President Rodney Erickson said in a statement.   

The ten member NCAA task force includes two Pennsylvanians: Nan Crouter of Penn State’s College of Health and Human Development, and Craig Hillemeier of the Penn State College of Medicine.  It will be chaired by the chancellor of the University of California, Riverside. 

While Dermody doesn’t know much about the non-Pennsylvania task force members, he believes they are highly qualified.  “So I hope they see that it’s the right thing to do to make sure that Pennsylvania’s children are taken care of.”

Reactions Abound to Voter ID Ruling

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Stakeholders are weighing in now that a Commonwealth Court judge has rejected critics’ call for an injunction against Pennsylvania’s new Voter ID law.  Here’s a sampling:

 

ACLU of Pennsylvania legal director Vic Walczak:  “Given clear evidence that impersonation fraud is not a problem, we had hoped that the court would show greater concern for the hundreds of thousands of voters who will be disenfranchised by this law.”

Secretary of the Commonwealth Carol Aichele: “I am pleased Judge Simpson affirmed the constitutionality of the Voter ID law.  This law will reinforce the principle of one person, one vote.  By giving us a reliable way to verify the identity of each voter, the voter ID law will enhance confidence in our elections.”

State House Democratic Leader Frank Dermody (D-Allegheny):  “Today’s ruling is a travesty not just for those Pennsylvanians whose right to vote will be stripped away by this law but for all Pennsylvanians and all American citizens.  A threat to one person’s right to vote is a threat to us all.  I sincerely hope the Supreme Court will right this terrible wrong and will overturn this decision in time for the November elections.  The commonwealth’s highest court should see what the rest of the nation so plainly does – that this law is a scam.”

Governor Tom Corbett: “Now that the court has upheld the constitutionality of the law, we can continue to focus our attention on ensuring that every Pennsylvania citizen who wants to vote has the identification necessary to make sure their vote counts.”

 

As Rep. Dermody alluded to in his statement, the case will surely be appealed to the state Supreme Court ahead of the November 6th General Election.  In the meantime, implementation and outreach efforts continue.  Interested voters can find a full list of acceptable forms of identification online.

Top Democrat: Private Management Agreement Unnecessary for PA Lottery

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The Pennsylvania Lottery’s 2011-12 Annual Report shows a 10.4% increase in net revenues, which means a record $1.06-billion will be used for programs that benefit the state’s senior citizens.

The positive financial news comes as the state Department of Revenue continues to investigate a potential private management agreement for the lottery, and House Minority Leader Frank Dermody (D-Allegheny) believes that it’s proof no such deal is needed.

“The lottery’s doing quite well and there’s nothing that the current folks can’t do that these new people could do, other than skim profits off the top,” Dermody tells Radio PA.  “This is just another solution in search of a problem.”

But the welcome lottery growth has not turned officials off to the idea of entering into a private management agreement.  “The need for the programs is going to grow over the next ten to 20 years, and we need to be looking at every possible way to increase the funding for our seniors,” Pennsylvania Lottery Executive Director Todd Rucci said in a telephone interview.

If officials decide to take the next step toward a private management agreement, Revenue Secretary Dan Mueser says invitations for bid could go out in the fall.

Pennsylvania Lottery

PA Explores Private Lottery Management

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The Corbett administration is investigating whether privatizing lottery management will improve its ability to support programs for older Pennsylvanians.  The state’s senior citizen population is projected to grow by 20% over the next decade, and Revenue Secretary Dan Meuser says they want lottery revenues to do the same.

“Keep in mind, the state of Pennsylvania maintains all full control of this lottery,” Meuser tells Radio PA.  “We are not talking about at all selling the lottery.  We are bringing on a private consultant to help us meet the growth demands of the lottery.”

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

There’s no rush.  Requests for Qualifications went out in the spring, and Meuser says they are now in their “due diligence” phase of exploration.  “We’re not there yet,” Meuser explains.  “We’re not sure if a firm out there believes they can in fact do that, or if that firm can be acceptable to us.”

Private firms have expressed interest.  Meuser, however, cannot say which ones or even how many.  He tells us that could affect the competitiveness of the procurement process.  If they decide to proceed, invitations for bid could go out in the fall.

The trail for such private management agreements has already been blazed by the state of Illinois.  The Prairie State has just wrapped up its first fiscal year under private lottery management, and Illinois Lottery Superintendent Michael Jones believes it can work.  “I absolutely believe that the amount of money they promised the state is realizable,” Jones explains.  “With good marketing and good games and good prizes this will be a big success.”

Northstar Lottery Group promised Illinois $851-million dollars in profits during year one, and $951-million dollars in profits in year two.  Under the contract, Jones says, Northstar will receive significant bonuses if they hit those targets, and will have to pay the state penalties if they fall short.  Preliminary revenue numbers for Illinois’ first fiscal year under private lottery management are expected to be released in the near future.

Supporters call it a great way to generate new revenue without raising taxes.  “[Illinois] wouldn’t have done it if they weren’t going to get a billion dollars in extra revenue over the next five years,” says Reason Foundation director of government reform Leonard Gilroy.  “It wouldn’t have happened.”  Like Pennsylvania, Gilroy says states like Indiana and New Jersey are also seriously considering privatizing their lottery management.

Some members of the state House Democratic caucus are already speaking out against the issue in Pennsylvania, however.  “Why would we pay a company millions of dollars to do the same thing we could do ourselves – especially when those millions of dollars are badly needed for programs that help older Pennsylvanians?” asks Minority Leader Frank Dermody (D-Allegheny).

Secretary Meuser says the private entities’ proposals will help them make that call.  It’s something he says they’re taking very seriously. “The lottery funds will continue and only to go to benefit older Pennsylvanians and we are working now to secure that is the case, without question, today and ten years from now.”

Liquor Store Privatization Update

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Debate began Monday evening on the latest version of a plan to get state government out of the booze business.  Majority Leader Mike Turzai asked, “Why is Pennsylvania so anachronistic? Why is Pennsylvania not willing to focus on its citizens and consumers?” Turzai has been the leading voice on liquor store privatization.

His latest plan would replace the 620 state-run liquor stores with 1,600 private sector wine & spirits licenses.  Pennsylvania’s beer distributors would be given the right of first refusal at a fair market value.  The remaining licenses would be auctioned off to the highest bidder.

But Monday’s House debate was cut off after nearly three hours, and has not resumed since.  Democratic Leader Frank Dermody doesn’t think supporters have the votes.  “I don’t believe they’re there, and we’re working hard to make sure it stays that way,” Dermody explained to Radio PA by phone.  “Even if you’re for privatization, this is a terrible bill.”

While beer distributors would be given first crack at the new licenses under Turzai’s plan, the Malt Beverage Distributors Association of Pennsylvania opposes the language.  “Ultimately when you look at this bill, it’s just forcing your local beer distributor out of business to sell-out to a major corporation,” explains Mark Tanczos, president of the MBDA of PA.  Tanczos outlined his position in a letter to the General Assembly.

Governor Tom Corbett can be counted among the high-profile proponents of liquor store privatization.  Corbett recognizes this won’t be the final legislative product, but wants to get the ball rolling nonetheless.  “Let’s get this first step done,” Corbett emphasized to reporters this week.

House debate could resume as early as Monday.