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Lottery Debate Dominates Several Budget Hearings

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As Governor Tom Corbett mulls his next steps, Revenue Secretary Dan Meuser spent the bulk of his House budget hearing defending the recently-rejected Lottery contract.  Meuser remarked that the premise for much of the opposition is wrong.  “There’s no plan to sell the Lottery.  We cannot by federal or state law.  There is no plan to relinquish control of the Lottery.  We maintain full control of the Lottery,” he emphasized.

At issue is the private management agreement the Corbett administration negotiated with Camelot Global Services, in which the private company has guaranteed record profits over the next 20-years.  The administration has been working on this for nearly a year, because the demand for senior services is growing at a pace that’s too rapid for the Lottery Fund to sustain. 

On Valentine’s Day Attorney General Kathleen Kane called that contract illegal and unconstitutional, and she rehashed that decision in front of the Senate Appropriations Committee on Wednesday.  Kane’s main points were: 1) the contract infringed on the legislature’s authority, and 2) KENO is not an authorized game under the Lottery Act. 

“I am not an economist and I don’t pretend to be, I am a lawyer, and we went through the statutory construction of the Gaming Act, the Lottery Act, as well as the General Assembly’s authority,” Kane said as she told the panel this was not a policy decision. 

Revenue Secretary Dan Meuser

Revenue Secretary Dan Meuser

But Secretary Meuser disagreed with both of Kane’s major points at his House hearing one day earlier.  “The law clearly states – laws granted by the legislature – granting the Department of Revenue the ability to hire vendors for the effective and efficient growth of the Lottery, and to promulgate new games. 

Meuser also contends that KENO – which was rolled out in nearby Ohio a few years ago – falls within the scope of the Lottery’s terminal-based game regulation, not the “slot machine” definition of the Gaming Act.  He says KENO would us the same algorithm as some exiting Lottery games. 

In lieu of a protracted legal debate, some Democratic lawmakers are calling on Governor Corbett to work with the General Assembly to maximize Lottery revenues in-house.  Also, one Republican lawmaker plans legislation to authorize KENO while barring online, interactive Lottery games.

Radio PA Roundtable 02.15.13

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On this week’s Radio PA Roundtable, Matt Paul catches us up on the Attorney General’s disapproval of the controversial lottery management contract. He’ll also chat one-on-one with State Rep. Scott Conklin (D-Centre) about all of the latest developments in the Penn State scandal. Plus a Pennsylvania Bishop discusses Pope Benedict XVI’s big announcement.

Radio PA Roundtable is a 30-minute program featuring in-depth reporting on the top news stories of the week.

Click the audio player below to hear the full broadcast:

[audio:https://s3.amazonaws.com/witfaudio/radiopa/Roundtable02-15-13.mp3]

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.”

 

Attorney General Rejects Lottery Contract

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Like thousands of state contracts every year, the Professional Management Agreement with Camelot Global Services is subject to review for “form and legality.”  But Attorney General Kathleen Kane says it failed that test.  She says it’s in violation of both the law and the state constitution. 

Kane addressed the media for about five minutes this afternoon.  Listen to her entire statement by clicking below:  KaneLottery

Governor Tom Corbett entered into the contract in hopes of generating billions of additional dollars, over the next 20-years, for state programs that benefit senior citizens. 

A recent Franklin & Marshall College Poll found that 64% of Pennsylvanians oppose the move.

Opinions Shift on Same-Sex Marriage

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Public opinion is changing when it comes to same-sex marriage in Pennsylvania.  Today’s Franklin & Marshall College Poll finds that 52% of Pennsylvania voters now favor legal marriage for gay and lesbian couples, compared to 41% who oppose it. 

Terry Madonna

Terry Madonna

Poll Director Terry Madonna believes this is the first poll to show majority support for the issue in PA.  “Some polls gave gotten up to 47, 49, even 50% support – depending on how the question was worded – but not a majority support for gay marriage,” Madonna tells Radio PA, “heavily driven by young voters whose attitudes on gay marriage are very different from seniors who oppose gay marriage.” 

Just seven years ago, in May 2006, Madonna’s poll found just 33% support for same-sex marriage in the Keystone State. 

Democratic state Senator Daylin Leach (D-Montgomery) has long been pushing marriage equality legislation, and is already circulating a co-sponsorship memo this session, which would legalize same-sex marriage in Pennsylvania.  However, while public opinion may be changing, Madonna believes the Republican-controlled General Assembly is still many years away from changing state law. 

The F&M Poll provides a number of compelling results aside from the same-sex marriage issue.  Here’s a sampling:

– Governor Tom Corbett’s job performance rating has hit a new low, as just 26% indicate that he’s doing a “good” or “excellent” job. 

– 64% oppose plans to put Pennsylvania Lottery operations in the hands of a private manager. 

– 82% want more money being spent on transportation infrastructure, but only 47% support the main recommendations of the TFAC report. 

– 53% support privatizing state-run liquor stores.

Administration Answers Lottery Questions, Bidder Discusses Plan

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Details of the Corbett administration’s plans to privatize Pennsylvania Lottery management became clearer at a public hearing convened Monday by the Senate Finance Committee.  As the administration seeks to finalize a 20-year, $34-billion dollar deal with Camelot Global Services, Revenue Secretary Dan Meuser did his best to put many of the lingering questions to rest.  “Under the Private Management Agreement, the Commonwealth will maintain ownership and all control of all aspects of Lottery operations, at all times,” he stressed to the panel. 

Pennsylvania’s aging population is the driving force behind the effort to put a private sector company in charge of the Lottery’s day-to-day operations.  With PA’s senior citizen population skyrocketing, Meuser says Lottery funding could fall short of demand as early as 2015.  The numbers have led the Corbett administration to explore private management as a way to guarantee steady growth in the Lottery Fund.   

11-months of work resulted in one bidder, but chief negotiator Pete Tartline says two other companies dropped out of the process, in part, because the Commonwealth was asking for too much in return.  “Yes, this is a sweetheart deal.  It’s a sweetheart deal for Pennsylvania’s seniors,” Tartline said as he explained that Camelot did not know it was the only bidder in the end. 

The public hearing was held three days after the Corbett administration issued a “notice of award,” which officially ended the procurement process.  While there’s no binding contract in place yet, Camelot Global Services also appeared in Harrisburg to answer lawmakers’ questions.  “Millions of people playing, spending relatively small sums of money, is what we believe has been the key to our success in the UK,” says Camelot Global Services CEO Diane Thompson.  Camelot has run the United Kingdom’s Lottery since its inception 18-years ago, however they plan to locate their Pennsylvania operations in the Keystone State and pay the applicable Pennsylvania taxes. 

When the contract is signed, which could be soon, officials say the Attorney General will have 30-days to review it.  Final exeuction of the contract will be followed by a six month transition period. 

The state worker union, which represents about 175 Lottery employees, is filing suit to block the deal.  “None of us have seen Camelot’s proposal.  None of us understand the rush to sell our most successful operation without a vetting process, and none of us want profits skimmed off senior programs to pad the pockets of foreign CEOs,” AFSME Council 13 Executive Director David Fillman told the committee.  Given the same opportunity to expand Lottery options, Fillman believes the current structure can beat Camelot’s profit estimates by 10 – 30%.

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Corbett Opts to Privatize Lottery Management

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Early Friday evening the Corbett administration announced its decision to hire a private sector manager to run the Pennsylvania Lottery.  The administration has been exploring the possibility for months, as a way to secure steady revenue growth for the programs that benefit PA’s senior citizens.  Ultimately it received one bid, from Camelot Global Services – the same company that runs the National Lottery in England.

The “notice of award” comes just days before the Senate Finance Committee is to convene a public hearing on the controversial issue.  Below you will find complete statements being issued by various stakeholders:

 

The Corbett Administration (Department of Revenue):

Harrisburg –– In the effort to secure critical, long-term funding for older Pennsylvanians, Secretary of Revenue Dan Meuser today announced the next step in the selection process for the the Private Manager of the Pennsylvania Lottery. 

The Commonwealth of Pennsylvania has issued a notice of award to Camelot Global Services PA, LLC, which provides for a 20-year Private Management Agreement.  A notice of award is not a binding contract. 

Under Pennsylvania procurement laws, the issuance of the notice of award allows the Corbett administration the opportunity to disclose contractual and procurement details of the Private Management Agreement at the Senate Finance Committee Hearing scheduled for January 14. 

With the issuance of this award, Secretary of Revenue Dan Meuser, Secretary of Aging Brian Duke and Pete Tartline, Executive Deputy Secretary, Governor’s Budget Office will be able to address all relevant contractual procurement questions at the hearing. 

The administration will gather information at the hearing and the near future will determine what is in the best interest for Pennsylvania seniors.

 

Camelot Global Services: 

“We are delighted the Commonwealth of Pennsylvania has issued a notice of award for the private management of the Pennsylvania Lottery. 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. 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. We are committed to make major investments in the lottery – in its brand, in its operations and in its people. We fully recognize that at the heart of any successful organization is its people. We intend to retain as many current lottery employees as possible and increase the number of employees in Pennsylvania overall.”

 

State Senate Democrats:

Harrisburg — January 11, 2012 — Senate Democrats today released statements expressing dismay and disgust at the actions of the Corbett Administration  in announcing the notice of award as it relates to the private management agreement, (PMA), for the Pennsylvania Lottery. 

“This is extremely disappointing and disturbing,” said Senator Jay Costa (D-Allegheny).  “The action taken by the Corbett Administration was done without public input.  Today’s decision has the potential to jeopardize senior programs and put taxpayers on the hook.”

“This has been a bizarre process that violates the public trust,” Costa continued.  “There were no hearings, little opportunity to understand the proposed PMA and no scrutiny. The process was violated and the citizens of Pennsylvania were abused by this arbitrary action.”

Senator John Blake (D- Lackawanna), Democratic Chairman of the Senate Finance Committee pointed out the proposal needs legislative authorization and it demands legislative scrutiny.

“The process was culminated when the General Assembly was not in session and there was little public examination of the proposal,” Blake said.  “This process wasn’t transparent — it was opaque. No one could see the end result except a small group of the governor’s inner circle.”

Expressing extreme disappointment on behalf of his constituents, Senator Rob Teplitz (D-Dauphin) said the use of a secretive process would lead to the privatization of a significant state asset and is unprecedented. “This is not a proper way to alter generations of public policy and violated the public trust.” 

“On a personal level, many of the affected employees are my constituents and have been treated with complete disregard,” Teplitz said.  “The arrogance of this administration in the way this was handled is deplorable.”

“I am extremely disappointed in this administration’s decision to jam this deal through at the last minute prior to a key Senate Finance Committee hearing,” said Senator Matt Smith (D-Allegheny).  “This shows a disturbing lack of transparency by the Corbett administration and hinders a meaningful dialogue regarding this multi-billion dollar deal. The Camelot plan certainly deserves a proper examination by the General Assembly and Pennsylvania taxpayers are entitled to further information.”

Senator John Wozniak (D-Cambria) echoed the sentiments of his colleagues related to the PMA.  “There are many questions related to how this privatization effort impacts seniors and property tax relief related to gaming.  The concerns of taxpayers should have been taken into consideration and questions answered before the governor took this action.”

 

AFSCME Council 13 (State Workers Union):

HARRISBURG – (JANUARY 11, 2013) AFSCME Council 13 will continue to oppose Gov. Tom Corbett’s plan 

to give away as much as $1.5 billion in PA lottery funds that could fund vital senior programs to Camelot

Global Services, the U.K.?based corporation that wants to take over the lottery.

Gov. Corbett signed a contract tonight after months of secretive negotiations with Camelot.

“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.

“This is a midnight raid. The governor rushed this deal through when the legislature was not in session.

He refuses to provide access to any of the documents that they’ve traded back and forth with Camelot

and he has refused to hold a single public hearing on this deal,” Fillman added.

AFSCME has provided a counter?proposal to the administration to modernize and expand the lottery 

that would provide $1.5 billion more for senior programs than Camelot would under its flawed plan. 

“Apparently, the governor wants to privatize something – anything – no matter the costs to 

Pennsylvanians,” Fillman said. “Our lottery is one of the best in the nation and this administration just

two weeks ago was congratulating our team for the great work they’re doing. Now, they’re telling 

people thanks, but we’re terminating your job.” 

AFSCME and seven Democratic lawmakers filed a lawsuit in Commonwealth Court to stop the governor 

from privatizing management of the lottery. Seniors who benefit from lottery programs and several

lottery employees also joined that litigation.

In addition, AFSCME is working with lawmakers in both parties to oppose Camelot’s proposal to change 

current state law to drastically reduce the Commonwealth’s annual commitment to lottery?funded 

programs. Current state law mandates that the state invest 27 percent of the Lottery Fund in senior 

programs annually. That minimum returns to its standard level of 30 percent on July 1, 2015.

But Camelot is betting that lawmakers will change that law and maintain the 27 percent floor for

the next 20 years, through 2033. This change alone would amount to a $1.244 billion loss to seniors if 

the same sales revenues are achieved without Camelot’s profit taking.

“For 42 years, the lottery has always gone well above the minimum because that’s the right thing to do,” 

Fillman said. “But under this deal, every $1 above that minimum goes to Camelot’s bottom line.”

Pennsylvania Lottery Turns 40

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The Pennsylvania Lottery is the only lottery in the nation that designates all of its proceeds to help senior citizens.  That’s what state officials are highlighting as they celebrate the Pennsylvania Lottery’s 40th anniversary.  “Since then we’ve been able to generate $21.5-billion dollars to fund programs for our older Pennsylvanians, and that’s something we’re very proud of,” says lottery executive director Todd Rucci. 

Some of the programs funded by the Pennsylvania Lottery include the Property Tax / Rent Rebate Program, PACE & PACENET and the 52 area agencies on aging.   “It’s very important to Pennsylvanians because the lottery supports older Pennsylvanians,” says Secretary of Aging Brian Duke.  He joined Todd Rucci to mark the anniversary at a Dauphin County senior center this week. 

During recent appropriations hearings officials told state lawmakers the lottery’s new strategic plan seeks to broaden the player base, in part by better explaining where the proceeds go. 

The new plan also means the retirement of ‘Gus,’ Pennsylvania’s 2nd most famous groundhog, and a longtime lottery spokes-animal.  “The robotic nature of Gus… added about $140,000 dollars to the production costs of a commercial,” Revenue Secretary Dan Meuser explained to the House Appropriations Committee.  “So we thought we’d save a little bit of money and put him out to pasture for a little while.”   

The Legislative Budget & Finance Committee recently took a comprehensive look at the Pennsylvania Lottery.  It noted a looming spike in the state’s senior citizen population compared to the modest growth that’s being projected for state lottery revenues.

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PA Man Claims Powerball Jackpot

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51-year-old Steven Lloyd of Harding, Luzerne County has claimed the 12th largest prize ever awarded by the Pennsylvania Lottery.  Lloyd describes his winning November 19th Powerball ticket as a random purchase at the Turkey Hill in Exeter.  He used the change from buying his coffee and granola bar to make the Quick Pick purchase.  “I said, oh, just put the five dollars on Powerball,” Lloyd explained during a news conference at the Pennsylvania Lottery headquarters in Dauphin County. 

Lloyd had to have his winning ticket validated at the Lottery headquarters on Monday morning.  “The Thanksgiving holiday weekend was the longest weekend of my life, because I had a ticket worth 30-some million dollars that I had to worry about for four or five days,” Lloyd said with a nervous laugh.    

The November 19th jackpot was $59.9-million dollar annuity, but Lloyd went with the cash option that grosses him $37.6-million dollars before taxes.  He may not be a regular Lottery player, but Lloyd is now the 14th Pennsylvanians to win a Powerball jackpot.  He wants to use his newfound wealth to “pay it forward.” 

The winning combination for the drawing was 09 – 16 – 17 – 28 – 30, Powerball 11.

Lottery Fund

House Committee Wants to Study PA Lottery

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The State House Aging and Older Adult Services Committee has unanimously signed off on a comprehensive study of the Pennsylvania Lottery.  “I think it’s going to bring out a number of factors that we really need to consider, because we know that the Lottery system really does provide a lot of revenue for programs that benefit senior citizens,” says State Rep. Martin Causer (R-McKean), the prime sponsor of HR 106.  Causer spoke briefly to the committee, last week, before his legislation was brought up for a vote.  The study would be conducted by the Legislative Budget and Finance Committee, and officials say the cost would be minimal. 

The Pennsylvania Lottery’s contribution to programs and services that benefit older Pennsylvanians is anything but minimal.  “The Lottery, over the course of its existence, has contributed over $19-billion dollars to funding for senior programs,” says State Rep. Tim Hennessey (R-Chester), chairman of the Aging and Older Adult Services Committee.  Since the last study of the Pennsylvania Lottery was conducted in 1994, Hennessey thinks HR 106 is a good idea: “To see in a sense how solvent it is and what it looks like going forward.” 

The largest program supported by the Lottery Fund is the Property Tax and Rent Rebate program, which was expanded with the advent of casino gaming in 2006.  PACE is the second biggest program paid for with dollars from the Lottery Fund; it provides prescription drug benefits to older Pennsylvanians.  According to a financial statement contained in Governor Tom Corbett’s budget proposal, the Lottery Fund is expected to begin the new fiscal year with a balance of $133-million dollars.  It also projects $3.14-billion dollars in gross ticket sales, which is up slightly from the current year.     

Rep. Causer told the committee that budgetary factors have changed since 1994, and casino gaming has been introduced, so it’s time to re-do the study.  Up next for HR 106 is the House floor.