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Battle Lines Being Drawn Over Liquor Privatization

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The details of the plan may be new, but the arguments for and against liquor privatization are perennially similar.  “This is an agency that makes money, that continues to make more money every year,” UFCW Local 1776 President Wendell Young IV said while questioning the logic behind dismantling the state store system. 

The UFCW, which represents 3,500 employees at Pennsylvania’s wine & spirits shops, has been on the front lines of the privatization battle for years.  This time around, Young says the governor’s plan would not only jeopardize thousands of family-sustaining jobs, but it would drastically increase the number of alcohol outlets.  “If you think about what he proposed… you could wind up with 20 – 30,000 or more outlets in Pennsylvania selling wine or spirits.” 

As Senator Jim Ferlo (D-Allegheny) did on the Senate floor, Wednesday, Young likens the Corbett plan to the “Wild West” of alcohol sales.    

The expansion of alcohol outlets has some worried about the effects of increased consumption.  “There is a large body of research that shows a relationship between increases in consumption and a whole host of alcohol-related problems,” says Deb Beck, President of the Drug & Alcohol Service Providers Organization of Pennsylvania.  “I don’t think one needs a lot of research to get that.”

Beck says a little inconvenience is a small price to pay, noting that Pennsylvania already has unmet needs when it comes to drug & alcohol treatment programs. 

While it may not be enough to assuage the concerns of privatization critics, Governor Tom Corbett’s plan would address both issues: employees and increased outlets. 

The plan calls for tax credits for business that employ displaced Liquor Control Board employees, education and civil service credits, as well as a new committee to help affected workers find re-employment. 

As for the increased number of alcohol retailers, the governor’s plan tries to balance it with increased enforcement measures.  They include stiffer penalties for selling booze to underage or visibly drunk persons, a requirement that new alcohol retailers must use ID scanners and a 75% increase in funding for treatment programs.    

If Corbett succeeds it would leave Utah as the only state to maintain complete control over its liquor system – from distribution to retail.

Scarnati Doesn’t Want Budget Hostages

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As the key issues on this spring’s legislative agenda become clearer, the Senate’s top Republican says now is not the time to start linking them together.  “That’s Washington-style politics and we don’t need that,” Senate President Pro Tem Joe Scarnati (R-Jefferson) told reporters who huddled into his conference room at the state capitol. 

Joe Scarnati

Joe Scarnati

Scarnati does not want to see the liquor privatization issue tied to transportation funding.  “I think we’ve talked about it enough,” Scarnati said, discussing the urgency of improving the state’s transportation infrastructure.  “We have a study, we have a report; we have everybody feeling the necessity to get this done.  Delaying it and linking it just really doesn’t do any good for the commonwealth.” 

His comments come as the Corbett administration has also been signaling that the pension reform issue will be tied to the state budget, specifically education funding.  “The issue of cutting public education is a very sensitive issue… and putting an either-or doesn’t make this budget a lot easier to get done.” 

Scarnati believes pensions should be addressed, and that the first step should be passing a bill that enrolls all newly-hired state workers in a 401(k)-style defined contribution retirement plan.  “That’s the tourniquet that stops the bleeding, and that’s a move that we need to make,” he says. 

But Scarnati does not know if the votes exist to reduce the future pension benefits of current state employees.  He’s anxious to see the options that Governor Tom Corbett is expected to lay out along with his budget plan, and believes there’s a willingness to work toward a solution to the public pensions’ $41-billion dollar unfunded liability.

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%.

Cash

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.”

Deadline Extended for Pennsylvania Lottery Management Offer

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Governor Corbett will have more time to consider a bid to privatize management of the Pennsylvania Lottery. Officials have announced that the lone bidder has agreed to extend its deadline, which was set to expire at midnight December 31st.  The administration now has until January 10th to consider the offer from Camelot Global Services PA LLC.

The Revenue Department says the extension will allow the union representing Lottery employees to present a counter-proposal for commonwealth review.

The bid extension will also allow more time for the risk mitigation firm Kroll Advisory Solutions to analyze the suitability of Camelot as a potential private manager for the Pennsylvania Lottery.

Meanwhile, State Senator Mike Brubaker, chair of the Senate Finance Committee, issued a statement saying he’s pleased with the extension.  He adds he has been informed that a second extension is anticipated.

As a result, the Senate Finance Committee will not alter plans to hold a public hearing on January 14th to provide an opportunity to fully vet the impact of privatizing lottery management.

Lottery Lawsuit Filed in Commonwealth Court

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Union officials are mounting a legal challenge to the potential deal to privatize the management of the Pennsylvania Lottery.  “We feel that based on the Lottery Act passed in 1971… the privatization of the Lottery is not something the governor has exclusive jurisdiction to do.  We feel that legislative action has to be taken also,” explains AFSCME Council 13 Executive Director David Fillman, who points out that the General Assembly is currently between sessions. 

Several Lottery workers and Democratic state lawmakers have joined AFSCME in the effort to permanently block Governor Tom Corbett from entering into a deal that turns Lottery management over to a private entity.  Fillman says the Lottery is working well for government, and does not need to be privatized.    

A 20-year, $34-billion dollar bid from Camelot Global Services is currently under review, with a December 31st deadline fast approaching. 

“This is a frivolous lawsuit that’s looking out for the special interests of a union, rather than what the governor is trying to do, which is look out for the best interest of Pennsylvania’s senior citizens,” Corbett spokesman Kevin Harley tells Radio PA. 

Harley says the only reason privatization of Lottery management is being explored is to ensure revenue growth for the programs that benefit older Pennsylvanians.  He says no decision has been made.

RadioPA Roundtable

Radio PA Roundtable 11.23.12

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On this week’s Radio PA Roundtable, Matt Paul brings you the latest updates on the possible privatization of Pennsylvania Lottery management. Also, Governor Tom Corbett discusses his Thanksgiving holiday and we get a preview of deer season from the Pennsylvania Game Commission.

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/Roundtable11-23-12.mp3]

State Considers Bid from Potential Lottery Manager

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State officials have until the end of the year to make a decision on a 20-year, $34-billion dollar bid to turn over the day-to-day operations of the Pennsylvania Lottery a private company.  After qualifying three potential bidders, the Commonwealth received one bid from Camelot Global Services PA LLC.  It’s the same company that operates the National Lottery in the United Kingdom.

Department of Revenue spokeswoman Elizabeth Brassell says the state would be well-protected by the potential private management agreement (PMA).  “There’s a profit threshold that the company has to meet in order to get paid incentive compensation,” Brassell says.  “Beyond that, if there’s any contract year where that profit threshold is not met, there are additional securities… that the state can dip into and deduct shortfall payments from to make up the difference.” 

The Corbett administration is looking to generate more money for programs that benefit senior citizens, a population that’s on the rise in PA.  The Pennsylvania Lottery is the only lottery in the nation, which generates profits solely for senior programs. 

But opponents point to last year’s record profit of more than a billion dollars at the Pennsylvania Lottery.  “There’s only 2.3% administrative costs; so it’s not only profitable, but it’s also efficient,” says AFSCME Council 13 Executive Director David Fillman. 

AFSCME represents 175 of roughly 220 Pennsylvania Lottery workers, and Fillman says they will sit down with state officials to discuss the bid next week.  “We’re confident that anything that the Commonwealth wants to do… it’s something that the current employees can do.” 

No decision has been made.  Brassell says they will evaluate Camelot Global Services and crunch the numbers determine if a PMA is in the best interest of the state.  Even if the bid is accepted, the state would maintain ownership and control of the Pennsylvania Lottery.

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.