Government & Politics
8:23 am
Mon January 7, 2013

Commonwealth Foundation Says Lottery Privatization Will Save Senior Services

Demand for services funded by the Pennsylvania lottery will start outpacing its revenue if nothing is done, according to the Commonwealth Foundation.

A new report from the conservative public policy think tank warns that more than 5,000 Pennsylvania seniors have been wait listed to receive lottery benefits and over the past two years waiting lists grew by 52 percent.

Elizabeth Stelle, a policy analyst for the Foundation, said seniors will face program cuts or other revenue streams will need to be found unless something is done.

By 2030, about 25 percent of the state’s population will be above age 60, according to the Department of Revenue. This would presumably lead to a higher demand for services.

Stelle said Camelot Global Services, which has submitted a bid to manage the state’s lottery, will generate an additional $2.3 billion for senior services over the first decade of an agreement.

She said a private manager is better than reforming the state-run system because the company would provide guarantees of revenue.    

“If Camelot, if any other private manager would not follow through on their guarantees or commitments, they can be held responsible,” said Stelle. “The Commonwealth has $200 million in collateral they can draw down from if the private manager does not deliver on its promises.”

Stelle said under the current system there are no consequences if the lottery doesn’t meet its profit projections.

She said over the past five years lottery profits were “erratic,” ranging from a decline of 2.2 percent to growth of 4.9 percent.

However, lottery sales are up 8.5 percent from last year.

A Fight Over Jobs

The bid from Camelot has drawn fire from the American Federation of State, County, and Municipal Employees (AFSCME) 13, the union that represents 160 of the 233 lottery workers.

The union has expressed concerns about what will happen to workers if the bid is accepted, and whether a foreign company, Camelot is headquartered in the U.K., can provide the same expertise state employees do.     

Stelle said there are provisions in the projected contract that requires a private manager to interview all of the current state lottery employees and offer some positions.

The Department of Revenue will also keep 70 of the current workforce.                                                                                                                                                                                                     

“You’re actually going to see an expanded workforce. And we think that there’s no reason to assume that Camelot would not follow through on those promises,” said Stelle. “They are incorporating in Pennsylvania if the contract is agreed upon. They will pay 100 percent Pennsylvania taxes, 80 percent of their employees have to reside or have to physically work in the Commonwealth.”

The report accused AFSCME of looking out only for the $100,000 in union dues contributed by lottery employees. It says the dues “funded six-figure salaries for union bosses and nearly $1 million in political activity in 2011-12.”

AFSCME has until January 8th to present its own proposal to the state to operate the lottery.

Stelle said Camelot is capable of producing profits running the lottery.

She said the U.K.’s lottery, which the company manages, is three times the size of Pennsylvania’s and there are only about 5 companies in the world that can manage lotteries.

Stelle said the lottery should be privatized but, if the bid isn’t accepted, reforms should be made to make the lottery more accountable, more transparent, and provide more audits of the Department of Revenue.

Camelot's bid to run the lottery expires Janaury 10th.