Corbett seeks to privatize Pa. lottery

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HARRISBURG -- With dreams of how they would have spent the Mega Millions jackpot still on the minds of many Pennsylvanians, Gov. Tom Corbett is querying private firms to see if they can squeeze more profits out of the state's $3.2 billion lottery system.

The proposed change, announced Monday as the Corbett administration asked companies interested in the task to submit their qualifications, could mean a more stable flow of funding to programs for older Pennsylvanians if an outside firm takes on the risk of growing lottery sales.

Pennsylvania still would maintain ultimate control of the lottery, as the commonwealth is required to do under federal law. The lottery system's day-to-day operations, however, would be managed by a private firm.

The state could see a guaranteed profit, and the company would keep a percentage of profits above that level.

The proposal comes as the state's Republican chief executive has been seeking to privatize non-essential government services in order to cut costs amid still-lagging state revenues.

In their 15-page request to companies, administration officials noted the increasing number of elderly residents, who are eligible for property tax rebates and discounts on prescription drugs due to the lottery proceeds.

The state's lottery, which is the sixth largest in the nation, has shown steady performance since its founding in 1971, noted the request. But, it added, that minimal growth may not keep pace with demand for lottery-funded programs as the number of older residents increases.

"Our state's fast-growing population of older adults means time is not on our side, and we need to maximize funding for senior programs and services in a way that does not ask taxpayers to dig any deeper into their pockets," Mr. Corbett said in a statement.

Interested firms must submit their qualifications, including experience managing lotteries and their financial capabilities, by May 1. Firms deemed to be qualified then will be asked to submit proposals for how they would boost profits.

A similar proposal was implemented by Illinois state officials in 2010, when they chose a partnership between GTECH and Scientific Games to run their system. The companies promised to generate billions in new profits over the first few years and have proposed introducing new games and expanding retail outlets.

GTECH was awarded a Pennsylvania contract in 2005 to operate a computer system to monitor the state's new slot machines. The company also was awarded a Pennsylvania Lottery contract in 2008 regarding terminal sales, but after the company altered the equipment it planned to install, the department selected Scientific Games instead for the five-year contract.

It was unclear on Monday whether legislative approval may be required for the changes sought by the Corbett administration.

Top Democrats in both chambers, who were not briefed on the proposal before it was announced publicly, immediately expressed concerns about potential consequences for seniors' programs.

"Lottery funds for seniors should not be jeopardized, and my fear is that will happen if lottery operations are turned over to a private company that puts profits ahead of the needs of seniors," said Senate Minority Leader Jay Costa, D-Forest Hills.

House Majority Leader Mike Turzai, R-Bradford Woods, described the proposal as "a step in the right direction," and his Senate GOP counterpart said the exploration would provide useful data on what services private companies could provide.

"We'll see what that request brings, and then we'll have a more detailed discussion," said Senate Majority Leader Dominic Pileggi of Delaware County. "I think it's too early to get into what-ifs."

Also hazy was the future of the lottery system's 233 employees. David Fillman, executive director of Council 13 AFSCME, which represents a portion of those workers, said they oppose the change.

Administration officials said it is premature to discuss the potential impact on lottery employees but said they intend to keep employees and labor unions informed as the process moves forward.

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Harrisburg Bureau Chief Laura Olson: or 717-787-4254.


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