Corbett, British firm drop plans to privatize state lottery

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HARRISBURG -- Nearly a year after Attorney General Kathleen Kane rejected a contract for a British company to manage the Pennsylvania Lottery, Gov. Tom Corbett and Camelot Global Services announced Monday they will let the company's bid expire.

But the Corbett administration would not rule out the possibility of again seeking a private manager for the state-operated lottery, whose proceeds benefit programs for seniors, or future involvement with Camelot.

"It is too soon to conclude any potential strategies or initiatives moving forward," said Jay Pagni, Mr. Corbett's press secretary.

The governor had advocated for the 20-year management agreement as a way to bolster funding for senior programs such as property tax rebates and discounts on prescription drugs. Camelot had committed to bringing in more than $34 billion in profits over the life of the contract, in part by introducing online ticket sales and keno.

But in February Ms. Kane threw the effort off course with an announcement that her office had concluded the agreement would violate state law, in part, she said, because it would infringe on the General Assembly's authority to make policy.

Camelot and the administration agreed several times to extend the validity of the management bid as they sought a way to execute the contract. Earlier this month, a conceptual agreement with the union representing rank-and-file lottery workers appeared to smooth the way for legislation to authorize the hiring of a private manager.

But lawmakers adjourned without acting on the issue, leaving the parties facing another bid expiration deadline at year's end.

Going forward, Mr. Pagni said, the administration will consider how best to increase lottery revenue.

"We'll take what we've learned and use those tools to grow the lottery," he said. "Depending upon the strategy and initiatives, it may include outside parties or may not."

The head of Camelot Global left room for future work with the state.

"We remain on good terms with the Commonwealth of Pennsylvania and are open to future possibilities," managing director Alex Kovach said in a statement.

He said Camelot will continue to build international relationships and noted the company was recently announced as the preferred bidder to manage the national lottery of Ireland.

On Friday, Senate Majority Leader Dominic Pileggi, R-Delaware, said members of the Senate have an interest in legislation to specifically authorize an administration to contract with outside firms to provide services to the lottery.

"We should be clear about whether or not the governor has that authority under the statute," he said. "I believe we will address that issue in the first six months of next year."

Consideration of such legislation would come after the Senate holds at least one public hearing on the issue, said Erik Arneson, Mr. Pileggi's spokesman.

In the House, Republican spokesman Steve Miskin said dropping the Camelot bid would make it easier to pursue legislation granting the governor clear authority to manage an agency through an outside contractor, though GOP leaders there believe the law already allows such contracts.

"It doesn't mean we can't make it more clear, maybe in bold letters, so it's easier for the attorney general's office to understand what the law says," Mr. Miskin said.

David Fillman, executive director of AFSCME Council 13, the union representing about 170 rank-and-file lottery workers, said news of the bid's imminent expiration was a "pleasant surprise." He said the union had worked with the Corbett administration through November and December on legislation to allow the management agreement while ensuring current and future workers would remain union members.

But the union would prefer to keep management with the state, and Mr. Fillman said it looks forward to improving the lottery.

Earlier in December, Auditor General Eugene DePasquale called on the governor and General Assembly to resolve the Camelot bid. The state had spent $3.48 million on expenses related to the initiative, with another $1.1 million authorized through Dec. 31, he said.

Senate Minority Leader Jay Costa, D-Forest Hills, said his members were pleased with the announcement. They had opposed the Camelot agreement largely because of objections to the bidding process, he said, but might consider future involvement of private groups.

"If there's a way in which we can enhance revenues by maybe bringing in outside advisory groups to help us, along those lines, that's something we need to maybe consider doing," he said.

Karen Langley: or 717-787-2141 or on Twitter @karen_langley. First Published December 30, 2013 1:01 PM

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