UK-based firm seeks to run Pa.'s lottery system

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HARRISBURG -- After a seven-month search, Pennsylvania officials announced Tuesday that only one company submitted a bid to manage the state's $3.5 billion lottery system.

United Kingdom-based Camelot Global Services LLC was the sole company to submit a proposal. The firm -- which runs the UK lottery -- has pledged to bring in more than $34 billion in profits over the course of a 20-year management contract, in part through introducing online ticket sales and keno.

Gov. Tom Corbett's administration now will compare that bid against estimates for how much money the lottery would raise if the system continues to be managed internally, as well as investigate Camelot's criminal and financial history.

They also must talk with labor representatives about what the change would mean for the lottery's 170 union employees.

"While there are several additional steps before we'll be prepared to make a final decision, this is a proposal that warrants a complete and detailed review, and it is encouraging to see the potential private manager propose 20 years of significant profit growth," Revenue Secretary Dan Meuser said in a statement.

If the bid is accepted, Pennsylvania would join Illinois and Indiana in hiring an outside firm to manage its lottery system. Several other states, including New Jersey, reportedly are considering making a similar move.

The private manager would be responsible for daily operations, including equipment, training, marketing and customer service, according to documents released earlier this month. The state would retain ownership of the lottery and continue to oversee auditing, data validation and other functions .

The Corbett administration briefed legislative staffers on the Camelot bid during a conference call Tuesday. The Department of Revenue posted a document listing the company's profit commitments on its website, though additional materials will remain confidential until a final decision is made, potentially by the end of next month.

The bid culminates a highly secretive process that began in April, during which the administration talked with several unnamed companies about how they would boost lottery profits. Two other qualified bidders dropped out of the process in recent months, according to an administration memo.

Proceeds from the state lottery fund programs for older Pennsylvanians, including property-tax rebates and discounts on prescription drugs.

Mr. Corbett has pointed to the state's growing elderly population as a reason to look for ways to increase revenues for senior programs.

While officials will not release the full internal profit benchmarks against which they'll be weighing Camelot's offer, an initial news release on the private manager search stated that lottery revenues were projected to grow by about 1 percent annually through fiscal year 2014-15.

Following the bid announcement, critics continued to question why an outside firm is being considered after the lottery announced record annual profits topping $1 billion this summer.

"There is no good reason to dismantle the lottery," said David Fillman, executive director of AFSCME Council 13, which represents the lottery's union workers. "The administration has sold out our seniors and our members without one public hearing, without any legislative oversight and without anyone knowing how they crafted the terms and cut this deal."

Under the agreement terms, the state would maintain about 70 employees out of the current complement of 232. Other agency employees could seek positions with the outside firm, or potentially elsewhere in state government.

Democrats also took issue with the administration's approach, saying they believe the executive branch cannot institute online sales or keno games without the General Assembly's authorization.

"We think that is solely and strictly a legislative function and not something that we've delegated to the administration," said Senate Minority Leader Jay Costa, D-Forest Hills.

state

Bureau chief Laura Olson: lolson@post-gazette.com or 1-717-787-4254.


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