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Pennsylvania considering private bids to manage lottery system
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HARRISBURG -- State officials say they're seeking bids from companies interested in managing Pennsylvania's Lottery, and indicate that new options like online sales or keno should be part of those proposals.
Those details were part of the broad terms of a potential private management agreement that were released Friday. Gov. Tom Corbett's administration announced in April that it was looking into hiring an outside firm to maximize revenues from the $3 billion state lottery system.
Discussions with interested companies have been kept confidential, with officials refusing to name the companies that submitted their qualifications earlier this year or even the number of potential bidders.
Documents released by the Corbett administration say the potential contract would be for at least 20 years, requiring $150 million in collateral in case the new management firm does not meet its revenue projections.
Officials with the Department of Revenue and others involved in the consideration process next will be reviewing business plans, which will outline proposed organizational structures for the Lottery and plans for growing its customer base.
The final step would be for bidders to submit dollar figures on how much they would increase revenues from the gambling system, which announced record profits in August.
"Bidders have acknowledged that we're one of the best in the nation," Revenue spokeswoman Elizabeth Brassell said. "Now it's just a factor of going through their business plans to see what we can do better, bigger, faster."
Lottery proceeds fund programs for older Pennsylvanians, such as property-tax rebates and discounts on prescription drugs. Mr. Corbett and other administration officials point to the state's growing senior population as a key reason to boost revenues.
A top option for raising new dollars would be creating new games or ways to play, such as keno or online sales, stated a document on the potential agreement terms.
During talks with bidders, "it became evident that incorporating Internet products and monitor-based games into Lottery's portfolio is one of the most effective ways to responsibly grow revenues to benefit older Pennsylvanians."
"Monitor-based" games such as keno could be implemented as early as next year, and Internet games beginning in 2015, according to the document.
It also stated that bidders' plans for such games "will be evaluated against the Commonwealth's own implementation plans for such ideas," in part to ensure that they are "socially responsible."
Asked about his support for further expanding gambling options, Mr. Corbett replied: "I want to see what the bids look like."
His spokesman, Kevin Harley, said later that the administration believes that Internet gaming and keno could be implemented without legislative approval.
House Democrats disagreed with that assessment, but said they'd be willing to discuss legislation to authorize keno. Measures were introduced during the past two sessions by Democrats -- former Rep. John Pallone of New Kensington and Rep. Paul Costa of Wilkins -- but both bills died in committee.
Democrats also questioned why the administration was moving forward with efforts to bring in an outside manager given the Lottery's recent success.
"Why is Governor Corbett so intent on privatizing a lottery that has been a national model for decades and just delivered a record $1 billion to programs that help older Pennsylvanians?" asked House Minority Leader Frank Dermody, D-Oakmont.
The administration's announcement came amid more news reports from Illinois about how the first-in-the-nation private lottery manager there missed its revenue targets.
"If I find this is going to cause us to lose money, are we going to do it? No," Mr. Corbett told reporters Friday. "But if we can ensure increased funding for our seniors, who are the recipients of the Lottery ... then we have an obligation to look at privatizing."
Administration officials briefed legislative staffers and union representatives Friday on next steps. The agreement terms indicate that the state would maintain 70 Lottery employees, while others among the 232 current employees could seek positions with the private firm.
So far, two states have implemented private management systems for their lotteries, with Indiana joining Illinois on that list last month.
Scientific Games Corp. and GTECH Corp. have partnered with a Chicago advertising firm to run Illinois' system, while GTECH beat out Scientific Games in Indiana.
Both firms have held contracts with the Lottery here, and Scientific Games is a consultant in the agency's search for a private manager.
The United Kingdom-based Camelot Group, which was unsuccessful in its bid in Illinois, also has expressed interest in managing Pennsylvania's Lottery.
First Published November 10, 2012 12:32 am
