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Pennsylvania Lottery celebrates record high profits
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HARRISBURG -- As officials at the Pennsylvania Lottery celebrated record profits last week, reports about another lottery system serving as an example for the commonwealth's privatization effort were less rosy.
The Illinois Lottery just completed its first year under a private manager, a system that Pennsylvania officials are considering implementing in an effort to further boost profits.
While Illinois saw record profits for its scratch cards and Powerball tickets, its estimated $726 million in profits fell short of the $825 million that the Northstar Lottery Group promised last July, according to news reports.
Officials there did not return a request for comment on the lower-than-expected figures. Missing their revenue target could result in the company paying millions in penalties, and the private firm reportedly is seeking to adjust that figure to lower its liability.
Pennsylvania has been reviewing such a private-management system for its lottery, and officials are meeting with potential firms to decide whether the state would like to move on to seeking bids.
The revenue figures out of Illinois haven't dissuaded officials from those efforts, although they say they are tracking how the system there, the first of its kind, is working out.
"We're keeping an eye on what's going on Illinois, as well as in other states exploring other private management systems," said Department of Revenue spokeswoman Elizabeth Brassell, adding that includes learning from the mistakes of other states.
The state of Indiana also is considering hiring a private manager for its lottery and is hoping to sign a deal by November.
Ms. Brassell said Pennsylvania officials are seeking "realistic, competitive bids" that will make the lottery more financially secure and give them more predictability in budgeting.
Few details are being released publicly about the companies that have expressed interest. The department is not releasing any information on the number of bidders in order to ensure the process remains confidential, she said.
A firm, Kroll Advisory Solutions, has been retained to begin preliminary background and financial checks of prospective bidders, should the state decide this fall to continue the process.
As for the new Pennsylvania profits report -- which showed a $100 million increase in net revenues over the previous year, for a total of $1.06 billion in the fiscal year ending June 30 -- the Corbett administration says the record figures aren't altering the steps they're taking to pursue a private manager.
But the new figures could impact the burden on applicants, who must show how they'll be able to improve the current system.
"It definitely is going to set the bar a little bit higher for potential bidders," Ms. Brassell said. "It's not entirely unexpected but hard to predict. We're hoping to smooth out the high highs and low lows if we engage a private manager."
But Democrats continue to raise a skeptical eye at the privatization proposal, pointing to the new profit figures as an example of the current system's success.
Talking to reporters last week, House Minority Leader Frank Dermody, D-Oakmont, questioned whether a private company could keep their administrative costs as low as the state has while boosting revenues.
"The lottery is doing quite well, and there's nothing that the current folks can't do that these new people coming in can, other than to skim profits off the top," Mr. Dermody said.
First Published August 4, 2012 12:00 am
