Debatable odds: Must a privatized lottery offer video gambling?
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Before taking a chance and outsourcing the operation of the state lottery, the Corbett administration needs to be sure the odds favor a private company delivering a winning hand for Pennsylvania.
State officials are not there yet.
After a seven-month search, the state announced that only one company -- Camelot Global Services LLC in the United Kingdom -- submitted a bid, offering to manage the lottery system under a 20-year contract. The firm, which runs the UK lottery, said it would bring in $34 billion in profits during that period.
We have no objection to the state hiring a firm to run the Pennsylvania Lottery, a system that has sales of $3.5 billion a year and turns a profit topping $1 billion. The games are not a key function of government, just as running retail liquor stores through the Liquor Control Board is not.
That said, there are serious problems with the deal on the table now.
Most alarming is an underlying assumption of the state's proposed private management agreement, which says that Internet sales and "monitor-based games" are the most effective way to increase revenue. The state's parameters for a private company say Internet sales could start in 2015 and "keno-like monitor based games" as early as next year.
That fuzzy language suggests a vast expansion of legalized gambling to include what are commonly called video-poker machines -- devices that frequently allow players to bet on poker hands or the game of keno, sort of a reverse game of bingo.
Slot machine casinos were approved by the Legislature in 2004, with table games OK'd later, but both before slots and since, there have been attempts to legalize video poker machines in bars and restaurants. Those efforts failed, but if they are to be revived, it should be through legislation that would get public hearings and floor debate, not through the backdoor of an executive branch contract with a private company managing the state's lottery.
It also seems unusual that only one firm made it all the way to the final round in the lucrative business of lotteries. According to a state memo, two other qualified bidders dropped out of the process in recent months.
The state said in a news release that its next steps will be to make sure the terms proposed by Camelot provide more growth than the state could achieve on its own and to examine the firm's background in detail.
The better course would be to step back and re-evaluate what a private firm should be able to do for the lottery. It shouldn't be allowed to introduce a whole new range of gambling that might not be right for Pennsylvania.
First Published November 26, 2012 12:00 am