In Rebuttal / What Camelot isn't telling us: Pa. Lottery employees do a better job for half the price
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Alex Kovach's Jan. 3 article "We Know Lotteries: And If Pennsylvania Invites Us In, We Will Invest in Pennsylvania" left out many things regarding the plan to privatize the Pennsylvania Lottery. Most notably, the article failed to explain how this foreign company plans to increase revenue for the commonwealth while reaping millions off the top of Pennsylvania Lottery sales.
Mr. Kovach begins by touting Camelot Global Services' success at running the United Kingdom's lottery, and rightly so due to its track record. However, Camelot has no experience running state lotteries in the United States. The article implies that Camelot has experience running lotteries in the United States because of its ties to the California Lottery. However, according to its own website, Camelot does not manage or operate the California Lottery. Rather, it provides consulting services. Camelot's only other attempt to enter the United States' lottery market occurred when it submitted a bid to take over the management of the Illinois Lottery. This bid was rejected.
While it is true the performance of California's Lottery has increased since it began using business and strategic consulting services from Camelot, the boost in sales should be expected because California had one of the worst performing lotteries in the country. The year before Camelot began consulting for the California Lottery, average per capita lottery sales in California was $84. That was less than half of the national average of $199 in annual sales per capita. In contrast, Pennsylvania's average per capita lottery sales in 2008 was well above the national average ($246). Four years later, the Pennsylvania Lottery is still outperforming the California Lottery.
Camelot claims it will raise additional lottery revenue by adding new games such as keno and other online lottery games. But to do this it will need approval from the commonwealth. If the governor's goal is to raise additional lottery revenue by adding games, he could work with the General Assembly to give the current managers of the Pennsylvania Lottery that ability right now. There is no need to enter into a 20-year contract with a private company in order to accomplish this goal.
The article goes on to praise the work of the employees of the Pennsylvania Lottery. But Mr. Kovach claims Camelot will improve the lottery's performance due to its "commitment to innovation, excellence, teamwork, integrity and responsibility." These are nice corporate buzzwords, but what they imply is that the lottery's current employees are not responsible or innovative; they lack integrity and do not excel at their jobs. I find this ironic because these are the same employees who have outperformed Camelot's consultants in California in each of the last four years.
Camelot claims that it will invest in the Pennsylvania Lottery and its employees. It also claims that it "intends to keep as many of the current lottery employees as possible." If this were true, why is it that Camelot's bid to take over the lottery only requires it to keep 70 of the lottery's 230 employees? In essence, if the governor approves the privatization plan, Camelot will be authorized to lay off more than two-thirds of the lottery's current employees.
I, for one, am always suspicious when a private company wants to take over a public program. Private companies only want to run public programs when the programs are profitable or have the potential to be profitable. In the case of the Pennsylvania Lottery, we are talking about a profitable and extremely well-run program. Private companies are motivated by profit, which is the way they must operate. However, for every dollar of profit Camelot makes running the lottery it is taking a dollar from programs for Pennsylvania's seniors. Last year alone, the Pennsylvania Lottery generated more than $1 billion for Pennsylvania senior citizens. Unfortunately, the Corbett administration and the Department of Revenue have been unable to disclose how much Camelot intends to take off the top in management fees.
I realize it costs money to manage the lottery regardless of whether the commonwealth or a private company does it, but the commonwealth does it cheaper. Last year, the cost of public employees managing the Pennsylvania Lottery was just over 2 percent of total sales. According to Camelot's own website, its administrative fee for managing the United Kingdom's lottery was over 4 percent of total sales. Why would the commonwealth want to bring in a private company to manage our lottery when the employees of the Pennsylvania Lottery have historically done it for half the price?
First Published January 7, 2013 12:00 am