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Union says Lottery Privatization Could be Costly

This chart from AFSCME Council 13 says that keeping the Pennsylvania Lottery state-run can generate at least $1.5 billion more in profits than Camelot’s proposal.

Union says Lottery Privatization Could be Costly

By Melissa Daniels | PA Independent

HARRISBURG — Pennsylvania’s administration is looking to win big off of a pursuit to privatize the Pennsylvania Lottery, estimating as much as $34 billion in 20 years of profits from lone bidder Camelot Global Services.

But public-sector union officials representing 174 state lottery employees said Tuesday that the state doesn’t need to look to a private manager to fulfill its goals of larger profits.

In a proposal to retain control of the Pennsylvania Lottery, the American Federation for State, County and Municipal Employees Council 13 said that keeping the Pennsylvania Lottery state-run can generate at least $1.5 billion more in profits than Camelot’s proposal.

AFSCME also criticizes the private management agreement the administration is considering with Camelot, saying that it could end up costing taxpayers hundreds of millions of dollars if Camelot fails to meet its revenue estimates.

AFSCME’s report asserts that Camelot’s expansion proposals, like introducing Keno and online gaming, would be more profitable under a public-management agreement because they could be operated without the costs of paying a private manager.

“If those expansions are found to be legal, there’s no reason why our folks who have the knowledge and have the working experience can’t expand those games going forward,” said Kristie Wolds-Maloney, the labor union’s director of grievance and arbitration, who helped author the proposal.

The lottery has implemented new games before, like Powerball and Mega Millions, with the assistance of some outside contractors.

The state has 10 days to respond to AFSCME’s proposal.

The state already extended a deadline with Camelot to make a decision on its bid by Thursday. That allowed time for the union to make its proposal, which was contractually required. But that deadline may be extended again.

Elizabeth Brassell, press secretary for the Department of Revenue, said that extension on the Camelot bid decision “was negotiated with both parties (with) the understanding another bid extension may be necessary.”

Gov. Tom Corbett and members of his administration have maintained that Pennsylvania has to find new ways to earn more money from the lottery. The operation supports social service programs for senior citizens, a quickly growing state’s sector of the population.

By 2030, the population of Pennsylvanians 65 and older is projected to increase by 51 percent, representing 22.5 percent of the total population with more than 2.9 million residents, according to the Legislative Budget and Finance Committee.

But AFSCME’s subcontracting compliance manager, Michael Fedor, said that the agreement with Camelot would result in fewer dollars for senior programs. The agreement, he said, would lock in a 27-percent rate of return. Without the agreement, and with the state keeping control of the lottery, state law is set to increase the rate of return at 30 percent in 2015, meaning a loss of $1.2 billion in the 20-year life of the private agreement, he said.

In its proposal to Pennsylvania, Camelot outlined annual profits under current statute, and a 20-year 27 percent rate.

AFSCME also said that if Camelot came up short on its estimates, the guarantees outlined in the agreement don’t go far enough to fill in the gap. The concern is that general fund revenue would be needed to make up the difference, union officials said.

This proposal isn’t the first swing AFSCME has taken against the privatization plans. The union represents 174 lottery employees, out of approximately 250 lottery employees overall.

In December, AFSCME Council 13, along with several Democrat lawmakers, filed a lawsuit against the state, alleging that existing state law does not allow the administration to privatize the lottery or make certain expansions without legislative approval. No hearing date is set for that case yet.

Contact Melissa Daniels at melissa@paindependent.com

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