The Tribune Democrat, Johnstown, PA

January 8, 2013

Lottery plan draws heat from union

John Finnerty
CNHI News Service

— The most obvious difference for customers included in a plan to privatize the $3.5 billion-a-year Pennsylvania Lottery may be the expansion of games to include computerized games such as keno. But, even if the bid to lease the right to manage the lottery to a British company, Camelot, falls through, the state would explore the addition of keno – a type of computerized bingo, said Elizabeth Brassell, a spokeswoman with the state Department of Revenue. “We could” add keno without privatizing, she said, adding that the state has been developing estimates of how much revenue it could generate by adding keno without hiring an outside company to manage the lottery. For a well-established lottery, computerized games such as keno are one of the most obvious ways to generate new revenue, she said. In the Maryland, keno accounted for $204 million in sales last year, more than 11 percent of the total lottery sales in the state, according to the Maryland Lottery’s annual report released in December. The legality of the plan to expand to include keno is among the issues raised in a lawsuit filed by the union representing 175 employees of the Pennsylvania Lottery in seeking to stop the privatization proposal. In that lawsuit, the plaintiffs – representatives of AFSCME Council 13 and several state lawmakers, including state Sen. John Wozniak, D-Johnstown – argue that the governor does not have the authority to complete the deal without an act of the Legislature. David Fillman, executive director of AFSCME Council 13, said the union also believes that the use of keno machines is illegal, since the machines are essentially the same as those used in the state’s slots parlors, so they ought to be regulated the same as slot machines, rather than added to the menu of offerings of the lottery. The union, which represents 175 Pennsylvania Lottery employees, will file its response to the Gov. Tom Corbett’s plan to privatize the lottery today. The union has the right to respond to the privatization measure as a term of its labor agreement with the state. The union’s response is due a day before a deadline set by the state and Camelot on which the two sides are supposed to reach an agreement on whether to proceed. However, the state Senate Finance Committee has scheduled a hearing Monday on the lottery privatization plan. Brassell said that Camelot and the state could postpone the deadline in light of the Senate hearing; however, no decision about that had been made by Monday. The union objects to the privatization plan because of the uncertainty over whether or how many jobs would be lost. Brassell said 70 lottery employees would remain employees of the state, while Camelot would interview the remainder if the company gets the right to manage the lottery. “Mr. Fillman has been saying that these jobs will be lost,” Brassell said. “But they are just being transferred from the public to the private sector.” The Corbett Administration has argued that the privatization measure is needed to generate increased revenue to meet the need to fund programs for seniors in Pennsylvania. Twenty-seven percent of lottery revenue in Pennsylvania is designated for senior programs – includng property tax rebates, prescription drug assistance and reduced bus fares. In 2010-11, the lottery generated $915 million for those senior programs, according to a Legislative Budget and Finance Committee report. But with the number of seniors in the Commonwealth expected to in-Zcrease from 1.9 million in 2010 to 2.9 million by 2030, state officials are worried that the lottery will not be able to keep pace with demands for services. Brassell said that while the lottery could add new games even without privatizing, the Corbett Administration believes that the private sector would be less restrained by governmental bureaucracy, and thus be better able to meet the demand for increased revenue. Under the terms of the proposed deal with Camelot, in exchange for the rights to operate the lottery for 20 years, Camelot will provide the state with $150 million in collateral and another $50 million line of credit. That money will be used to make up the difference if Camelot fails to generate enough revenue to meets its projections. Camelot’s bid indicated that the company guarantees it will make at least $34 billion in profit over the term of the lease.

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