Pa. attorney general rejects lottery contract

Published on NewsOK Modified: February 14, 2013 at 4:22 pm •  Published: February 14, 2013
Advertisement
;

In a memo she sent Thursday to Corbett's Department of Revenue, which oversees the lottery, Kane's office revealed that it had asked Corbett to withdraw the contract because of a pending lawsuit filed by Democratic lawmakers and the union that represents lottery employees. Corbett refused.

Kane's office subsequently decided that state law does not allow the governor to privatize the operation or management of the lottery nor does it allow the expansion of gambling that the contract would permit.

Her office also concluded that the "indirect expenses" that Camelot can claim under the contract — essentially a management fee of up to 0.75 percent of the annual profit, or hundreds of millions of dollars over the life of the deal — are an unconstitutional waiver of the state's "sovereign immunity" protection against paying certain damages or claims.

Corbett, whose administration signed the agreement last month, has said he believes Camelot can produce higher and more stable lottery profits. Democratic lawmakers have criticized Corbett as simply diverting money from programs for the elderly to a foreign firm at a time when the state employees who run the lottery are achieving strong gains in profits and sales and keeping overhead low.

Corbett's agreement with Camelot is for 20 years. Camelot guaranteed at least $34 billion in profit to the state in that period and could earn another 10 years in extensions if it meets certain performance benchmarks. It was allowed to charge the management fee and receive cash incentives for exceeding its annual profit commitments. Those incentives were capped at 5 percent of annual profits.

Besides the lawsuit, other challenges had awaited.

Treasurer Rob McCord, a Democrat, had warned that he may withhold payment to Camelot unless he was satisfied that the company's still-vague plans to expand the scope of lottery gambling were allowed by current law.

Also, top Republican senators have said they will introduce legislation that prohibits the Pennsylvania Lottery from competing with casinos through online gambling.

Currently, profits from the 41-year-old Pennsylvania Lottery benefit programs for the elderly, including transit, rent and property tax rebates, prescription drug assistance, senior centers and long-term care services. Two other states, Indiana and Illinois, have hired private lottery managers, while New Jersey is moving in that direction.