Gov. Tom Corbett wanted to hire the firm that manages the United Kingdon's lottery to do the same in Pennsylvania.
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Pennsylvania Attorney General Kathleen Kane gives a statement today in Harrisburg rejecting the Pennsylvania Lottery privatization.
Kane said she won't approve the 20- to 30-year contract with Camelot Global Services because it conflicts with the state constitution and is prohibited by law.
The contract's legality is being challenged in court by Democrat lawmakers and the union that represents lottery employees. Corbett can challenge Kane's decision in court.
“I'm deeply disappointed," Corbett said in a statement this afternoon. "I don't agree with the attorney general’s analysis and decision, and we will review our legal options."
Corbett has said he believes Camelot can do a better job than the state in raising lottery profits. Democratic lawmakers criticized Corbett for what they saw as diverting money from programs for the elderly to a foreign firm."My job is to protect Pennsylvania’s seniors, and we will continue to do that," the governor said in his statement. "We have a growing population where one in four Pennsylvanians will be over the age of 65 by 2017. My goal is to ensure that funding for senior programs keeps pace with that growth.”
Camelot, which runs the United Kingdom's official lottery, also issued a statement voicing disappointment in the decision.
Kane: Contract illegal
The attorney general's office reviews state contracts for form and legality.
In a memo she sent today 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 the pending lawsuit filed by Democratic lawmakers and the lottery employees union. 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.
Bipartisan firestormRepublican Party of Pennsylvania Executive Director Mike Barley released an afternoon statement challenging that Kane "broke the promise she made to Pennsylvanians to use her office for effective oversight, not political gimmicks.”
“Kathleen Kane’s blatantly political decision to hold long-term funding hostage for Pennsylvania’s seniors is downright shameful," Barley stated.
Democratic lawmakers and Pennsylvania Treasurer Rob McCord, also a Democrat like Kane, lauded Kane's rejection.
State Rep. Bob Freeman, D-Northampton, said he still can't fathom where Corbett got the authority to hire the private firm.
"I don't know what the basis was in law for him to do this," Freeman said early this afternoon from his Easton office. "There is no provision in the (state) lottery law that allows" the governor to make such a change on his own.
Freeman said he assumed Corbett made the move based on the lottery law not specifically prohibiting it. Freeman called that "convoluted logic."
Corbett "can try and make his case in court," Freeman said of the likely appeal of Kane's ruling.
"Privatizing the lottery is crazy," Freeman said, adding that the state doesn't need to "skim" $127 million from lottery receipts to hire a consultant to tell the state what it can already do on its own. "It's like paying someone to borrow your watch to tell you what time it is."
The contract would "tie the hands" of future governors for 20 to 30 years when it comes to the lottery, Freeman said. "That's a terribly long time," he said.
"I don't know what motivated him to do this," Freeman said, adding that the $1 billion the lottery generated last year for programs for the elderly points to its success. "If it's not broke, why is he trying to fix it? ... I'd contend it is the most successful lottery" in the country.
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.