SOURCE: Pennsylvania Treasury

Pennsylvania Treasury

December 18, 2013 12:01 ET

Treasurer McCord Highlights Corbett's Waste of Lottery Funds

$3.4 Million for Privatization Consultants Should Have Been Used for Senior Services

PITTSBURGH, PA--(Marketwired - December 18, 2013) - Money wasted on consultants and law firms aiding Governor Tom Corbett's misguided attempt to privatize the state Lottery should have been used to help senior citizens in Allegheny County and elsewhere in Pennsylvania, State Treasurer Rob McCord told a group of seniors today. He called on Corbett to abandon what he termed an "ideological pursuit of Lottery privatization."

During a visit to the Greenfield Community Senior Center in Pittsburgh, McCord highlighted the $3.4 million Corbett has so far spent on his privatization plan, and talked about the services to older Pennsylvanians that money could have provided.

"We estimate Allegheny's share of that $3.4 million equals more than $412,000. That could have provided Allegheny County's seniors with 20,000 more prescriptions through PACE and PACENET, or; 103,000 additional transit rides through the Port Authority, or; property tax and rent rebates to nearly 1,000 additional senior households," McCord said.

"That's outrageous, and I fear Governor Corbett may be looking to waste even more, continuing to pursue a bad plan at an expensive price -- one our seniors cannot afford," he added.

The latest in numerous bid extensions granted to the European firm Camelot Global Services, Inc., the sole company to bid on the private management agreement, expires on December 31. Corbett, however, has been in discussions with legislative leaders about redesigning the management plan.

McCord said the potential changes are significant enough that the administration would probably need to put the contract up for bid again. Companies other than Camelot might decide to examine the restructured proposal and seek the contract. That would add an additional layer of waste, as much of work already performed by consultants on the original bid would have to be redone.

Of the $3.4 million the Corbett Administration has paid so far, $2.36 million has gone to the consultant DLA Piper. Another, Greenhill and Co. LLC, previously received $1 million, and the law firm of Blank Rome has gotten more than $116,000 defending the governor's plan against litigation.

McCord was the first statewide official to express grave concerns about the proposed arrangement.

In December 2012, McCord informed the administration that he might not be able to disburse commonwealth funds to Camelot if the company, as proposed in a draft plan, introduced types of gaming not authorized by the Lottery law, or types that could conflict with the 2004 state law that legalized slot machine gambling exclusively at licensed casinos. The possibility of expanding the Lottery to include keno or on-line gaming has been associated with the privatization plan.

Then, in February 2013, Attorney General Kathleen Kane disapproved the contract, citing legal problems. The Corbett Administration has since extended Camelot's bid while claiming it is trying to address the attorney general's objections.

While expressing no view about whether the legislature should approve additional kinds of games -- such as keno -- for Lottery purposes, McCord again registered his concern about awarding a private manager the opportunity to develop such new alternatives first. 

"It is premature and imprudent to bring in a private manager under the charade of trying to enhance Lottery proceeds from new games. The public employees who currently oversee the Lottery have done a great job to this point, and the administration has yet to demonstrate that a private manager would be more effective at increasing revenues from keno or other games. The time to see if private managers think they can do better is after we have learned what revenues our experienced Lottery officials can produce from keno, not before," McCord said.

McCord has closely monitored the money spent on consultants and legal fees for the Lottery plan. Under the state Fiscal Code, the treasurer is required to review payment requests, but he can stop them only if they are illegal. Although McCord considers the consultant payments a gross waste of Lottery funds that should be used instead for seniors, they met the minimum legal standard. He said, however, he was visiting the Greenfield Community Senior Center in part to shine a spotlight on the waste.

"Our seniors have worked hard their whole lives, paid taxes their whole lives. And we have made commitments to them in return -- commitments to honor their lifetime of work and service with programs they dearly need. Let's use the Lottery Fund for them, rather than on an unpopular and costly ideological privatization quest. The Governor should not extend this bid again. He should not waste more of our seniors' money," McCord said.

For more information, visit www.patreasury.gov.

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