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Governor Corbett continues push to privitize Lottery System

01.03.13

JANUARY 2013, LEHIGH VALLEY Edition of The Union News

Governor Corbett continues push to privitize Lottery System

BY PAUL TUCKER
THEUNIONNEWSABE@AOL.COM

REGION, December 19th- Pennsylvania Republican Governor Tom Corbett has made it clear a major prioity of his will be the privatization of the state lottery system in 2013.

The office of the governor recently released a summary of his intension and the terms and conditions of the Private Management Agreement (PMA) recently which includes the suggestion that privitizing the system would “provide more reliable and predictable revenue to ensure the continued strength and viability” of the Pennsylvania Lottery system.

The PMA will be a contract between the Commonwealth of Pennsylvania and a yet-to-be-determined private industry expect structured to assure funding to support lottery-funded senior citizen programs, the summary states.

The PMA will establish the management relationship between Pennsylvania and a private manager which will govern day-to-day operations of the Pennsylvania Lottery, define the scope and duties of services to be provided by the private manager, establish expectations on Lottery growth opportunities, employ industry best practices for marketing and management of the Lottery by which the contractor will be measured to ensure the Commonwealth is getting expected results.

However, what Mr. Corbett’s summary does not state is why he finds it neccessary to privitize the state lottery system which makes millions of dollars for the Commonwealth each year that supplies funds for many programs for the elderly.

The lone bidder for the PMA is Camelot Global Services of Great Britain. The bids expires on December 31st, 2012, and Mr. Corbett is on a “mad dash” to get the privitization through by the deadline. Camelot Global Services has guaranteed him they will double lottery profits over 20 years. These are profit thresholds that must be achieved by the manager in order for the manager to earn any incentive compensation.

The American Federation of State, County and Municipal Employees (AFSCME) Union represent 170 of the 230 state workers employed by the lottery system.

Currently AFSCME officials are meeting with the Corbett Administration discussing the reason the contract is being considered and proposing alternate methods for the results the PMA would achieve.

If a private manager fails to meet these annual profit commitments, the Commonwealth will draw shortfall payments down from the $150 million cash collateral provided by the manager to secure its performance in order to preserve funding for programs benefitting older Pennsylvanians, the summary states However, no funding projections are yet available.

Mr. Corbett has proposed privitizing the Pennsylvania State Stores and other services during his first two-years as Governor.

Under the plan, the PMA manager would provide to Pennsylvania $150 million in cash collateral. It is against this cash collateral that any shortfall payments would be drawn, if the PMA manager fails to meet its annual profit commitment in any year.

If the cash collateral is depleted to less than $50 million at any point in the contract term, then the manager would obtain letters of credit of $50 million to ensure the financial and performance based obligations of the agreement.

Bidders must invite the current Lottery employees to apply for job opportunities during the employment transition period that may take up to a year. However, the manager could use subcontractors and vendors to provide products or services for the management of the Lottery.

Since its inception in 1972, the state lottery system has raised $27.6 billion for Pennsylvania seniors.

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