Why is Tom Corbett fast-tracking a plan to outsource the management of the Pennsylvania Lottery to the private sector?

Will 100 percent of the proceeds still benefit seniors?

Has the commonwealth studied other states' experiences with lottery privatization?

What happens if the management firm fails to meet guaranteed funding levels?

These are just a few of the questions state Sen. Mike Brubaker wants answered. The Lititz-area Republican's district includes most of northern Lancaster County.

As chairman of the Senate Finance Committee, Brubaker has scheduled a Jan. 14 public hearing to explore what has become the Corbett administration's most aggressive effort at privatizing state government services.

The hearing may be the only chance for proponents and critics to argue the pros and cons of the massive privatization effort.

Corbett fast-tracked plans to bring in a private company to manage the Pennsylvania Lottery, arguing that a rapidly growing senior population has made it necessary to explore ways to make the lottery more profitable.

"The administration still believes they have unilateral authority to make the deal, but I want to make sure we have all the information before moving forward," Brubaker said Thursday.

But time is running out.

The winning bid from Camelot Global Services expires Dec. 31, and the plan is facing some significant hurdles.

Last week, Corbett gave the lottery employees' union until Jan. 8 to present an alternative to privatization, a requirement of their contract.

That date is well past the bid deadline.

But Elizabeth Brassell, spokeswomen for the Department of Revenue, said Thursday that the administration was optimistic that Camelot would extend Monday's deadline.

An extension would be good news for Brubaker, who prefers that state residents learn the details of deal before the governor makes a decision.

Under the proposed deal with Camelot, which runs the national lottery in the United Kingdom, profits totaling $34 billion are guaranteed over the life of the 20-year contract — an average of $1.7 billion per year.

"We have a dramatically growing population of seniors, and from a financial standpoint this would improve our ability to help those programs," Brassell said.

But Dave Fillman, executive director of American Federation of State, County and Municipal Employees Council 13, doesn't think privatization is worth the gamble.

During the last fiscal year, the lottery recorded more than $3.5 billion in sales and $1.1 billion in profits. All proceeds from the system go toward programs that benefit the state's senior citizens.

"These private companies are driven by money, which means 100 percent of the profits won't make it to seniors," Fillman said. "My guys and gals do a heck of a job making sure the money gets to our seniors."

Fillman pointed out that the council has 40 years of history to draw on.

"We can show what we've done in the past. Camelot can only make predictions about the future," he said.

Administration officials have said they expect Camelot's profits to be helped by the introduction of keno terminals in bars and restaurants.

Brassell said among the chief terms of the deal with Camelot is a requirement that it pay certain profit levels to the state. To ensure it would do so, the management firm is being asked to provide a $200 million cash collateral.

Brubaker said he doesn't doubt that Camelot will make good on its promises, but he has a few questions about the deal.

Why is Corbett rushing into a deal without the Legislature weighing in?

Will 100 percent of lottery profits will still go to seniors, or will it be used to reduce the state's debt?

Are we going to be able to hold the management firm accountable?

These questions, and others, will be asked by Finance Committee members, Brubaker said.

"This is a multibillion-dollar contract — we want to make sure we're getting it right," he said.

The Republican lawmaker said he wasn't sure, as of Thursday afternoon, who will be on the list to testify at the Jan. 14 hearing. But, he said, he will ask members of various groups that have a stake in the decision.

The most important group — older Pennsylvanians — could suffer if the commonwealth rushes into a deal, warned a new report from the left-leaning Keystone Research Center.

"With the baby-boom population aging, Pennsylvania should not rush into a plan that could produce more revenue for the contractor," said Stephen Herzenberg, author of the report and executive director of the Keystone Research Center.

Herzenberg supports Brubaker's call for a public hearing, saying that the deal raised red flags right away when it was announced in November.

Herzenberg's report raises questions about financial ties between Camelot and Greenhill & Co., the private consultant retained by the Corbett administration to manage the bidding process.

Greenhill worked on the $576 million sale of Camelot to its current owner, the Ontario teachers' pension fund, and would receive $3 million if the privatization deal goes through.

"There appears to be a clear conflict of interest that interferes with Greenhill's ability to advise the Commonwealth on whether lottery privatization makes sense," Herzenberg said.

Brassell disagrees.

"There are no rules that say a consulting company can't advise a company in many different deals," she said.

Brubaker said he hopes the Finance Committee will get to the bottom of many questions surrounding the lottery privatization issue.

"I'm in favor of outsourcing certain governmental functions, but more information is needed on this issue," he said.
kshuey@lnpnews.com