Secretaries of aging and revenue discuss Camelot Group bid
HARRISBURG, Pa. — If Pennsylvania Gov. Tom Corbett accepts an English company's bid to handle the day-to-day management of the Pennsylvania Lottery, no two state agencies will be more immediately and profoundly affected than the Departments of Aging and Revenue.
The Aging Department is one of the main beneficiaries of the $3.5 billion Lottery, which funds programs ranging from Meals on Wheels to in-home care services for Pennsylvania's senior citizens. The Revenue Department, which has direct oversight of the lottery, is the conduit for that money — and will retain that oversight, which is required by law.
Pennsylvania Revenue Secretary Dan Meuser and Aging Secretary Brian Duke took a few minutes to talk about the proposed privatization and the bid submitted by a North American subsidiary of the Camelot Group, which runs the National Lottery in the United Kingdom.
Q: The Department of Aging receives most of the money from the Lottery. Can you talk about how the demand for services has changed and your expectations of how a private manager might increase cash flow to your agency?
Brian Duke: By 2030 one in four [Pennsylvanians] will be over 60. We serve about 35 percent of that population with direct services. We serve 960,000 people each year with direct deserves to keep them in their homes and community.
We have an obligation to be a source of information and support. We play a key role in prevention: what we do to keep people healthy and well and to help people [with services] ... so they don't need to later access more expensive services. That growth and demand tells us we have to look at our revenue stream.
When you look at PACE [the prescription drug program for the elderly] and [other] services, 75 percent of our budget comes from the lottery and the remainder comes from Tobacco Settlement fund and federal sources. We have to make sure that revenue is enhanced and supported.
Q: What sorts of services does Aging offer to older Pennsylvanians?
Brian Duke: The Department of Aging, through relationships with the 52 Area Agencies on Aging in the 67 counties, offers a great variety of services, including Meals on Wheels and community and protective services. We've seen growth in financial exploitation cases, which has us greatly concerned. PACE enhances health and wellness. Lottery dollars are also used, through [the Revenue Department] for the property tax and rent-rebate program and at the Department of Transportation, which offers shared rides and transit [for seniors].
Q: For people who are unfamiliar, what is "financial exploitation?"
Brian Duke: These are cases where individuals have misappropriated or taken someone's financial resources and used them without that person's consent or in [unwanted] ways. Sometimes it's someone cosigning a checking account or managing financial affairs and spending more money for personal purposes.
Q: The administration has until Jan. 10 to make a decision on Camelot's bid. The original deadline was Dec. 31. Why did the administration seek an extension?
Dan Meuser: The primary factor was our obligations ... to the unions. The unions had ... an opportunity to provide a counterproposal [to Camelot]. That is due on Jan. 8. We felt an extension was essential ... [and a] mutual consent extension was reached.
Q: What happens next?
Dan Meuser: We will continue to be very serious about analyzing this bid.
Q: How do you respond to critics who say the proposal wasn't properly vetted?
Dan Meuser: We held a hearing last April. We put together an illustrated brochure on the timetable and what the potential revenues were. And how the payment plans were going to work. ... There is a hearing scheduled for Jan. 14 before the Senate Finance Committee; we are very much looking forward to that. There'll be various stakeholders involved. It's a significant initiative and that is why ... we've been following a due diligence process.
Q: It's not a secret that the lottery has struggled in the face of the growth of the state's casino industry. Why do you think a private manager can do a better job than the state in preserving its financial health?
Dan Meuser: We have an opportunity to make the PA Lottery the No. 1 lottery in the world. [In the bid we] get $150 million in security, annual profit levels that are higher than our projections. If those minimums aren't obtained (which are higher than our projections) we receive funding back. Provides predictability.
Keep in mind we remain in charge of the lottery. We're hiring a business growth manager to maximize responsible growth and maximize responsible net revenue. The casinos are law. They're important for employment to Pennsylvania.
We don't want to upset any other industries. We want responsible growth. And they're going to help us achieve that in a large scale and faster manner than we perhaps would have done on our own. In the casino counties, not all, maybe half, lottery growth is slightly less. [In] about five or six casino counties ... there is a minimal effect, but minimal is not a problem.
Q: Are you concerned about casino industry opposition if a private manager adds Keno, which has been mentioned?
Dan Meuser: Other states have introduced Keno that have casinos. We've received no information that there has been a negative effect. Keno is a terminal-based game that's under the authority of the secretary of revenue. It's a lottery game ... [that] is certainly within ... our authority. We've not talking about video lottery or slot machines or poker. That's a whole different species. That would require legislation and to the best of my knowledge, the governor does not support that.
Q: So what's the longest you can wait before making a decision on a contract?
Dan Meuser: We have this extension to [Jan. 10], and with all due respect to the bidder, I'm sure they're anticipating Jan. 10. We do have the hearing on Jan. 14, and with all due respect to [the Senate] and the Legislature, there is the distinct possibility that an added extension could take place.
What we also have to be very careful about, should that be the case, and there's a number of ifs in there — if a union proposal comes back, if the decision is made to pursue any further extension — is that there's a bid in place from Camelot.
The bid calls for them to take over management in July, so there is a limited time. I'm sure they want as much time as possible to hit the ground running in the first fiscal year [of the contract].