HARRISBURG, Pa., Jan. 8, 2013 /PRNewswire-USNewswire/ -- Pennsylvania workers could generate at least $1.5 billion more in profits for seniors than the private operator currently negotiating with the Corbett administration to take over the system, according to a proposal released today by AFSCME Council 13.
AFSCME submitted a counter proposal to the administration today that provides a more realistic and stable path forward for the lottery, already one of the most successful in the nation.
The report also highlights serious concerns about the Corbett administration's process in pursuing a private manager for the Lottery, which is attempting to bypass the legislature and has yielded only one bidder, United Kingdom-based Camelot Global Services PA LLC.
AFSCME's proposal includes dozens of specific changes to the lottery that would expand sales and net revenue; institute more controls and oversight of the Lottery Fund; and ensure greater transparency and accountability to all Pennsylvanians.
"If public employees have the opportunity to operate the lottery under the same expansion that the administration wants to provide Camelot, we would beat Camelot's guaranteed profits by at least 10 percent to 30 percent - without giving away hundreds of millions in revenue to Camelot at the expense of our seniors," said Dave Fillman, Executive Director of AFSCME Council 13.
The Private Management Agreement (PMA) threatens the jobs of 258 Pennsylvanians, including 174 AFSCME members.
AFSCME's analysis shows that the Annual Profit Commitments (APC) Camelot has proposed are based on an understanding that lawmakers will reduce the guaranteed minimum payment for senior programs by 10 percent starting in 2015.
Current state law mandates that the lottery invest at least 27 percent of the Lottery Fund in senior programs annually. Under state law, that minimum returns to its standard level of 30 percent on July 1, 2015 after the recession caused the legislature to grant a temporary relief to the fund in 2010.
But Camelot is betting that lawmakers will change current law and maintain the 27 percent floor for the next 20 years, through 2033. This change alone would amount to a $1.244 billion loss to seniors if the same sales revenues were to be achieved without the profit taking of a private manager. Factor in the private manager's profit taking for exceeding their APC's and Camelot's expenses, and the loss to seniors could top $1.5 billion over 30 years.
In addition, AFSCME analysis shows that the Camelot plan would not provide adequate protections against a shortfall in lottery profits.
Camelot's $200 million security, designed to make up any shortfall in profits, "… comes attached with so many exclusions, exceptions, caps and limitations that both the profit guarantee and predictable funding the Commonwealth seeks in this PMA do not actually exist," the report says.
The PMA stipulates that the cash withdrawal to cover any profit shortfall cannot be greater than 5 percent of that year's profits. This cap is rarely, if ever mentioned in public by Camelot or the Corbett administration.
Although the Corbett administration asserts the security would include $200 million, the cap prevents the Commonwealth from ever realizing the full amount of that security even if Camelot's profits were more than $200 million short.
A five percent shortfall of profits by Camelot in the first year means the state would lose out on $2.8 million of the so-called guaranteed "profits" because of this cap and a shortfall of just five percent in the 5th year of the agreement would result in a $4 million shortfall.
A 10 percent shortfall of the "guarantee" in year one would leave the state $62 million short of the guarantee. A shortfall of 10 percent in the 5th year would result in an $87.3 million loss for the state that the Lottery Fund or tax payers could be forced to make up.
AFSCME's proposal also raises serious questions regarding the administration's secretive negotiations with the lone bidder for the lottery - United Kingdom-based Camelot Global Services PA LLC.
The winners in this deal are Camelot and a handful of consultants, AFSCME's analysis shows. Greenhill & Company, DLA Piper, and Kroll Advisory Systems are guaranteed at least $600,000 for their time spent on these matters.
"So far, the only folks providing input to the administration are the consultants who stand to make hundreds of millions in fees," Fillman added.
"The bottom line is that Camelot has the opportunity to make annual profits in a single year greater than all the salaries, incentives, benefits the Commonwealth currently pays the workforce operating one of the best performing state lotteries in the nation."
Fillman said that AFSCME looks forward to testifying before members of the Senate Finance Committee on Jan. 14th.
"Senator Brubaker and his colleagues deserve praise for calling for a public hearing on this deal," Fillman said. "It's incredible that the administration tried to push this through without providing the public or the legislature with an opportunity to ask questions or provide input about this deal."
AFSCME Council 13 represents more than 65,000 employees in the Commonwealth of Pennsylvania. For more information, visit www.afscme13.org.
SOURCE AFSCME District Council 13