PA’s Private Lottery Contract Unconstitutional, AG says

By Melissa Daniels | PA Independent

HARRISBURG — Pennsylvania’s Attorney General Kathleen Kane rejected the governor’s contract with Camelot Global Services to manage the Pennsylvania Lottery.

Kane, during a five-minute news conference Thursday, said the contract “contravenes the Pennsylvania Constitution and is not statutorily authorized.”

Gov. Tom Corbett’s administration entered the contract — a professional management agreement — with Camelot in January. The Office of the Attorney General is required by state law to review contracts for “form and legality.”

In this case, the Camelot PMA failed to meet that test, according to a letter from Kane’s office to the administration sent early Thursday.

State officials in the Department of Revenue said, upon entering the Camelot agreement, it would bring in more money than the lottery makes as a state-run entity. Profits fund programs for senior citizens, like prescription drug and at-home assistance costs.

But throughout the procurement process, lawmakers from both parties, unionized workers at the PA Lottery and State Treasurer Rob McCord publicly wondered if the contract was legal, if the procurement process was fair, or if it overstepped the rights of lawmakers to authorize an expansion of gaming.

The rejection means that the state won’t see additional revenue from the state lottery that was projected.

Corbett’s budget officials have said the Camelot contract would bring an additional $50 million to senior citizen programs’ in the 2013-2014 budget, which was proposed on Feb. 5.

Corbett said in a statement that he was “deeply disappointed.”

“I don’t agree with the attorney general’s analysis and decision, and we will review our legal options,” he said. “My job is to protect Pennsylvania’s seniors, and we will continue to do that.”

Kane, who won the office by a landslide in November, is the first Democrat and first woman elected to the Attorney General seat. This announcement marks her first major decision in the office.

In her announcement, Kane said that the PMA failed the form and legality test on three main points. First and foremost, Kane said the executive branch, namely the secretary of revenue, overstepped legal boundaries.

“The PMA is an unlawful extension of executive authority that infringes on the General Assembly’s powers to make basic policy choices regarding the management and operation of the lottery,” as described in the state constitution, Kane said.

Kane said parts of the proposal adding electronic and monitor-based games like Keno to the state lottery system are not authorized by the State Lottery Act. That’s because the expansion “usurps the authority” of the Pennsylvania Gaming Control Board, Kane said.

Lastly, the contract allows Camelot to be compensated for “indirect expenses.” This “open and undefined indemnification” is unconstitutional, she said.

Kane did not take questions from reporters after she made the announcement.

Democrats have denounced the Corbett administration’s move to privatize the state lottery, but Kane said her decision was based solely on the legality of the contract.

And she said she wanted to warn the public against politician’s who may point the finger at her office from taking money from seniors.

“It is disingenuous to put the cart before the horse by promising money to people in need based upon a contract before making sure that that contract is legal and then blaming the messenger when it is deemed illegal,” Kane said.

Kane said the office reviews as many as 5,000 contracts a year.

“While most are approved, we do not rubber stamp any one of them,” Kane said.

Contact Melissa Daniels melissa@paindependent.com