Sen. Rob Teplitz
Sen. Rob Teplitz

Local Republicans are backing Gov. Tom Corbett's quest to privatize the state's lottery system, despite Attorney General Kathleen Kane's rejection of a contract to allow a British company to take over the state-run system.

Kane said the deal with London-based Camelot Global Services violates the state constitution and isn't authorized by law, but some York area lawmakers said that decision was political and they believe the contract would have raised more money than the current system.

Positions seem to be divided along party lines, with Democrats backing a lawsuit challenging the legality of the contract. Kane is a newly seated Democrat, while Corbett is a Republican.

Sen.

Rep. Mike Regan
Rep. Mike Regan
Rob Teplitz, D-York and Dauphin counties, is both the only Democrat in the York County delegation and the only local legislator vocally opposing the privatization.

While some of his Republican colleagues said the governor shouldn't have bypassed the state legislature when negotiating the contract, they said they didn't support Kane's action.

'A detriment': Rep. Mike Regan, R-York and Cumberland counties, said the lottery negotiations "might not have been handled in the best political way," but he said the state is losing out on a proposal that would've provided more money for seniors.

"We were kind of in the dark," said Rep. Will Tallman, R-York and Adams counties. "There were questions on how (the company) was chosen."

But he said the premise behind the contract was a good one, regardless of how it was handled.

"(The loss of the contract) is going to be a detriment," he said. "Money for the Baby Boomers, which I am one, can't be sustained because the aging population is growing."

The contract protected income for the elderly by denying the company of profits if it didn't generate enough money to meet certain thresholds, said Rep. Seth Grove, R-Dover Township, adding that the state-run lottery hasn't always been able to generate a steady income.

"I think a lot of (the debate around privatization) is just politics," he said. "Union protection."

The deal would've almost instantly provided an extra $50 million for needed senior programs, such as home-based care that keeps seniors out of expensive group-living facilities, he said.

Legal challenge: Teplitz praised Kane, saying the pending legal challenge from Democratic lawmakers and the union that represents 170 lottery employees is reason enough to deny the contract.

He said he's concerned about giving management of the profitable operation to an overseas company with purely financial interests; Camelot won't be concerned with Pennsylvania's seniors, who benefit from the lottery proceeds funneled to rent and property tax rebates, transit, prescription drug assistance, senior centers and long-term-care services.

Also at issue are about 100 lottery employees who live in his district and could lose their jobs.

Teplitz said the Legislature should have been involved in the lottery privatization plans. "The process should've been open and transparent," he said. "When it's not, it makes everyone suspicious, and rightfully so."

Kane's position: [cka: AP background: ]Kane's decision came after Corbett undertook a nine-month process to find and hire a private company to replace state employees atop the $3.5 billion Pennsylvania Lottery.

In a memo she sent Thursday to Corbett's Department of Revenue, which oversees the lottery, Kane's office revealed that it had asked Corbett to withdraw the contract because of a pending lawsuit filed by Democratic lawmakers and the union that represents lottery employees. Corbett refused.

Kane's office subsequently decided that state law does not allow the governor to privatize the operation or management of the lottery nor does it allow the expansion of gambling that the contract would permit.

Her office also concluded that the open and undefined "indirect expenses" that Camelot can claim under the contract - essentially a management fee of up to 0.75 percent of the annual profit, or hundreds of millions of dollars over the life of the deal - are an unconstitutional waiver of the state's "sovereign immunity" protection against lawsuits.

Corbett, whose administration signed the agreement last month, has said he believes Camelot can produce higher and more stable lottery profits as the state tries to keep pace with rising demand for programs for senior citizens that the lottery funds.

Democratic lawmakers have criticized Corbett as simply diverting money from programs for the elderly to a foreign firm at a time when the state employees who run the lottery are achieving strong gains in profits and sales and keeping overhead low.

- The Associated Press contributed to this report. Reach Christina Kauffman at ckauffman@yorkdispatch.com