Third and State

Pennsylvania's new Attorney General Kathleen Kane yesterday found that Governor Corbett's contract privatizing the state's lottery is illegal.

While this was a legal decision, it was also good news for Pennsylvanians concerned about the implications of privatizing the lottery, including the loss of revenues the lottery provides to programs for seniors.

As the Keystone Research Center pointed out in December and again in January, the plan to privatize the lottery looked like a bad deal on its face. The state had only a single bidder, a recipe for getting fleeced whether you are a homeowner installing a new deck or a state privatizing the lottery.

The contract also looked like a sweet deal for the private bidder: Camelot's annual revenue commitments to the state appeared to be easily attainable. Nearly half of the first $100 million achieved above these commitments (more than $100 million in later years) would have gone to the company. Over 20 years, Camelot stood to rake in $1 billion to $2 billion in profit that might otherwise have gone to services for seniors. Since it wasn't clear how much of its own money the company would invest in the lottery, the expected profits appeared to be a phenomenal return on investment.

Most suspect of all, the commonwealth's privatization advisor, Greenhill & Co., had a blatant conflict of interest, standing to make millions if the privatization went through.

This deal was also rushed. It would have turned over control of the lottery to a private company for an entire generation without an open, public and thoughtful process.

You would think all these concerns would be sufficient to get Pennsylvania's last sheriff to change course on this deal.

You would be wrong.