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Brit Firm Bags $35B Pennsylvania Lottery Contract

Pennsylvania Gov. Tom Corbett awarded a 20-year, $34.6 billion contract to Britain's Camelot Global Services LLC to operate the state lottery.

Camelot operates Britain's national lottery. Its owner is the Ontario Teachers' Pension Plan, one of Canada's largest pension funds.

"This is about providing for and protecting seniors, and nothing else," Corbett said in a statement Thursday. Pennsylvania is the only state that earmarks all its lottery proceeds for elderly-related programs.

"Today in Pennsylvania there are nearly 2.7 million individuals age 60 and older, and that number will grow to 3.6 million by 2030. We have the fourth largest population of older adults in the country, and with that comes significant and costly obligations," he said.

Under the contract, Camelot's annual profit commitments will provide 9.5% compounded annual growth over the first five years of the contract and 6.1% over its first 10 years. According to Corbett, analysis against projected lottery performance shows incremental profit growth of at least $460 million over the first five years and at least $1.3 billion over the first.

Camelot must provide a minimum of $34.6 billion in profit over 20 years.

"The savings of employee benefits, pension and wages will be small but the governor is looking at a one-time infusion of cash into the system from the winning bidder, Camelot. This one-time windfall of cash will help fill gaps in the state's budget that could occur in the upcoming fiscal year," said David Fiorenza, a Villanova School of Business professor and the former chief financial officer of Radnor Township, Pa.

Pennsylvania stands to become the third state, behind Illinois and Indiana, to privatize its lottery.

New Attorney General Kathleen Kane has 30 days to review the contract. Treasurer Rob McCord has questioned its legality. Both are Democrats. Corbett is a Republican.

Council 13 of the American Federation of State County and Municipal Employees, along with seven Democratic lawmakers, sued the state on Dec. 17 in the Commonwealth Court of Pennsylvania, saying the Lottery Act of 1971 prohibits a governor from privatizing the lottery without approval from the state Legislature.

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