Pennsylvania’s proposed contract with Camelot Global Services to run the lottery system violates the state’s constitution, Attorney General Kathleen Kane said Thursday.
Kane, who took office last month, said she “cannot approve the contract.”
Gov. Tom Corbett in January awarded a 20-year, $34.6 billion contract to Britain’s Camelot Global Services LLC to operate the state lottery. Camelot, whose owner is the Ontario Teachers’ Pension Plan, one of Canada’s largest pension funds, operates Britain’s national lottery.
Kane is a Democrat, Corbett a Republican. Corbett touted the plan as benefiting elderly-related programs. Pennsylvania, which began its lottery in 1972 is the only state that earmarks all its lottery proceeds for such use.
But Kane on Thursday said Corbett crossed the line. Quoting from internal staff memos at a press conference in Harrisburg and citing state gaming laws, she said the governor overstepped constitutional boundaries by “unlawfully infringing on the General Assembly’s power to make basic policy choices regarding the management and operation of the lottery.”
Expanding the lottery to electronic games such as Keno without General Assembly approval, she said, is also unconstitutional, as is a contract provision allowing Camelot to be indemnified for “indirect expenses.”
Kane said her finding on contract legality is unrelated to policy or “the wisdom of the business decision.” She hinted at pressure from Corbett’s administration to approve the deal.
“Promising money to people in need based on a contract that is not legal and then blaming those entrusted to do their job correctly is both disingenuous and a perfect example of putting the cart before the horse,” Kane said before telling reporters she would only answer questions in writing.
“I'm deeply disappointed. I don't agree with the attorney general’s analysis and decision, and we will review our legal options," Corbett said in a late-afternoon statement.
State Treasurer Rob McCord, also a Democrat, applauded Kane.
“The administration was repeatedly warned, as early as last year, that the proposed contract would permit new forms of gambling not currently authorized by the Legislature and not regulated by the Gaming Control Board,” he said.
David Fiorenza, a professor at Villanova School of Business and a former chief financial officer of Radnor Township, Pa., expects more party-line splits over Corbett’s privatization efforts. The governor in last week’s budget message called for privatizing the state’s liquor stores.
“This decision is just the first of many the Democratic attorney general will make that will oppose the Republican governor’s agenda to privatize services and move in a more positive economic direction for the commonwealth of Pennsylvania,” Fiorenza said Thursday afternoon. “When faced with opposing views and political parties, politics will outweigh the overall macroeconomic decisions for the long term sustainability of Pennsylvania.”
Moody’s Investors Service rates the state’s general obligation bonds Aa2, while Fitch Ratings and Standard & Poor’s assign AA-plus and AA ratings, respectively.
