Treasurer McCord Assesses PA Lottery Performance, other States’ Experience with Lottery Privatization, Expansion in Latest Quarterly Report

Says topic warrants examination given state’s move to privatize Pennsylvania Lottery

Harrisburg – As the state considers privatizing management of the Pennsylvania Lottery, State Treasurer Rob McCord said the operation’s performance and the experience of the only other state to privatize – Illinois – warrant examination, which is why he selected this topic for the latest edition of The McCord Report.

“The Pennsylvania Lottery is an incredibly important asset to the state – especially for our senior citizens who depend on the revenues it generates for programs and services,” said Treasurer McCord. “As the custodian of the Pennsylvania Lottery Fund, I want to ensure we manage it properly and prudently. That includes making well-informed decisions about how we can maximize revenues.”

Treasurer McCord noted proceeds from the Pennsylvania Lottery supported more than 8 million hot meals and nearly 11.4 million low-cost prescription medications in fiscal year 2010-11. Over the same period, the Lottery provided older Pennsylvanians with $280 million in property tax and rent rebates, $214 million in support for the state’s 52 Area Agencies on Aging and other senior centers, and nearly $158 million in free and shared ride-assistance among other services.

The latest edition of The McCord Report looks at total sales and net revenues of the Pennsylvania Lottery over the past 10 years, and it calculates the average benefit per senior citizen by county. Additionally, the report compares the lotteries of Pennsylvania and the nine other largest operations in the United States. The Commonwealth operates the seventh largest lottery in the country in terms of total revenues in the last fiscal year. Of the six ahead of Pennsylvania, four offer additional games such as Keno or video lottery terminals. The comparison provides details on total revenue per adult resident, total administrative costs, and administrative expenses as a percentage of sales for each of the top 10 states.

One of those other “Top 10” states is Illinois, which became the first state to privatize management of its lottery in January 2011. Illinois signed an agreement with Northstar Lottery Group. Northstar assumed its management responsibilities in March 2011, making July 1, 2011-June 30, 2012 the first full fiscal year in which it has operated the state’s lottery.

Northstar’s plans called for increasing the percentage of Illinois’ adult population who are lottery customers, adding new games, and expanding the number of retail outlets. The group also proposed a greater online presence, which would allow for a player loyalty program and subscription service. In March, Illinois became the first state in the country to sell lottery tickets via the Internet.

In April, the Corbett administration issued a request for qualifications to pursue a private management agreement for the state’s lottery.

“This is relatively unchartered water,” said Treasurer McCord. “While a number of other states are considering the privatization of their respective lotteries, only Illinois has executed such an agreement. We continue to watch the results unfold there and will revisit that topic in future editions of our quarterly report.”

The Treasurer also pointed to Pennsylvania’s neighbors, Maryland and Ohio, which each introduced Keno to boost sales revenues. Keno players attempt to match their numbers to numbers drawn frequently throughout the day, as often as every four minutes. Over the last decade, Keno accounted for nearly half of Maryland’s increase in lottery revenues. In Ohio, the game has been responsible for 86% of the increase in revenues since it was introduced in 2009.

The McCord Report offers unbiased information on timely topics affecting the state and its economic health. Earlier issues have looked at public funding for transportation and higher education, the state’s debt level, and the issue of privatizing Pennsylvania’s wine and spirits stores.

To view the most recent edition of The McCord Report, as well as past issues, visit www.patreasury.gov and click on the “McCord Report” graphic.

Media contact: Michael Smith, 717-787-2991 or news@patreasury.gov

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