PA Lottery looks to win some legislative help

By Andrew Staub | PA Independent

The Pennsylvania Lottery wants to expand, but first it must get some help from lawmakers.

As the population ages, lottery officials want to grow programs that help older Pennsylvanians. For that to happen, Revenue Secretary Dan Meuser said, the lottery needs the Legislature to relax a state law requiring it to reach certain returns each year.

In 2008, lawmakers temporarily reduced the profit-margin requirement from 30 percent to 27 percent, and they extended that reprieve in 2011. The reduction expires next year, which is problematic, considering the continued popularity of instant games that don’t bring as much profit as terminal-based games such as Cash 5, The Daily Number and Treasure Hunt.

“Without margin relief, we’re not going to get anywhere near delivering for older Pennsylvanians,” Meuser said.

Instead of tempering sales of instant games, Meuser said, the lottery could expand into the younger demographic.

“By getting more people to play a little, the funding can come in to support these important programs that otherwise would be supported via taxes,” Meuser said.

By 2020, 19.2 percent of Pennsylvania’s population will be 65 or older, according to the Independent Fiscal Office. That’s up from 15.4 percent in 2010.

As people age and retire, they tend to spend more on items that aren’t taxable – such as health-care services, said Matthew Knittel, IFO director. As people leave the work force they rely on non-taxable income such as Social security or pensions, he said.

Knittel said research that people older than 65 are also less apt to play the lottery, the very system supporting the property tax rebates, free transit services and low-cost prescription drug programs.

“We expect the demand to increase at a good clip over the next five or 10 years,” Knittel said.

The lottery reported record profits of $1.07 billion this past fiscal year. Still, a profit margin requirement of about 24 percent could help, Meuser said.

Removing the “artificial cap” would mean more net profit, Meuser said. Allowing the margin requirement to return to 30 percent would result in about $350 million in lost net profits annually, he said.

State Sen. Michael Brubaker, R-Lancaster, chairs the Finance Committee and favors lowering the margin permanently or for longer than three years, he said. He also floated the idea of eliminating it.

“Why restrain the ability of your organization to drive dollars — maximum dollars — to senior programs when we have these artificial limits in place that do exactly that?” he said.

Meuser’s comments came as lawmakers explore adding Keno, which, the revenue secretary said, could bring in anywhere from $40 million to $180 million if placed in bars, restaurants and other locations.

Players win money by matching numbers in drawings held several times a day. Fifteen states and Washington, D.C., offer the game, with New York the first, starting in 1988, said Jonathan Griffin, a policy specialist with the National Conference of State Legislatures.

David Fillman, executive director of the American Federation of State, County and Municipal Employees Council 13, said the union believes 1,500 locations could feature Keno in the first year, if the state approves the expansion. That number could grow to more than 3,000 by the fifth year, he said.

But without more help, Meuser said, Keno would be “inhibited.”

“The margin relief comes first,” he said. “Without that, we cannot optimize retailers, we cannot continue with the instant games that exist today, we cannot realize meeting the demands over the next 10 years.”

Andrew Staub is a reporter for PA Independent and can be reached at Andrew@PAIndependent.com. Follow @PAIndependent on Twitter for more.

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