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In the Bid to Privatize PA’s Lottery, One Is the Loneliest Number

2:23 pm in Uncategorized by ThirdandState

By Stephen Herzenberg, Third and State

Three Dog Night: One

One is the loneliest number that you’ll ever do …

Although I’m dating myself, some of you may recognize the Harry Nilsson song made famous by Three Dog Night. We recommend that Governor Tom Corbett download it to his iPod as he contemplates whether to accept a solitary bid from Camelot Global Services to take over the operation of the Pennsylvania Lottery. Whether privatizing state services or getting a new roof for your house, having a single lonely bidder is a red flag for a fleecing — for overpaying the contractor.

In its bid, Camelot promises 20 to 30 years of lottery profits that barely increase at the rate of inflation — even with the addition of new lottery games such as Keno and online gaming. The deal could produce big-time profits for Camelot with performance no better than the public system could produce. If the company maxes out its incentive-based compensation over the initial 20-year contract, it could receive $1.15 billion in today’s dollars; more when you count annual management fees.

A good deal for Camelot, but not for the Pennsylvania seniors who benefit from lottery proceeds, as the Keystone Research Center finds in a new report. The impact on seniors is critical since the lottery generates $1 billion a year for services that benefit area senior centers, low-cost prescription drugs, transportation for seniors, and property tax and rent rebates.

Experience from other states offers little to recommend this deal. Illinois is the only state to privatize its lottery, and it is now embroiled in litigation about how much the contractor owes the state because of poor performance. Indiana just privatized its lottery, so there’s no information yet on the results. Both states received more than one bid from private companies.

Pennsylvania’s move toward privatization is especially puzzling given the lottery’s good track record and record profits in the last two years. A recent Pennsylvania Treasury analysis found that administrative costs in the Pennsylvania Lottery were the second lowest, as a share of lottery system sales, of the 10 largest lotteries in the United States.

The Keystone report also raises questions about financial ties between Camelot and Greenhill & Co., the private consultant retained by the Corbett administration to manage the bidding process. Greenhill worked on the $576 million sale of Camelot to its current owner, and would receive millions if the privatization deal goes through. 

When you add up all the questions about this deal — starting but not ending with the lack of multiple bidders, the lack of transparency, the low revenue commitments, and an apparent conflict of interest that could motivate Greenhill to push for privatization — it seems like a game of tee-ball for seven-year olds: as in, “eight strikes and you’re out.”

Based on all the questions raised by Keystone and others, at the very minimum the Corbett administration should slow down and undertake in partnership with the Legislature a transparent and comprehensive review of lottery privatization before locking the commonwealth into a bad deal for a generation.

 

Changing the Subject Doesn’t Make Payday Lending in PA a Better Idea

8:55 am in Uncategorized by ThirdandState

Payday Loans Neon Sign

(Photo: rinkjustice/flickr)

By Mark Price, Third and State

In legislative hearings last month, proponents of a bill to legalize high-interest payday loans tried to change the subject and questioned the motives of some of their constituents. But these attempts don’t alter the fact that allowing payday lending is a bad idea.

As we’ve explained before — and as the U.S. military, U.S. Congress, and former President George W. Bush have all agreed — payday loans are a debt trap that further impoverishes low-income families, driving more of them into bankruptcy. Pennsylvania should leave in place the strong regulations that make use of payday loans much less common here than nationally.

Here is a bit more detail on what happened at the September 19 Senate Banking and Insurance Committee hearing on House Bill 2191. Chairman Don White raised the issue of credit cards and alleged that the AARP’s opposition to payday lending was motivated by the organization’s desire to protect a credit card product it offers. At another point, Representative Chris Ross, the sponsor of the bill, warned that payday lenders currently selling a limited number of online payday loans illegally may be stealing the identities of consumers.

Even if this were true, why does it mean we should legalize storefront payday lenders to locate in local communities throughout Pennsylvania and charge 369% annual interest rates on short-term loans? It doesn’t.

While the strategy of House Bill 2191’s supporters was to talk as little as possible about the dangers payday lending poses for consumers, more telling was who attended the hearings. The hearing room was full of people who had driven in from around the state — Pittsburgh, Allentown, Philadelphia. Pastors, credit counselors and affordable housing groups showed up in opposition to the bill, even though they weren’t testifying.

Their presence didn’t stop some committee members from questioning the motives of an AARP volunteer and rushing the testimony of a pastor of a social service ministry and a military veteran. The only supporters of the bill were the out-of-state companies that stand to benefit financially from these 369% APR loans.

The will of the people — and the editorial boards — on payday lending is clear. Don’t legalize it. Let’s hope that the will of the people outweighs the dollars of the payday lenders in this year’s end game on this issue.

PA Must Reads: Haute Couture, Extended Unemployment Benefits and Nursing Home Cuts

8:51 am in Uncategorized by ThirdandState

Zoolander

A blog post by Mark Price, originally published at Third and State.

Project Runway fans (don’t judge) know that this week is Fashion Week in New York. So in a nod to our fashion forward readers comes a story about an effort to provide more workplace protections for fashion models.

Models are more than just pretty faces. They’re often overworked, underfed and underage independent contractors with little say when things go bad behind the scenes. Many are just teenagers far from home, in some cases earning as much in a day as their poor families back in Russia and Eastern Europe do in a month. As a result, many fear speaking out about sexual harassment, unscrupulous booking agencies, demands to alter their bodies, lack of backstage privacy and punishing stretches with little sleep.

“Modeling is precarious freelance labor,” said model Sara Ziff, who was discovered at 14 walking home from her New York City school. “We have very little job security. It’s also a winner-takes-all market. There’s only one Gisele. Basically, it’s a labor force of children who are working in a very grown-up business.”

Dorian Warren at NewDeal 2.0 has more on the effort to provide workplace protections for models.

You really must read all of Simon Johnson’s post this morning on efforts in Washington to weaken extended unemployment benefits.

The principle behind unemployment insurance is simple. Since the 1930s, employers have paid insurance premiums (in the form of payroll taxes, levied on wages) to the government. If people are laid off through no fault of their own, they can claim this insurance — much the way you file a claim on your homeowner’s or renter’s policy if your home burns down…

The original legislative intent, reaffirmed over the years, is clear: Help people to help themselves in the face of shocks beyond their control.

But the severity and depth of our current recession raise an issue that we have literally not had to confront since the 1930s. What should we do when people run out of standard unemployment benefits — much of which are provided at the state level — but still cannot find a job?

In negotiations currently under way, House Republicans propose to cut back drastically on these benefits, asserting that this will push people back to work and speed the recovery. Does this make sense, or is it bad economics, as well as being mean-spirited?…

The jobs crisis was caused by recklessness in the financial sector, made possible by irresponsible deregulation (including a period when Republicans controlled Congress and the White House) and resulting in enormous unconditional bailout protection for the bankers at the heart of the disaster (under both President George W. Bush and President Obama).

Let’s be generous for a moment and simply state that mistakes were made — on an enormous, macroeconomic scale with gut-wrenching consequences for families around the country. Why would anyone now seek to punish these people when they seek work but cannot get it?

Since Simon brought up punishing the 99% for the sins of the 1%, let’s turn our attention to the state budget. My colleagues at the Pennsylvania Budget and Policy Center have released their full analysis of Gov. Corbett’s proposed budget. The Philadelphia Inquirer this morning focuses in on the budget cuts targeting nursing homes.

Pennsylvania nursing-home operators, already hit hard by last year’s cuts in federal and state funding, face another revenue loss in Gov. Corbett’s proposed budget for the fiscal year starting July 1. The budget proposal, released Tuesday, calls for a 4 percent cut in the Medicaid reimbursement rate for nursing homes. The total revenue loss for nursing homes is projected by the Pennsylvania Health Care Association to be $46.5 million…

“The issue isn’t: Can you cut costs? Everybody can cut costs. The issue is: Can you cut costs and provide quality care?” Kleinberg said. Cutting aid to elderly poor who rely on Medicaid is a relatively “easy thing to do,” she said. “Their need is so great, but their voice is so small.”

PA Must Reads: New Year, Same Old Economic Austerity

8:11 am in Uncategorized by ThirdandState

A blog post by Mark Price, originally published at Third and State.

From November 2009 to November 2010, Pennsylvania added 63,300 jobs. From November 2010 to November 2011, the state added just 51,000.

Wait, isn’t that backwards? Nope. A weak economy, the end of federal Recovery Act funds and state budget cuts slowed the pace of Pennsylvania job growth in the most recent year.

The big question mark going forward is whether the pace of job growth in the Commonwealth will continue to lag the rest of the country. Key will be whether school districts continue to face large budget deficits.

The news out of Stroudsburg this morning suggests this is going to be another challenging year for the Pennsylvania job market.

Larger class sizes, staff reductions, eliminating elective courses for students or a wage concession are possible remedies to close a projected $9.8 million deficit in the Stroudsburg Area School District budget, said Business Manager Don Jennings.

As school districts continue to add people to the unemployment lines, the Corbett administration is looking to make the situation that much worse by adding costly new regulations to address a problem that doesn’t exist.

Yes, Bridges Need Repair and Little Old Ladies Are Homeless but Have We Really Done Enough for the Top 1%?

7:22 am in Uncategorized by ThirdandState

Bridge In Need of Some Repairs (Photo: rumble, flickr)

Bridge In Need of Some Repairs (Photo: rumble, flickr)

A blog post by Mark Price, originally published at Third and State.

With unemployment in the construction industry at record highs, interest rates low and a deep backlog of thousands of structurally deficient bridges in need of repair, now is a great time to spend money to fix stuff do nothing!

Actually, it is not really that bad; it’s worse. The Pennsylvania Legislature is spending time debating changes to the state’s prevailing wage statute, even though a large body of empirical research demonstrates that changes to prevailing wage laws do not lower construction costs.  Anyway, if you find yourself in Pittsburgh, make sure your car seat also doubles as a floatation device.

A report to be issued today says the Pittsburgh metropolitan area has the highest percentage of structurally deficient bridges in the U.S. …

[James Corless, the director of the Washington, D.C.-based Transportation for America, said:] ‘These metropolitan-area bridges are most costly and difficult to fix, but they also are the most urgent, because they carry such a large share of the nation’s people and goods.’

A key state lawmaker is quoted in the Post-Gazette story saying that the chances of passing a transportation funding plan diminish with each passing day. Only 19 scheduled session days remain this year, and it is far less likely a revenue-raising plan will be enacted next year, an election year. Read the rest of this entry →