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When Pennsylvania Attorney General Kathleen Kane ruled that Gov. Tom Corbett’s contract for private management of the state lottery was illegal, proponents of privatization shot back that Kane’s decision meant a loss of an additional $50 million for senior services.
Advocates said that having a private company running the lottery would increase receipts and eliminate growing waiting lists for senior services, which, by law, are supported by a percentage of lottery funds.
“We will use this new money to address the need and demand for our programs,” Corbett said in a January press release announcing a contract with Camelot Global Services PA. “Specifically, I propose to use it for home and community-based services so that older adults may continue to live in their homes.”
“Additional increases in revenue would help decrease the waiting list of 5,400 older adults who are waiting for home support and personal care services to keep them in their homes,” the statement continued.
But the waiting lists are growing because the state itself has been funneling existing lottery funds away from the senior programs it has pledged to support. The funding shift, which began long before attempts to privatize, is something Corbett left out of his public comments about the topic.
Lottery ticket sales have increased by five percent over the past five years, according to the Pennsylvania Lottery. But funding has decreased overall for county agencies that are supposed to receive lottery proceeds, resulting in complaints about long waiting lists for some services.
“We do have a waiting list for our lottery-funded care management program,” said Mary Phan-Gruber, deputy administrator for Allegheny County’s Area Agency on Aging. “We have 200 to 300 people on the waiting list for that program.”
County-based agencies provide direct services to the elderly, such as meal deliveries, health assessments, programs at senior centers and abuse investigations.
The state’s Lottery Fund receives all lottery sales revenue, and most of it pays for administration, salaries, payouts to winners and other costs. But Pennsylvania law requires that at least 27 percent of lottery revenues pay for services for seniors in the state. These funds then go to state and county agencies on aging to pay for programs that will help keep them in their homes.
Receipts from the lottery have gone up in recent years, while county agencies on aging received steadily smaller amounts from lottery funds.
'The Spirit of the lottery law'
In 2009, the state’s Lottery Fund received $910 million in proceeds. That figure rose to more than $915 million in 2010, and more than $960 million in 2011, according to the state lottery’s economic and benefit reports.
Even as revenues from the state's lottery games have gone up, funds for community senior services have gone down. Some of the lottery funds have been diverted to nursing homes.
In 2009, county agencies received $234.4 million in lottery funds. For 2010, $228.2 million and for 2011, it went down to $214 million.
Community services for the elderly didn’t get additional money because it was sent to long-term-care homes instead.
“It really violates the spirit of the lottery law,” said M. Crystal Lowe, executive director of the Pennsylvania Association of aging agencies. Not all residents of the long-term-care homes are elderly, Lowe pointed out.
Of the residents in nursing homes receiving the lottery dollars, nearly 15 percent were under the age of 60 in 2011, the most recent year for which information is available, according to the Pennsylvania Department of Health.
“I guess the state thought, ‘Let’s use the extra money for this instead of the agencies on aging,’” said Lowe. “I don’t like it, but I have to look at things practically.”
Lowe said she believes the agencies on aging are a more cost effective way to help seniors.
“We often serve people in the community, combining public and private resources at about one-third the cost of nursing homes,” said Lowe. “And with things like food delivery, adult day-care services and providing respite for families caring for individuals, we keep people from having to go to nursing homes.”
The amount of lottery money allocated to the Department of Public Welfare for long-term nursing care has varied over the years. In 2007-‘08, it was nearly $249 million; in 2008-‘09, nearly $300 million, and $178 million in 2010, ‘11 and ‘12.
County officials said they make do, even as the need for services grows.
“We have tried to take whatever funding we have and spread it over as many consumers as we can,” said Tim Landrin, director of home- and community-based long-term care at the Southwestern Pennsylvania aging agencies.
His agency, which receives 75 to 80 percent of its funds from the lottery, saw funding decrease by more than $627,000 between 2008 and 2011.
Allegheny County’s aging agencies gets about half its funding from the lottery. From 2008 to 2011, the agency’s support went down by $3.7 million.
“We set guidelines for who we can more immediately serve,” said Phan-Gruber. “And those who have fewer functional needs are put on a waiting list.”
'To attract the best bids'
In 2012, when lottery profits topped $1 billion, county agencies did receive more money, $287 million, up from $214 million the year before. But by then, there had been many county-level cuts.
Corbett’s administration was already putting together a private management agreement for the lottery and inviting bids. And the Pennsylvania Senate was drafting requirements for a private company to run the lottery.
“It’s important to do this when a public asset is doing well in order to attract the best bids,” explained Elizabeth Stelle, a policy analyst with the Commonwealth Foundation, a Pennsylvania think-tank and research group that supports free-market policies. Stelle wrote the foundation's Jan. 3 report, which pointed to private management as a way to reduce the long waiting lists for senior services.
“Regardless of what’s causing the waiting lists, we do know that more revenue means more seniors can get services,” she said. “There will be additional revenues under a private management agreement.”
The contract with Camelot Global Services, which Kane deemed illegal, guaranteed certain profits for Pennsylvania’s lottery, despite past difficulties in predicting lottery revenues.
In four of the past seven years, estimates of lottery sales have fallen short of actual sales by as much as six percent, according to a 2012 Legislative Budget and Finance Committee report.
Corbett’s office did not return phone calls seeking comment, instead referring questions to the state’s Department of Aging.
Secretary of Aging Brian Duke told the state Senate, “The older Pennsylvanians we serve are usually of limited economic means, but are not receiving public assistance from Medicaid or other forms of assistance through the Department of Public Welfare.”
Public Welfare, however, is precisely the agency distributing lottery funds to nursing homes instead of county agencies.
Duke did not respond to calls for comment, but department spokeswoman Christina Reese said there were other reasons for the longer waiting lists.
“The need is growing within the elderly population,” she said. “There has also been an increase in costs for services.”
When asked about county agencies losing out on lottery profits, Stelle, of the Commonwealth Foundation, said: “It’s up to the administration to decide the way they structure the funding. But we can’t really talk about decreasing waiting lists until we get more revenue.”
However, local agencies might not share in that revenue if the state diverts it elsewhere.
Phan-Gruber said her agency is “neutral” on privatization. “But we have seen the increase in referrals [for services] over time,” she said. “We’re going to have a big population to serve.”
Reach Leah Samuel at 412.871.5378 or firstname.lastname@example.org.
The Fund for Investigative Journalism provided support for this story.
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