NEW YORK, Feb 14 (Reuters) - A plan by Pennsylvania's governor to transfer the state lottery to a private operator was rejected on Thursday by the state's attorney general as unconstitutional.
Transfer of the state's lottery to the Camelot Group , which also runs the National Lottery in Britain, was expected to generate $3 billion to $4.5 billion over 20 years in new funding for programs benefiting the elderly.
Pennsylvania Attorney General Kathleen Kane rejected the state's contract with Camelot in part because it would infringe the state legislature's power to "make basic policy choices" about the management and operation of the lottery, she said in a statement.
The contract would also have allowed Camelot to be "indemnified for indirect expenses," which is unconstitutional she said.
Pennsylvania Governor Tom Corbett, a Republican who has promoted the privatization as a way to fund better services for the elderly, said in statement that he will review his legal options.
"I'm deeply disappointed. I don't agree with the attorney general's analysis and decision," he said.
Pennsylvania has a high proportion of older residents. One in four will be older than 65 by 2017, Corbett noted.
"My goal is to ensure that funding for senior programs keeps pace with that growth," he said.
But Kane, a Democrat, said that "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."
As part of his proposed fiscal 2014 budget, Corbett has also proposed privatizing the state's liquor system. The state has a $41 billion unfunded public pension liability.