Lottery staff gets bigger bonuses

By James Salzer

The Atlanta Journal-Constitution

More than 200,000 teachers and state employees are being furloughed and seeing smaller paychecks this year, but the Georgia Lottery did well enough to hand out $2.75 million in bonuses to its staffers.

That’s up more than 8 percent from fiscal 2008, according to figures the Lottery Corp. provided to the Atlanta Journal-Constitution.

Lottery CEO Margaret DeFrancisco received a $204,034 bonus, up from $150,000 in 2008. That’s on top of a $286,000 salary, which was unchanged from 2008.

Lottery officials say the bonuses, which they call incentive payments, are commonly used in private industry to help retain top staffers. Georgia’s lottery, which is among the most successful in the nation, set another sales record in fiscal 2009, which ended June 30.

“These are people who could probably go anywhere they want to in this country,” said lottery board chairman James F. Braswell. “If they don’t hit the (financial) targets, they don’t get the bonuses.”

The lottery receives no state funding and was set up by the Legislature to operate like a business, with a president who reports to a board appointed by the governor. Its staffers are not considered state employees.

Still, some state lawmakers and some of those feeling the impact of billions of dollars in spending cuts call the bonuses ridiculous at a time when so many Georgians are struggling. Big bonuses doled out by businesses during the recession have also been an issue nationally.

“There seems to be a huge disconnect,” said Joseph Jarrell, a world history teacher at McIntosh High School in Fayette County.

“As teachers across the state, employees across the state, are either having to take furloughs or cutbacks, it (giving bonuses) makes no sense. It’s nothing but unconscionable.”

State Sen. Mitch Seabaugh (R-Sharpsburg) called the bonuses “outrageous.”

“I continue to be disappointed in the actions they are taking,” said Seabaugh, who has pushed for more legislative oversight of Lottery Corp. spending.

The General Assembly has an oversight committee. However, traditionally that committee has not been very active and it does not have the power to regulate lottery spending or stop bonus payments to employees.

The bonuses have long been a sore spot at the Capitol. That criticism has ramped up in recent years as the state’s financial condition deteriorated.

Gov. Sonny Perdue and lawmakers have pared state spending back about $3 billion in a little more than a year. Most recently, Perdue ordered $900 million in new cuts, including three-day furloughs for teachers and state employees. Additional cuts are expected.

Some lawmakers say the lottery should be giving more to HOPE college scholarships and pre-kindergarten programs.

The cost of those programs, skyrocketing because of increased college tuition and a jump in the number of eligible students, will almost certainly outpace lottery revenue this fiscal year. State officials project that by the fall of 2011, HOPE may have to start reducing the book stipend that students receive. That stipend, and money to pay for student fees, could eventually be eliminated.

State law requires the lottery to return “as nearly as practical” 35 percent of ticket sale proceeds to education programs, but the percentage has been dropping. Last fiscal year, the lottery gave just under 24 percent to education. The dollar amount, however, grew with the increase in sales, from $867.7 million to $872.1 million. Lottery officials say they need to continue putting a higher percentage of revenue back into prizes to keep ticket sales growing.

The lottery sold more than $3.6 billion in tickets last fiscal year. In fact, sales have increased in all but one year since the Georgia lottery began selling tickets in 1993.

That doesn’t happen by accident, lottery officials say. It takes top people to make the games successful year after year.

Bonuses have long been part of the compensation package, although they are 10 to 15 times larger than they were in 1993, the lottery’s first year.

In a nod to the bad economy last year, lottery officials reduced bonuses, although some employees got pay raises.

The reductions didn’t stop lawmakers from slamming lottery officials earlier this year during a hearing of the legislative panel that oversees the lottery.

DeFrancisco, the lottery’s president, declined to comment for this story.

However, Braswell of the lottery board said officials took the criticism from lawmakers to heart. The lottery commissioned an in-depth, four-month-long compensation study that looked at other companies and nonprofit groups. Braswell said the study found that the lottery’s compensation package to employees was “about in the middle.”

“The whole idea when the lottery was put into place was to try to attract the best people possible so you could compete for the kind of people you need to run a lottery,” Braswell said.

“We undertook this exhaustive compensation study to make sure we were doing what was in the best interest of the Georgia lottery.”

Rep. Kathy Ashe (D-Atlanta), a member of the House Higher Education Committee, doesn’t think the Lottery Corp. should be doling out big bonuses when lottery-funded programs — such as the HOPE scholarship — could really use the money.

She called the argument that big bonuses are needed to keep top employees from leaving “the kind of language we heard about the banking industry” when it was being bailed out by taxpayers.

“It just doesn’t make sense,” she said.

Seabaugh said the Lottery Corp.’s decision to hand out bigger incentive pay in the current economic climate makes it look out of touch.

Sales up; bonuses, too

The Georgia Lottery reported record sales again during fiscal 2009, providing more than $872 million for HOPE scholarships and pre-kindergarten classes. The lottery rewarded staffers with $2.74 million in bonuses or incentive pay, an increase of more than 8 percent over fiscal 2008. Below are to top five lottery bonuses for this year, and the salaries for those employees:

CEO and President

	2008	2009
Salary	$286,000	$286,000
Bonus	$150,000	$204,034

Senior Vice President Legal & General Counsel

	2008	2009
Salary	$183,000	$189,000
Bonus	$55,000	$55,000

Senior Vice President, Finance and Planning 
and Development

	2008	2009
Salary	$183,000	$189,000
Bonus	$55,000	$55,000

Senior Vice President, Administration

	2008	2009
Salary	$166,000	$171,000
Bonus	$50,000	$50,000

Chief Technology Officer

	2008	2009
Salary	$161,000	$166,000
Bonus	$45,000	$45,000

Source: Georgia Lottery Corp.