While teachers went without cost-of-living raises last year and had to take unpaid days off, some top state staffers managing their retirement accounts got pay boosts of more than 35 percent.
The two investment chiefs at the retirement system took home $609,000 each, almost double what they were paid before the recession hit in 2007.
According to state records, the two, Nancie H. Boedy and Charles W. Cary, made slightly more in fiscal 2010 than University of Georgia President Michael Adams, who was listed as earning $601,494. They made more than four times what then-Gov. Sonny Perdue was paid.
Teacher Retirement System officials said the big pay — a combination of salaries and “incentive pay” or bonuses — are needed to keep highly qualified money managers running teacher and state employee retirement programs that are now worth a combined $66 billion.
“For the same type of responsibility they have here, in the private sector they would earn at least double,” said Jeffrey Ezell, executive director of the Teacher Retirement System. “There is that possibility that any of the staff would leave.”
Still, some of his top staffers are longtime employees likely to retire with the state, where they could get lifetime pensions in the $200,000 to $300,000 a year range.
Of the $609,400 Cary and Boedy were paid in 2010, each got about $236,000 from “incentive pay” or bonuses. Cary and Boedy declined to comment for this story.
In total, the system paid about $1.6 million worth of incentive pay to 24 staffers.
Defenders say Georgia’s pension systems are in good shape compared with public plans in some other states, and the investment returns have been steady if unspectacular. While the teacher retirement system lost less than many other states during the recession, its return was less than that of many other state pension funds during fiscal 2010, according to Pensions & Investments newspaper.
The size of the bonuses stunned some lawmakers and retirees.
“I think they [the retirement system] should be embarrassed,” said state Rep. Ben Harbin, R-Evans, former House budget chairman. “I am a firm believer in rewarding people for doing a good job, but not to that extent and not in these economic times.”
Ruth Cowan, a retired teacher from Cleveland, Ga., said, “Teachers have been done an injustice and retirees have been done an injustice when the big boys still get their big bonuses.”
But Dennis Carpenter, a retired teacher from the Dahlonega area, said the retirement system money managers have kept the system in good shape. “I don’t begrudge anyone their salaries,” he said. “I think they are doing a good job.”
Taxpayers have a big stake in the retirement systems. The state and local school districts contribute about $1 billion a year to the teacher retirement fund. Members contribute almost $600 million. The state also budgets about $29 million to administer the systems.
The state’s 250,000 teachers and state employees have gone without cost-of-living raises because of the state’s persistent budget shortfalls. They have also had to take days off without pay. But they, and the state, have continued to pay into the retirement systems, which have generally gotten high marks when compared with struggling public pension plans in some other states.
While the teacher retirement system’s fund lost 13 percent of its value in fiscal 2009 and 3 percent in fiscal 2008, it beat the market averages.
In fiscal 2010, the Dow Jones industrial average rose 15 percent. Investments — a mix of stocks, bonds, short-term securities and cash — in the Teacher Retirement System gained 11.1 percent.
By comparison, the Florida Retirement System reported a 14.03 percent gain, the Kentucky Retirement Systems reported a 15.81 percent return and the Pennsylvania Public School Employees’ Retirement System had a 14.59 percent return, according to Pensions & Investments.
The stock market crash of 2008 caused the Georgia systems to lose billions of dollars. But it has since recovered. And, like the market in general, the retirement system accounts have been swollen by stock gains over the past six months.
An investment committee sets the benchmarks investment staffers have to meet to receive incentive pay. Each year’s award is paid out over three years as an incentive for the employees to remain with the system.
The bonuses were bigger than normal last year, Ezell said, in part because a portion of the incentive pay was held up in fiscal 2009 because the system’s investments lost money that year. So that portion not paid in 2009 was tacked on to the 2010 incentive pay, making the bonuses about a quarter bigger than they otherwise would have been.
Officials say the system saves money by having most of its investing done by state staffers instead of outside firms. The Commission for a New Georgia — a group composed of top-level business and professional executives — estimated in 2009 that the state’s two main retirement systems save $87 million a year in fees and other expenses by having an in-house investment team.
Ezell said his top investment staffers could make far more in the private sector and while data is not available, at least one expert agreed.
Nancy Webman, editor of Pensions & Investments, said in private money management, “somebody with that title would be making a hell of a lot more money than that.”
However, the same is not necessarily true with public pension funds.
Some states eliminated pension system bonuses — at least temporarily — in recent years. For instance, the Missouri State Employees Retirement System board voted last year to end its bonuses following a $1.8 billion portfolio loss.
The chief investment officer for the Texas Teacher Retirement System is paid $480,000 a year, according to a recent report in The Texas Tribune, an online news site.
The chief investment officer for the Pennsylvania Public School Employees Retirement System earns far less than Georgia’s chief investment officers, but most of the system’s investing is done by outside firms or individuals. In Georgia, state staffers do 82 percent of the investing. Since they are making more of the investment decisions, experts said, they would be expected to earn higher pay than officials in systems where most of the investing is done by outside firms.
Tim Callahan, spokesman for the Professional Association of Georgia Educators, the state’s largest teacher group, said teachers want top talent managing retirement funds. But considering that the state has been cutting spending for three years, the size of the system’s incentive pay “doesn’t pass the smell test,” he said.
“It doesn’t look good, particularly in the situation we’re in,” he said. “When they see these [bonuses], a lot of retirees have got to be saying, ‘Give me a break!’ ”
Bill Tomlinson, a former state budget director — and a retiree himself — called the pay “extremely excessive when you realize the average retiree in the employees retirement system gets about $28,000 a year.
“That is a monumental increase relative to what people who put money into the system are getting,” he said.