HOPE scholarship revamp slashes lottery bonuses, but …
By JIM WALLS
Controversial bonuses paid to Georgia Lottery employees could be whacked by 90 percent or more under the HOPE scholarship law signed this month by Gov. Nathan Deal.
But nothing in the law prevents the lottery board from jacking up executives’ base salaries to make up the difference. In fact, the board did so just last year, giving CEO Margaret DeFrancisco a $67,500 raise.
The new law ties the bonuses to the annual increase in proceeds for education:
” … production incentive payments, bonuses, or any other consideration in addition to an employee’s base compensation shall not exceed 25 percent of such employee’s base compensation. In total, bonuses shall not exceed 1 percent of the net increase over the prior year’s deposit into the Lottery for Education Account. No bonuses may be awarded in years in which there is not a net increase over the prior year’s deposit into the Lottery for Education Account.”
Lottery employees over the last six years pocketed nearly $15.4 million in so-called “incentive pay,” officials say. The new formula would have capped total incentives for that period at slightly more than $1 million.
A spokesman said the lottery board will comply with the new law but he could not speculate how else it might respond.
“Now we will have to change accordingly in how we compensate employees,” said J.B. Landroche, vice president for corporate affairs. “Those are decisions the board will certainly have to weigh in on — how to change a compensation structure that’s been in place for 17 years.”
After a 2009 study, the lottery board adjusted DeFrancisco’s salary and incentives so that her total compensation package, not just her base pay, was deemed competitive. Otherwise, consultants said, the CEO’s total pay would have fallen short of comparable positions in private industry.
Without another adjustment, DeFrancisco’s would almost certainly fall back below what the lottery board regards as a competitive level.
In 2010, for example, lottery workers collected $1.9 million in incentive pay. Under the new law, total incentive pay for all employees would have been capped at just under $118,000; DeFrancisco alone collected $143,276.
DeFrancisco was the second highest-paid lottery executive in the country even before receiving the pay raise, State Auditor Russell Hinton reported recently. He noted that other members of the lottery’s executive term didn’t get a similar bump even though the 2009 study concluded they too were underpaid.
Lottery officials have justified the incentive pay as necessary to retain top talent who can keep profits for education high.
“Part of operating our business is being able to compensate employees to produce results,” Landroche said. “Georgia is the only lottery in the U.S. able to increase profits for 12 consecutive years.”
Critics question whether the bonuses are excessive, particularly as lottery proceeds have failed to keep pace with costs of the HOPE scholarship and other education programs. To make up a projected $300 million deficit, the new law trims most HOPE scholarships by 10 percent and eliminates reimbursements for books and fees.
In the past, lottery workers have been eligible for bonuses even if ticket sales and proceeds for education fell precipitously.
Until 2009, senior staffers could collect hundreds of thousands of incentive dollars even if sales figuratively fell off a cliff. Hitting their target — $870 million for education — made $825,000 available for bonuses just for the leadership team, according to a chart released by the Lottery Corp. They could have made half that much in bonuses even if funds for education had plummeted by $200 million.
FOOTNOTE: Lottery officials had refused to release documents showing how lottery executives’ bonuses were calculated. The information was made available after we called Attorney General Sam Olens’ office.