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Ex-Georgia Lottery president got big bonuses

Jan 27, 2013, 5:29 pm

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Georgia Lottery

A state law designed to curb bonuses to Georgia Lottery executives didn't stop the organization from handing out huge "incentive" payouts and raises to top staffers.

The lottery funds the HOPE scholarship and pre-kindergarten classes, but ticket sales have struggled to keep up with growth in the programs. When lawmakers approved legislation in 2011 to prevent the programs from going broke, part of the deal was a severe curtailing of lottery staff bonuses.

But more than $260,000 worth of "incentive pay" went to top staffers in 2011 as lottery ticket sales dipped and the games' contribution to state education programs dropped, state records show. The biggest payout — nearly $83,000 — went to then-Lottery President Margaret DeFrancisco.

Last year, DeFrancisco got another big bonus — $75,000 — and top staffers got pay raises. Most state workers have gone several years without raises.

Georgia Lottery Board Chairman Jimmy Braswell said the organization followed the law. He noted sales improved last year.

"These kind of results don't just happen," Braswell said. "They come from a lot of hard work. The spirit of the legislation was to tie any future incentives to performance ... it seems to have worked pretty well."

But former House Higher Education Chairman Bill Hembree of Winston, who pushed for limiting lottery bonuses, found the payouts disheartening.

"The intent was to stop the (bonus) process all together. It's almost as if they are saying 'Who cares what the Legislature thinks?' " he said. "It's wrong. It just sends the wrong message when you're cutting HOPE and cutting benefits to students."

Some lawmakers are now calling for more legislative oversight of the organization. Georgia governors have traditionally opposed that, and Gov. Nathan Deal would likely do so as well.

Hembree, who is no longer in the General Assembly, and other lawmakers argued for several years that the lottery bonuses had gotten out-of-hand at a time when state government was cutting way back. Once the Great Recession hit, the state stopped giving cost-of-living raises to employees and teachers, and more than $1 billion was cut from state education programs.

Meanwhile, DeFrancisco received a $204,034 bonus — which the lottery calls "incentive" pay — in 2009 and $143,276 in 2010.Her total pay package in fiscal 2012 was $456,000.

DeFrancisco, who has retired and was unavailable for comment for this story, previously defended the "incentive pay" program as a way to keep top staffers working for the Lottery. The results showed, she said, because ticket sales — most years — continued to climb.

The lottery was created as a relatively independent, business-like entity unlike typical state agencies. Such bonuses are more common in the business world than in state government.

The 2011 law limiting lottery bonuses was part of legislation Deal pushed to overhaul the HOPE scholarship program. Thousands of students lost the scholarship as part of new eligibility requirements, and benefits were cut to those who kept the award.

The new law — signed by Deal in March 2011 — limited bonuses to no more than 1 percent of the net increase in lottery money going to education. No bonuses are supposed to be given if net proceeds handed over to the state go down, as they did in 2011.

Lottery officials said last week that bonuses paid to staffers in 2011 were "pro-rated," and counted toward work done until the law went into effect in March. Instead of cutting off bonuses completely in a year in which sales fell, the organization used its old, internal formula for setting bonuses. It paid staffers the bonuses they "earned" through the time the legislation was signed into law.

In 2012, while the law curtailed the amount the organization could give out in bonuses, the 10 highest-paid lottery employees below DeFrancisco received raises in their base pay. None of them took a major hit because bonuses were reduced, and some even earned more money.

Tandi Reddick, a spokeswoman for the lottery, said the pay increases were a result of job promotions and additional work taken on by top lottery executives. In some cases, the titles of top executives changed from 2011 to 2012, according to state records. In some cases they did not.

Kurt Freedlund, for example, rose from senior vice president to chief operating officer, and his base pay went from $198,000 to $217,000. His bonus declined, but his overall pay in fiscal 2012 rose to $240,407, up from $235,603. Others kept the same titles and got raises, but Reddick of the lottery corporation said they took on more responsibility.

The lottery supplies the funding that allowed the state last year to provide HOPE awards to more than 200,000 college students and pre-kindergarten classes to 83,000 4-year-olds. The ticket sales dip in 2011 meant $37 million less toward those programs. Fiscal 2012 sales improved and produced a $55 million increase in money to HOPE and pre-kindergarten, allowing Deal to increase payments to students still eligible for HOPE.

With Deal support, the Lottery board replaced DeFrancisco in October with Debbie Dlugolenski Alford, head of the governor's Office of Planning and Budget. Alford served on the Lottery board but had no other lottery experience before taking over. Her base pay is $300,000 a year, $67,000 a year less than DeFrancisco's.

Sen. Jason Carter, D-Atlanta, who has sponsored legislation to reverse some of the HOPE scholarship changes made in 2011, said the bonus law was meant to be a "shot across the bow that the lottery needs to get its act together." DeFrancisco's bonus, he said, "is certainly something we will look into."

Carter said lawmakers have been concerned about several issues involving the running of the lottery, from the return education receives from ticket sales to the fact that the board chose a relatively inexperienced president.

"Two years ago there was bipartisan discomfort with the lottery corporation and whether there was any (legislative) oversight," he said. "Now that we have a person (in charge) with no experience, I think you are going to see a lot more scrutiny."

While he declined to address the bonuses, Deal spokesman Brian Robinson noted the 2011 law stabilized HOPE and allowed the governor to put more money into education programs that by now were projected to be broke. Lottery sales have continued to set records this year under Alford.

"It's amazing progress that results from sound management and bold leadership," Robinson said.

Thanks to truesee for the tip.

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