State lawmakers are surprised by the number of Tennessee Lottery employees who have received bonuses totaling nearly $700,000 since the launch of the games in January.
Lottery CEO Rebecca Paul has earned $245,000 in bonuses for beginning scratchoff games ahead of schedule and starting the lottery online by March 20. The other 142 Tennessee Education Lottery Corp. employees have cashed $422,304 in startup bonus checks, according to lottery records, an average of $2,974 each.
Paul used employee incentives when starting lotteries in Florida and Georgia. She said the bonuses helped Tennessee's lottery sell tickets 21 days before the target opening date and net an extra $30 million for lottery-funded scholarships.
"You only have one chance to start a lottery, and every day you don't sell tickets, you lose millions or more," Paul said.
Lottery officials gave the state nearly $64 million on Thursday to fund college scholarships. Paul said the lottery expects to give Tennessee another $41.3 million at the end of the fiscal year on June 30. That puts scholarship funding well ahead of the $88 million goal for the lottery's first year.
Rep. Chris Newton, R-Cleveland, said the overall bonus amount seems high and will bring the subject up at the Legislature's next lottery oversight committee meeting.
"This concerns me a little bit as far as public perception," he said. "I hope this is just unique to the startup year and not a historical trend we are going to see continue."
The Tennessee numbers so far are less than the approximately $1.6 million in incentive payments made in Paul's final year running the Georgia Lottery, which began in 1993. But Tennessee's bonuses were more than twice the $200,000 in bonuses paid last year by the South Carolina Lottery.
Paul's salary could reach $752,500 this year in salary and incentives. In her final year with the Georgia Lottery, Paul made $500,000, including incentives.
Lottery employees "from the mailroom up" will receive incentive bonuses, Paul said.
"I can't and have never done this all by myself," she said.
Sen. David Fowler, R-Signal Mountain, said he was surprised by how many lottery employees received incentive checks.
"I can't imagine there are that many people in key places that would have bonus-making responsibilities," he said.
Joseph Carcello, director of research for the Corporate Governance Center at the University of Tennessee, said bonuses help keep employees working hard and likely were needed to attract top people to new, uncertain jobs in Tennessee.
"You don't have the bonus, and they go home at 5 p.m. every day," he said. "They are not going to kill themselves."
The South Carolina Education Lottery, which began two years ago, did not offer a startup incentive package to its employees but still met its target date of Jan. 7, 2002, according to Pat Koop, the lottery's director of marketing and sales.
"We just knew we had a date to meet, and that was our goal," Koop said. "It was a bonding experience for all employees. We were working 24-7, and if we didn't get started on that date we were all concerned with just keeping our jobs."
The South Carolina Lottery does not offer an incentive package to its CEO or other top employees. It does give sales bonuses to marketing and sales employees, Koop said.
In Georgia, the more than $1.6 million paid in incentives last fiscal year accounted for less than 1 percent of the lottery's record $2.6 billion in revenue, spokesman J.B. Landroche said.
In Paul's last year there, 161 employees received bonuses ranging from $1,400 to $13,400. Paul got a $210,000 bonus in 2003, Landroche said.
"It could be zero if the corporation doesn't do as well as expected," Landroche said. "There are no guarantees."
Tennessee Lottery employees received a 6 percent bonus for beating the Feb. 10 startup date and another 4 percent bonus for the online target, lottery spokeswoman Kym Gerlock said.
The lottery board has yet to determine future lottery bonus plans, she said.
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