LANSING, Mich. — Performance pay is rare in government jobs.
But the Michigan Lottery Bureau has paid 75 employees more than $300,000 in incentive pay in the past year. And, according to the state's Civil Service Commission, the group is alone among about 50,000 state employees in being eligible for performance bonuses.
The program was initially set up for about 75 sales representatives who met quarterly goals for instant tickets and certain club games. It was expanded this year to include 16 more lottery employees — from the chief deputy commissioner to marketing coordinators. Each is eligible for up to $6,000 a year in performance bonuses.
The Lottery Bureau, cited "seven years of documented success" when it pushed to expand the bonuses for 2013. But the incentive pay program failed to meet its minimum goal in three of those seven years, according to a Free Press analysis of records obtained under Michigan's Freedom of Information Act. It's also difficult to demonstrate a link between lottery ticket sales and the incentive pay offered to sales employees.
Sales for games covered by the program grew $51.6 million during a 12-month period in 2007-08, when employees knew the program was suspended for budgetary reasons. Sales for those games plunged $39.9 million in the 2010 fiscal year, when the incentive program was operating.
The biggest success story for lottery sales has been the national Powerball game. Sales nearly doubled in Michigan, from $64.5 million in 2010 to $119.5 million in 2012. But sales of those tickets aren't covered by the incentive program.
Since October 2010, 80% or more of eligible Michigan lottery employees have qualified for bonuses in every quarter except two. During that time, the average quarterly award employees received ranged from $257 to $1,216.
"This seems pretty bad," said Andrew Biggs, a resident scholar at the conservative American Enterprise Institute in Washington, D.C., where he studies public sector compensation. "The incentive program reached its minimum goals in barely half the years it has been in operation," and in many quarterly time periods, "practically all employees received the bonuses," Biggs said.
"This looks very much like a pay increase in disguise."
Andrea Brancato, a spokeswoman for the Michigan Lottery Bureau, said results in each of the state's 72 sales districts is evaluated independently, so sales reps in certain districts can earn incentive pay even while overall sales drop.
"The goal is always to increase sales," Brancato said. "This goal can only be reached with the combined efforts of many lottery employees, including managers who create game strategies, game concepts and advertising campaigns."
Since the program began in late 2005, nearly $750,000 in performance pay has gone to employees in about 75 mostly sales jobs.
When the Lottery Bureau first proposed the current incentive pay program back in 2004, then-lottery commissioner Gary Peters — who held the lottery post until January 2008 and is now a Democratic U.S. House representative from Bloomfield Township running for the U.S. Senate — said, "We expect this program would achieve a minimum annual increase of over $32 million in sales."
But that target was reached only in 2006, 2007, 2008 and 2012. Sales for the games covered by the program grew only $10.6 million in 2009 and $4.8 million in 2011. Sales fell $39.9 million in 2010.
The Civil Service Commission had to approve the expansion of the program, which took effect this year.
Michigan Lottery human resources director Jennie Daniel said in a memo justifying the expansion that the program has "seven fiscal years of documented success." But she didn't mention that the program failed to meet its original goal 43% of the time.
Two types of games are eligible for the sales incentives. Those are instant games, such as Cash for Life and other scratch and win games, and certain club games, now limited to Club Keno to Go.
Goals are set every quarter for lottery sales representatives who handle various districts around the state. The goals vary by quarter, but the same goals apply to all employees, regardless of their district. In one case, a sales increase as small as 0.5% qualified for a bonus. Other times, double-digit increases are required.
"Targets are adjusted quarterly based on marketing conditions, which consider previous trends and economics, and lottery initiatives," Brancato said.
During the same period, different sales goals can apply to instant games than to club games. For example, for the second quarter of 2012-13, the most recent quarter for which data was available, a 1% district increase in instant-game sales qualified for a $400 bonus, while a 3% increase resulted in a $600 bonus and a 5% or higher increase earned $800. Bonuses also were available for instant-game increases in a sales region — which is larger than a district — with a 1% increase earning $100, a 3% regional increase earning $200 and a 5% or higher increase netting $300. On the club game side, a 19% district increase was required for a $200 bonus, while a 20% increase earned $300 and a 21% or higher increase earned $400.
The maximum bonus an employee can receive is $1,500 per quarter, or $6,000 per year.
Dennis Daley, a professor of public administration at North Carolina State University, said incentive pay in government gets talked about a lot, but rarely happens because unlike private sector companies, government agencies tend to have multiple goals that are "fuzzy" and difficult to measure.
The sale of lottery tickets is a good candidate for an incentive program because the goals are clear, Daley said. But Daley said he couldn't tell from the numbers whether the Michigan Lottery's incentive program was working well or not, and whether sales efforts or some other factors were pushing lottery sales.
"If all this is just the economy, it's like being awarded bonuses for the sale of beer or ice cream during the summer," Daley said.
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