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Tenn. may pay Paul 6 times what Calif., Texas, Fla. pay lottery chiefs

Tennessee LotteryTennessee Lottery: Tenn. may pay Paul 6 times what Calif., Texas, Fla. pay lottery chiefs

Package: $350,000 salary and up to $402,500 in bonuses

Tennessee's new lottery director will make at least three times the salary and perhaps as much as six times more than the directors of many of the nation's largest state lotteries, a Tennessean survey of lotteries shows.

Georgia lottery director Rebecca Paul, who was tapped during the weekend to head Tennessee's new lottery, will receive a base salary of $350,000. This compares with $134,000 in New York, $123,255 in California and $110,000 in Massachusetts, Texas and Florida.

All those lotteries are several times larger than Tennessee's is expected to be.

Additionally, Paul can earn an extra $402,500 if she meets a series of performance benchmarks that are tied to getting the lottery games going quickly and generating extra revenue. Paul received a similar incentive bonus in Georgia, totaling $210,000, for the fiscal year ending June 30, 2003.

Directors running the other large state lotteries get no incentive bonuses, the survey shows.

Denny Bottorff, chairman of the Tennessee Education Lottery Corp. board, de- fended Paul's compensation package.

''To me it's very simple,'' Bottorff said. ''She's the best. She's the gold standard. She is the top CEO in the industry and already was the highest-paid CEO in the industry. Her performance levels exceed all others by nearly twofold.''

Gov. Phil Bredesen said he supported the board's decision and had confidence in Paul.

''The lottery is a very competitive entertainment-related business. I think Rebecca Paul's pay package is clearly spelled out and quantifiable. And of course, Paul has no contract. If she doesn't work out, we can look elsewhere,'' Bredesen said.

Rep. Bill Dunn, R-Knoxville, said he had a philosophical problem with the pay package, however.

''To pay somebody that much money to encourage people to throw their money away doesn't sit well with me,'' said Dunn, a lottery opponent.

He said he feared Paul's incentives package would force her to play up the lottery in poorer sections of town where more people would play but could ill afford to do so.

''Her whole job will be to encourage people to spend money on a dream that millions will never realize,'' Dunn said.

Paul, who said she expects to oversee about 300 lottery employees, will have a yearly salary that exceeds top state employees.

Gov. Phil Bredesen earns $85,000, money he has chosen not to take.

Manny Martins, who heads the $7 billion TennCare program that oversees health-care services for 1.4 million Tennesseans, is paid less than $200,000.

Dave Goetz, head of the state's finance department which oversees the $21.5 billion state budget, earns about $130,000.

State Supreme Court Chief Justice Frank Drowota earns about $124,000.

Joe Johnson, interim president of UT who heads a university system serving 42,000 students on five campuses, earns $365,000.

Charles Manning, who heads the Tennessee Board of Regents, with oversight of 180,000 students on 45 university, junior college and technical school campuses, earns about $215,000 a year.

Lottery officials said, however, Paul's salary isn't based on the pay model for public servants but rather on the model for corporate executives, who are paid well but expected to meet performance standards to get that level of pay.

Asked at a news conference yesterday whether she were worth the money, she replied: ''You betcha.''

Paul, who directed the Illinois and Florida lotteries before coming to Georgia, said she has handled more lottery startups than anyone else in the world.

Even so, Paul said, her compensation in Georgia was far below the level of pay for CEO's at Coca-Cola, Delta Airlines and United Parcel Service, companies that generate revenue similar to the Georgia lottery.

The Georgia lottery took in $2.6 billion in last fiscal year, with profits of $750 million, but her compensation paled in comparison to the CEO's of those firms, she said.

''So certainly Georgia, and I believe Tennessee, believes the lottery should operate as a corporation, as a business. Looking at a state agency head or someone in government was never how I was compensated. I was compensated on a business model.''

''Plus, the compensation everybody is looking at only happens if we have an unprecedented success in our launch. If I start the lottery one day earlier than anyone else would have, the profits from less than that full day will pay my entire package for a year.''

Paul's incentive pay will be based on performance. For instance, if she has instant lottery tickets available for sale by Feb. 17, she will receive a bonus equal to 55% of her base salary, or $192,500. If the instant ticket games do not begin until March 30, her bonus will be only 5% of her base salary.

If online games start April 15, she will receive a bonus equal to 15% of her base salary, but a May 31 startup would provide only a 3% bonus.

Paul will be working without a contract and the salary arrangement covers only one year. If, as expected, she remains in the job longer than that, new incentives would be offered later.

To steal Paul away from Georgia, Tennessee lottery officials had to sweeten the pot, noted Tennessee lottery board member Deborah Story. She said to lure away a corporate executive, companies generally tack on 20% or more to their current salary. Paul's base pay in Georgia was $290,000, so she was offered about 20% more here.

However, when incentive pay is added, Paul's total salary could be about 50% more here than in Georgia: $500,000 vs. $752,500 an increase of $252,500 a year.

Story said the board expects to see the state more than recoup that money in the extra revenue Paul's track record would suggest she will generate for Tennessee.

''If you look at the history of the net proceeds or profits for the Georgia lottery, you will see a constant increase every year,'' Story said. Lotteries in other states have seen ''a lot of ups and downs,'' she said. ''Tennessee has the best, and we expect to have the best lottery as the result of it.''

Sen. Steve Cohen, D-Memphis, who championed a lottery for Tennessee, said attracting the top lottery administrator in the country was one of Tennessee's ''great coups.''

''If we could get the same type of person to run TennCare or mental retardation or corrections or the education system, we would be lucky,'' Cohen said.

Tennessean

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