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Published Friday, November 27, 2009 in Local

Seabaugh wants more accountability in state lottery operations

By Sarah Fay Campbell

The Times-Herald

Disgusted by high bonuses for Georgia Lottery employees and the lack of oversight and regulation of the lottery corporation, Sen. Mitch Seabaugh has pre-filed a bill to require greater transparency and accountability in lottery operations.

Lottery employees received some $2.75 million in bonuses this year, on top of their salaries. Employees received bonuses nearly as high in both 2007 and 2008.

When the Georgia Lottery was first created, the Georgia Lottery Corporation was set up to run it. A board of directors appointed by the governor oversees the actions of the lottery's director and has hiring and firing power over the director.

The lottery was set up that way "so that it would minimize manipulation by the Georgia General Assembly," Seabaugh said. "To a certain degree, that is good. But there needs to be transparency and accountability," he said.

"The important thing to remember is that this corporation, number one, was granted a monopoly -- yet they have, really, no oversight or regulation," Seabaugh said.

And when the lottery was created, the corporation was supposed to put 35 percent of annual revenues into the fund for HOPE scholarships, pre-K and other education needs, Seabaugh said.

In 2009, the lottery broke all previous sales records. But "the amount the lottery corporation contributed to the HOPE fund was less than 24 percent of revenues," Seabaugh said.

The biggest bonus went to Lottery CEO Margaret DeFrancisco. According to The Associated Press, DeFrancisco received a $204,034 bonus on top of her annual salary of $286,000. Last year, DeFrancisco's bonus was $150,000.

"They were less than 68 percent of the target, and yet she basically gave herself a 36 percent increase in her bonus," Seabaugh said. "I don't know many executives that were hitting 68 percent of their targets that would even be able to hold on to their jobs, let alone get a bonus."

Seabaugh's bill wouldn't stop bonuses, but it would increase oversight and would ask lottery officials to defend bonuses before they are given out -- not after.

"I believe that most people that have seen what the lottery has done the last few years with the bonuses they have paid would have considered them outrageous," Seabaugh said. "That is money that is being paid out, without accountability and without transparency, that should be going to the fund to provide for scholarships."

If the lottery is like a corporation, "the stockholders of this corporation are the citizens of the state of Georgia, and those people who have children that will go to school using HOPE," Seabaugh said. The stockholders of a real corporation "would force their board to make changes, if they did not like what they were seeing," he said. "These citizens cannot hold the board accountable for their actions -- that is why I filed the legislation."

Seabaugh said his bill does three things: It changes the makeup of the lottery's board of directors, it changes the makeup of the legislative oversight committee, and it requires the lottery corporation to submit a budget to the oversight committee.

"In that budget, they have to list what salaries and proposed bonuses they plan to give in the upcoming year," Seabaugh said. "So we can ask the questions about the amount of salaries they are going to pay, why they didn't hit their target, and why they think the bonuses are justified. That way, we have the discussion beforehand." "Every year we get told what they did -- we don't know about it until it is too late," Seabaugh said. "Basically they come in and just thumb their noses at us."

The committee wouldn't have any actual power to approve or change that proposed budget -- that would take a constitutional amendment. However, "I believe this bill will bring transparency and accountability," Seabaugh said.

Under Seabaugh's bill, instead of all board members being appointed by the governor, the appointments would be evenly divided amongst the governor, the lieutenant governor and the speaker of the House.

Changes to the legislative oversight committee "bring in people that really have a vested interest and a working knowledge of the impact of HOPE on our budget," Seabaugh said.

"I cannot imagine, in any way, why anybody would have a problem with an entity -- who has been granted a monopoly -- to have them come and discuss what it is they plan to do with regard to their salary structure, business structure, and the amount they plan to contribute" to the HOPE fund, he said.

Lottery officials say that bonuses are needed to attract and keep the best employees.

For the creative types and CEO, "their task is to come up with games that will entice people to buy lottery tickets. They have to come up with new and innovative ideas to keep people interested in buying lottery tickets," Seabaugh said.

People are definitely interested in buying lottery tickets.

However, Seabaugh said, "I believe that there are probably a couple of million people in the state of Georgia that could run the Georgia Lottery Corporation as well as the current leadership -- and could do it in a more cost-effective manner."

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