EagleTribune.com, North Andover, MA

January 29, 2013

Pay hike for Lottery director recommended

By Colleen Quinn
State House News Service

---- — BOSTON - As Treasurer Steven Grossman makes the case to protect the Lottery from midyear budget cuts, Lottery Director Paul Sternberg is poised to receive a $8,500 pay raise.

A Lottery Commission panel voted today to recommend the nearly 7 percent pay bump.

Sternberg, who came from the Connecticut lottery last year, currently makes $130,000. The raise would bring his salary in line with other lottery directors around the country, and reflect the job he has done over the last year, commission members said.

Other directors’ salaries range from $102,000 to $500,000. The head of the Connecticut lottery makes $163,644 and the New York director makes $164,440. The heads of Lottery operations in southern states pull in significantly more, with Kentucky’s making $226,800, Georgia’s director topping $450,000 including a bonus, and Tennessee’s making an average $500,000 with a bonus included.

Grossman, who oversees the Lottery, said while “there is always vigorous debate about compensation levels,” the Lottery under Sternberg has performed “exceptional.” Grossman called the proposed salary a reasonable rate of compensation.

Grossman said he is aware of the state’s “constrained resources” and salary cuts taken by lawmakers, but concluded, “I think we always have to practice the art of the appropriate.” Under Sternberg, the Lottery is on track to achieve record sales of $4.7 billion and profits of $927 million in fiscal year 2013.

“I think he has done a lot of very innovative things that have shown tremendous leadership in a very mature market which isn’t easy to do,” said Lottery Commission member Tim McMahon, a Gov. Deval Patrick appointee and former chief operating officer at the Massachusetts State Lottery.

McMahon and other commission members said they do not think the 7 percent increase should translate to similar raises for other Lottery employees. “I hope he doesn’t have the mindset that just because I got X, doesn’t mean I need to give all my seniors managers that,” McMahon said.

Union Lottery employees recently received a 1.5 percent raise, and will receive another 1.5 percent in June, according to a Lottery spokesman.

Sternberg left the room before the discussion. The commission plans to vote on the increase in February.

During the meeting, Grossman also discussed efforts to convince lawmakers not to cut approximately $900,000 from the Lottery budget as part of the midyear spending cuts proposed by Gov. Deval Patrick.

As part of plans to address a $540 million midyear budget deficit, Patrick has called on all constitutional offices to absorb a 1 percent midyear funding cut to spread the pain of budget reductions.

Grossman, who testified at a revenue hearing before lawmakers in December, reiterated his comments that cutting the Lottery budget would be “extremely unwise” because it would decrease the agency’s ability to generate money for local aid to cities and towns.

“There is no rationale for cutting the Lottery by $900,000 since the impact on Lottery sales would be tremendous,” Grossman said Tuesday. “It is particularly unwise, and we respectfully reject it.”

The Lottery would be forced to cut the $5 million advertising budget or scale back the number of tickets printed - a move that would cost approximately $20 million to $27 million in lost profits from unsold tickets, according to Grossman.

Other cost-cutting measures, like employee layoffs, would “compromise the efficacy of the Lottery,” said Jon Carlisle, a spokesman for Grossman.

Printing tickets is a variable expense, Carlisle said. To trim costs, the Lottery would need to not print 50 million tickets. Printing costs could be cut easier than other spending categories with fixed costs, according to Carlisle.

“Those are tickets for a game. Whether it is a $2 game or a $5 game, the loss in profit would be about $27 million,” Grossman said. “We will be saving $900,000 to lose between $20 to $27 million dollars.”

An advertising budget cut would also mean lost revenue, Grossman argued. During the holiday advertising campaign push, $4.52 was generated in sales for every dollar spent, lottery officials estimate.Cutting the advertising budget would risk sales and profits, “particularly at a time when the governor has put tremendous pressure and burden on the Lottery to generate revenues and profits,” Grossman said.

Lawmakers have not said when they plan to debate Patrick’s midyear budget proposal. Speaker Robert DeLeo told the News Service in December the House would likely take it up in January.

END 1/29/2013

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