Another viewpoint: NM Lottery CEO's pay hike excessive

The New Mexico Lottery Authority recently voted to raise Lottery Chief Executive Officer David Barden’s salary by 26%.

It goes from $174,142 to $220,000.

That is twice as much as the governor of New Mexico is paid. It is more than twice what the state attorney general is paid. It is significantly more than the chief justice of the Supreme Court and state cabinet secretaries are paid.

As a spokesman for Gov. Michelle Lujan Grisham put it: “What is the rationale” for this enormous raise? “Is the lottery doing a 26% better job of getting scholarship money to New Mexico students? I think if people find this salary and increase to be inequitable or improper, given the primary goal of the program, they have some justification for feeling that way.”

After all, every dollar going to excessive compensation for the Lottery CEO is a dollar less for college scholarships for deserving New Mexico students. The statutory purpose of the New Mexico Lottery is to “provide the maximum amount of revenues” for scholarships at the state’s public universities.

Beyond the huge bump in pay, the lottery CEO’s new contract also includes an additional 4% “salary retention adjustment” that will raise the CEO’s salary another $8,800 effective July 1, 2020, and a “car allowance” worth an unspecified amount.

(The CEO’s new contract eliminates bonus pay for performance provisions that could have yielded $23,509 for Barden, about half the $46,000 increase in the new contract.)

This expensive new contract will contribute to the lottery’s growing administrative costs, which exceed 16% of lottery revenues (3% of which go to internal lottery personnel, while the rest goes to multinational gaming vendors who run most of the lottery’s operations).

Perhaps most shockingly, the contract includes a golden parachute provision stating that the CEO will receive $440,000 if he is terminated “without cause” prior to July 1, 2020, and will be paid his full three-year contract amount ($677,600) if he is terminated “without cause” before the contract ends.

By including this golden parachute provision, Lottery Authority board members who were appointed by the former governor are handcuffing future board members who will be appointed by Lujan Grisham, preventing those future members from hiring a better lottery manager without a huge cost to taxpayers — and students.

What is most troubling about the lottery’s CEO’s excessively generous new contract is that the CEO has spent the past five years lobbying the Legislature to reduce the percentage of lottery revenues going to the scholarship fund.

During the lottery’s first decade, only about 23 cents of every dollar bet on the lottery reached the scholarship fund. Another 55 cents was used for prizes, and 22 cents went into overhead and administrative costs.

Think New Mexico successfully championed the enactment of a law in 2007 guaranteeing that at least 30% of lottery revenues must go to scholarships. It worked: the lottery has delivered more money to scholarships every year since the 30% guarantee was enacted than it did in any year before (an average of $42 million a year, an increase of about $9 million a year).

Despite this strong track record of success, during the past five legislative sessions, Barden has lobbied in tandem with the international gaming vendors that contract with the New Mexico Lottery to try to repeal the 30% guarantee.

(Profits for those outside vendors are tied to total lottery revenues, not the amount of dollars going to scholarships.)

In 2019, the bill supported by Barden and the vendors would have lowered the amount delivered to scholarships to $40 million in 2020, $40.5 million in 2021, and $41 million every year thereafter.

Thankfully, the legislation failed to pass, and under the 30% guarantee, the lottery delivered approximately $43.2 million to scholarships this year — over $3 million more than it would have received if Barden’s bill had passed.

The dollars going to scholarships in 2019 were also about 7% higher than they were in 2018, contradicting CEO Barden’s claims that the 30% guarantee has “severely hampered” the lottery’s performance.

We urge the governor to act swiftly to replace as many members of the Lottery Authority board as possible with New Mexicans who will put students first and focus on maximizing dollars for scholarships, consistent with the statutory purpose of the lottery.

Fred Nathan is executive director of Think New Mexico. Contact him at:

[email protected]