SCRA Baits and Switches on Pay Hikes

October 19, 2010

Investigative Reports

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The NerveDays after The Nerve and other media outlets reported that the S.C. Research Authority planned to enact a largely across-the-board 6.5 percent pay increase for its 240 employees, CEO Bill Mahoney privately backtracked, claiming the media erred.

In an Oct. 4 letter to employees, Mahoney derided coverage of SCRA’s board of trustees’ executive committee meeting on Sept. 30, in which several significant changes were approved.

“Since some of those approvals were somewhat inaccurately reported in the news … I thought I would write to you now and provide you with the facts,” his letter read, adding, “Here are the details, which the short attention spans of the press could not accurately report…”

According to Mahoney’s letter, salary adjustments were calculated for 97 employees – rather than for all SCRA employees – and those increases ranged as high as 9 percent.

“The press inaccurately seized upon 6.5%, a number discussed during the (executive committee) meeting as an example, but not as an aggregate average,” he wrote.

However, The Nerve videotaped the executive committee meeting and a transcript of the session reveals a different story.

During the portion in question, which can be seen here, Chairman Bill Masters asks Mahoney directly, “What percent raise are we talking about giving out? Is it across the board or weighted toward one group?”

Mahoney says that during the first year, the increase will be an approximately 6.5 percent base salary raise across the board for all employees.

“There’s no weighting top to bottom; it’s straight across the board?” Masters asks.

“Correct,” Mahoney responds.

“And total for three years, what percent is that – that we’re looking at long term?” Masters asks.

Mahoney says management is not proposing anything for three years, and the current proposal would apply to just the first year.

Masters then reworks his question and asks what the total rise in compensation would be across the board in percentage terms for SCRA employees over three years if salary increases are approved all three years.

Mahoney responds that it would be “three times 6.5 percent,” or nearly 20 percent in all.

Mahoney did not respond to interview requests from The Nerve.

After reviewing Mahoney’s letter and a transcript of the meeting, Masters wrote a letter to all SCRA board members, bringing the discrepancy between Mahoney’s assertions and the video of the committee meeting to their attention.

“I wrote a letter to the board – a fairly detailed letter – and I got total silence in return,” said Masters, who was appointed chairman by Gov. Mark Sanford last year.

Masters pulled no punches when asked why Mahoney would tout across-the-board salary increases for SCRA employees at a public meeting, then send out a letter days later stating that only about 40 percent of agency’s workers – mostly management, it’s believed – would be getting pay hikes, and at greatly varying levels.

“There’s no confusion, that’s just the way he is,” Masters said, referring to Mahoney. “That’s the way it’s been for 18 months. I don’t get the whole truth and neither does the board. I’m working on partial information and so is the board.”

The salary boost, set to go into effect in the coming weeks, came as the result of a recommendation of management consulting firm the Hay Group. SCRA officials would not give reporters copies of the study, saying the details could hurt the agency’s ability to compete.

In fact, Masters said he was not allowed to keep a copy of the Hay Group study, either. He reviewed it during an earlier SCRA Compensation Committee meeting, but management would not let him take it with him to review afterward, he said.

“What I was doing by asking Mahoney those questions in the executive committee meeting was clarifying what I had thought I’d heard in the comp committee meeting,” Masters said.

According to the Hay Group, the Research Authority ranks in the 25th percentile among peers in terms of what it pays. To remain competitive, SCRA should raise its compensation so that it’s much closer to the 50th percentile, the Hay Group reported.

While SCRA employees are among the best paid in South Carolina state government, as The Nerve has reported, board members argued the salary increase is needed to retain staff.

Board member Larry Wilson said it would be “foolish” not to increase employees’ pay given the organization’s revenue growth and what competitors pay.

“Any other view is very short sighted,” he said.

Masters, however, said he could not endorse the salary increases. “Given that the state is going through financial duress, I cannot support this,” he said.

Masters was referring to the fact that state funding for core government functions such as education and law enforcement has been reduced an unprecedented amount – some $2 billion – amid the Great Recession.

In addition, South Carolina’s federal stimulus funding from the American Recovery and Reinvestment Act of 2009 is running out this year. Largely because of that, state officials are projecting a $1 billion gap in the 2011-12 spending plan before legislators even start drafting it.

Masters tried to ask for an on-the-record vote on the pay hikes by each board member, but was met with resistance from MUSC President Ray Greenberg. In the end, the board approved the pay-raise plan by a voice vote.

Afterward, Sanford expressed displeasure with the pay bump, stating that the move raises serious questions.

“Only in state government can raises of almost $300,000 be dished out with seemingly no recognition of the fact that state government is facing a billion-dollar shortfall next year,” Sanford spokesman Ben Fox said. “Providing these lavish raises in the midst of the most difficult economic stretch in a generation is an affront to taxpayers…”

At present, almost half of all SCRA employees earn $50,000 or more annually; fully 90 make $60,000 or more; 36 bring home $100,000 or more; and 10 earn in excess of $150,000, according to The State’s Salary Database.

Mahoney said the salary increases are also warranted by the explosive growth SCRA has experienced in recent years. In the past five years, revenues have grown from $74.9 million to $172 million, he said.

SCRA was created in 1983 by the General Assembly, which gave the entity $500,000 and about 1,400 acres of undeveloped state land, estimated at that time to be worth $10.7 million. Of that, it has since sold at least 480 acres for more than $12.7 million.

It gets no direct state appropriations, but under the S.C. Industry Partners Act, South Carolina taxpayers can receive a 100 percent credit against state income taxes, insurance premium taxes and certain license fees for contributions. Last year, $6 million was contributed to affiliate SC Launch through this means.

Reach Dietrich at (803) 779-5022, ext. 110, or kevin@thenerve.org.