Wednesday, September 12, 2007

Teacher Retirement System investment chief could make $904,500 under proposed pay plan - Board meets this week to debate changes that would raise payc

By Robert Elder - AUSTIN AMERICAN-STATESMAN STAFF - Wednesday, September 12, 2007
Talk about salary creep.

Under one pay plan the Teacher Retirement System will consider this week, its chief investment officer, Britt Harris, could make $904,500 a year in salary and bonuses next year.

That is about $200,000 more than Harris can make under the system's current plan, and it probably would make him the highest-paid state pension fund manager in the country.

A handful of other high-level investment managers at the teacher system could pull down $500,000 annually.

The retirement system's trustees are scheduled to meet Thursday to consider a new compensation plan for its investment staff. Although the current pay plan is just 14 months old, Harris says a more generous plan is needed to attract the talent he needs to continue reshaping the $111 billion pension fund.

"This is the seventh-largest fund in America," Harris told trustees at their July 27 meeting. "And we have the fiduciary responsibility to provide the best possible staff to the Texas teachers."

Harris told trustees in July that he needs the right staff to implement the ongoing overhaul of the fund's portfolio. It is shifting 29 percent of its assets out of traditional investments and into hedge funds, venture capital, real estate, buyout firms and other private equity investments.

The timing and cost of a new pay plan is drawing static from the two educators on the nine-member board, who say they are uncomfortable with the retirement system edging into private-sector pay territory.

"Even though these are highly successful investment personnel, they are working for the public and for teachers' and educators' money," said Mark Henry, superintendent of the Galena Park Independent School District. "But maybe my biggest concern is I'm not sure we gave the plan we put in place about a year ago time to work."

A draft plan released Tuesday would dramatically increase pay and bonuses for the investment staff. It would would allow the top 27 investment professionals to earn bonuses of between 100 percent and 125 percent of their base pay.

At a current annual salary of $402,000 a year, Harris would be eligible for a $502,500 bonus.

Harris is already the state's highest-paid employee, with potential bonuses that could push his total to $700,000 annually.

(Higher education employees and state university athletic coaches aren't included in state payroll figures.)

The retirement system's senior-level investment managers, some of whom make between $200,000 and $300,000 a year, could make more than $500,000 under the new plan.

Exact pay figures aren't available for the teacher fund or for many public pensions because of a recent court decision that exempts those figures from the state's Public Information Act.

Harris said the total maximum bonuses paid under the draft plan would be $9.4 million — and that's only if the fund meets all its investment benchmarks, which would translate into an extra $1 billion of revenue for the fund.

Under the current compensation plan, the fund will pay about $1.5 million in bonuses over three years — about 40 percent of the possible maximum. The proposed new plan has different benchmarks.

Henry, the school superintendent, said that while the system's focus is on the investment staff, a more expensive pay plan threatens to divide the work force at the agency.

"A quality internal auditor has just as much to do with the success of TRS as its investment division," Henry said. "Or a benefits counselor. Where do you draw the line?"

The system's draft plan is more generous than those of other public pension giants. The $169 billion pension fund for retired California teachers pays its investment chief a base salary of $300,000 and an equal amount in potential bonuses.

The $22 billion Employees Retirement System of Texas instituted a bonus plan in January that pays investment staff a maximum bonus of 25 percent of base salary.

Its top investment official makes $300,000 a year in base pay.
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