Steve Meyers, South Dakota's state investment officer, got a raise this year that boosted his salary to $272,650, making him the state's highest-paid employee.
That got Pensions & Investments' editors thinking about what other states' top pension executives earn and how they rank among other employees in their states. So, we called all 50 states. Here's what our informal survey turned up:
* The four highest-paid public fund executives in the country -- Mr. Meyers, CalPERS' Sheryl Pressler, Virginia's Erwin H. Will and Alabama's David G. Bronner -- also are the highest-paid public employees in their states. Their average salary is $306,524.69.
* The average salary of the four lowest-paid state pension fund executives is $48,344.75. They come from Vermont, Montana, New Hampshire and Delaware.
* In nine states, the pension fund executives are the highest-paid public employees.
* Of the nine highest-paid public pension executives in the country, five are investment chiefs, four are executive directors.
* The average salary of all public pension fund executives surveyed is $121,897.44
Ms. Pressler, chief investment officer of the $141 billion California Public Employees' Retirement System, Sacramento, is the top earner. She can make up to $437,500 annually, including her maximum incentive award of 75% of base salary.
(CalPERS Chief Executive Officer Jim Burton's $121,000 salary is that state's second-highest.)
Mr. Meyers, whose 36% raise prompted the P&I survey, ranks second in pension pay. He oversees in-house management of the $4.8 billion South Dakota State Investment Council, Sioux Falls.
"One of the things I felt best about was the success we as a council had in getting the legislative agreement in that superior talent and superior results deserve the highest possible compensation we can afford," said Richard Walstrom, who recently retired as chairman of the South Dakota State Investment Council.
Mr. Will, CIO of the $31.5 billion Virginia Retirement System, Richmond, can earn up to $262,500 a year, making him the third highest paid in the nation. He gets a $175,000 base salary, with a 50% of salary incentive bonus based on performance. His 1997 bonus totaled 35% of his base salary, which at the time was $150,000.
The fourth highest-paid pension executive in the country is Mr. Bronner, who is CIO of the $22 billion Retirement System of Alabama, Montgomery's. He can make up to $253,208.77 a year, including a $1,500 expense allowance, an 8% cost-of-living increase and a longevity bonus of between $500 and $600. His base salary is $232,508.12.
Then there's Tom Herndon, executive director of the $82 billion Florida State Board of Administration, Tallahassee. Although he's the fifth highest-paid pension executive in the country -- earning $154,170 a year -- he ranks second among all of the state's employees.
These salaries still are a far cry from the compensation of their counterparts in the private sector, according to executive recruiters.
"A newly minted MBA" is fetching $125,000 easily in today's market, which is comparable to salaries of executive directors at many public funds after years of service, said Peter D. Crist, president of Crist Partners Ltd., a Chicago executive recruiting firm.
"They are compensated hideously low for the value of the market," he said. "Funds can get young talented guys, but keeping them is the problem."
Jane Marcus, executive director of the Chicago office of Russell Reynolds Associates Inc., agreed. Funds can expect to keep people on their way up for only five or 10 years, she said.
After that, recruiters say, public pension officials tend to move to positions in money management firms, consulting firms, corporate pension plans, endowments and foundations.
The move is more tempting than ever, because most public pension CIOs make between $120,000 and $150,000 and comparable positions at money management firms pay $800,000 and into seven figures, Ms. Marcus said.
Public fund executives who make the switch mostly have experience overseeing internally managed portfolios, but the money management side still "takes a different set of skills," she said.
Recruiting for public fund CIOs and executive directors can be tricky -- especially in out-of-the way places.
Dennis Moberly, state compensation specialist for the Idaho Personnel Commission, has noticed it is hard to bring in and keep people in his state.
Idaho Public Employee Retirement System CIO Bob Maynard ranks ninth in terms of state employee salaries, but seventh among pension fund CIOs nationally. He earns $112,403 and can earn a $1,000 bonus annually.
"I imagine it's just because the fund has grown," Mr. Moberly said in justifying Mr. Maynard's salary.
In Idaho, university faculty and state physicians earn more than Mr. Maynard, according to Mr. Moberly.
ABOUT MR. MEYERS' RAISE
South Dakota officials sensed location and pay were a problem when they raised Mr. Meyers' salary to help keep him in the state, said former trustee Mr. Walstrom.
"Shoot, we have had assistant investment officers that have been offered triple their salaries," he said.
One of the main problems in the CIO's compensation was investment bonuses required overall performance of the state fund to be better than returns posted by 75% of the funds in the Frank Russell Large Corporate Fund index. Only once in the past 14 years did Mr. Meyers earn a bonus, while the fund doubled in size in five years, Mr. Walstrom said.
The problem with that performance comparison: South Dakota's fund is under investment restrictions and often corporate funds are allowed to invest more aggressively, Mr. Walstrom said.
Now Mr. Meyers' bonus, which is 50% of his base salary, is made up of both sector performance and overall performance.
His bonus is based on absolute return as compared to the Salomon Big index for bonds and the Russell 1000 index for stocks. Sector performance is evaluated on a graduated performance scale outlined in basis points, and makes up 40% of Mr. Meyers' bonus pay.
Total fund performance is the basis for the remaining 60% of his bonus. The fund's performance is still benchmarked against the Russell Large Corporate index, along with a capital market benchmark calculated by the performance of a sample conservative asset allocation. That mix is 40% domestic equities, 16% international equities, 25% bonds, 7% merger arbitrage, 7% real estate and 5% cash.
MS. PRESSLER'S CASE
CalPERS uses quantitative and qualitative measures to determine Ms. Pressler's incentive pay. Her performance is measured in excess returns in basis points relative to the Salomon Large Pension index for U.S. bonds, Financial Times Actuaries/International Finance Corporation Index for international equity; Salomon Non-Dollar World Government index for international bonds; Standard & Poor's 500 index plus 500 basis points for U.S. stocks; and the National Council of Real Estate Investment Fiduciaries index for real estate.
Effective Aug. 1, her performance will be calculated in excess return in basis points of aggregate active domestic equity managers plus completion fund relative to CalPERS' Wilshire 2500 index.
Ten percent of her salary bonus is based on a peer group comparison of large pension funds from the Wilshire universe.
Qualitative measures will account for 25% of, and include such factors as asset/liability management, year 2000 compliance and cost effectiveness.