DENVER – State Treasurer Walker Stapleton brought some feistiness to via conference call what would otherwise have been a quick approval to award a contract extension worth up to $1.8 million to the head of Colorado’s public pension system.

The exchange between Stapleton and several other members of the Public Employees’ Retirement Association Board of Trustees was heated as they debated the Executive Director Gregory Smith’s compensation package for the next three years. Ultimately, the board approved on a 12-1 vote, a $394,000 base salary for 2016, with possible 30 percent annual bonuses and a one-time $200,000 retention bonus.

Stapleton, who wasn’t at the meeting but called into the conference, proposed that the bonuses should reflect things like the fund’s return on investment or decrease of the $26 billion unfunded liability that hangs over the pension during actuarial evaluations.

When debating how the board will determine if Smith should receive up to a 30 percent bonus – roughly $120,000 per year before taxes – Board Member Lynn Turner called Stapleton’s recommendation “asinine.”

“I’ve never heard anyone propose such a stupid idea,” Turner said, who is one of three governor appointees to the 16-member board of trustees.

Jon Forbes, Stapleton’s deputy treasurer, attended the meeting, and quipped that if anything was asinine it was a potential 30 percent bonus every year and interrupted Turner’s defense with an expletive.

But as ardent as Stapleton’s office opposed the raise for Smith, several board members defended the decision just as strongly. Smith was hired for the position to lead Colorado’s $45 billion pension plan in 2013 on a three-year contract that expires this year. His 2015 base salary is $328,335 and he will be eligible for up to a 20 percent bonus based on the board’s evaluation later this year.

“Greg took a contract at the time that was below market value,” said Marcus Pennell, elected to the board by the membership of the school employees retirement fund. “Much like a player would take a one-year contract in the NFL and then prove their worth to the team and hope to be paid later. When he proves it that means there’s a pay raise.”

Pennell said not only has Smith proved himself, he may be one of the best public pension fund managers in the country.

Stapleton, who is on the board because of his status as a state elected official, was less impressed with Smith’s performance. The treasurer said that characterization of the executive director’s employment was looking at a split-board vote with “rose-colored glasses.” Smith was hired by a single-vote margin.

After going back and forth on things like a $200,000 retention bonus Smith will receive if he stays for three years and his 12-month severance package if he’s fired, the board voted 12 to 1 to adopt the employment agreement that came out of several months of negotiation with two committees.

“I thought the process was very thorough and complete,” said Timothy O’Brien, who is retired from the state Auditor’s Office. “We did look at quite a bit of data. It’s not like you can find a one-to-one comparison with PERA, but I thought we were very deliberate and thoughtful.”

Comparison data collected by an outside firm (ERI Economic Research Unit) and provided to The Gazette by PERA showed that the mean base salary for Smith’s peer group (other CEOs and executive directors) is $325,000, while the average incentive package is $143,000. In 2016, Smith will take home a $394,000 base salary and up to $118,200 in incentives.

Stapleton used California’s massive $300 billion retirement system, CalPERS, as a contrast, noting the head of that organization’s annual salary with bonuses is almost $500,000, whereas in three years with the one-time retention award, Smith will receive about $750,000.

“From an asset comparison, from any comparable salary comparison, how can that be justified?” Stapleton asked his fellow board members.

The answer was complex. CalPERS executive doesn’t oversee investments, whereas the majority of PERA’s investments are handled in-house, increasing the responsibility of the executive.

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Contact Megan Schrader: 286-0644

Twitter @CapitolSchrader

Greg Smith. Photo from Colorado PERA website.