Pay dispute clouds GESB future plan

THE controversy over the pay packet of Michele Dolin, chief executive of the state superannuation agency GESB has overshadowed the long-running debate over the organisation's future being held at the highest levels of government.

In January 2008, when the GESB board signed off on a pay rise of $160,000 per year, a jump of more than 40 per cent, the organisation was less than six months away from being mutualised.

If everything had gone to plan, any hint of that decision would most likely not have emerged until after GESB was independent of government.

However, that turned out to have been overly optimistic.

Even at the time, critics were warning of a transfer to private ownership of as much as $350 million of reserve funds that they linked to defined benefit schemes, such as the 20,000-member Gold State Super. That scheme was not being mutualised and would remain the responsibility of the state.

It was this issue, and the potential tax issues, that caused the whole mutualisation process to be stopped by then treasurer, Eric Ripper, the day before it was due to go ahead on July 1 2008.

The annual report shows that, seven days after the mutualisation was stopped, Ms Dolin ceased to be a GESB director. GESB said her term simply expired.

The issues that halted the mutualisation have yet to be resolved and the state government currently has two reviews under way - one by Treasury's actuary Catherine Nance and another independent examination by federal bureaucrat Rod Whithear, ordered by state Treasurer Troy Buswell.

The importance of the reserves is highlighted in the annual report. GESB's actuary advised the fund manager that at June 30 its defined benefit schemes had a $396 million shortfall of assets against accrued liabilities, a significant turnaround since June 30 2007 when Gold State alone is believed to have had $744 million surplus of net assets to accrued actuarial liabilities.

The total GESB reserves have fallen more than 62 per cent to $383.1 million in two years.

This has largely been as a result of extraordinary negative investment income, $126 million last financial year (from a net asset base of $539.1 million at the start of that period) and $469 million the year earlier (from a starting net asset base of $1.02 billion).

It is also estimated about $16 million in reserve funds were used last year in the normal administrative operations of the fund manager.

A further $11 million in reserve funds were allocated as an advance payment to GESB Mutual Ltd, established as the key privatisation vehicle.