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What Passes for a Raise Today

What Passes for a Raise Today
October 7, 2010

A raise by any other name might not smell quite as sweet, but several universities are hoping one-time bonuses will be enough to retain faculty during a period of economic uncertainty.

In recent months, a number of institutions have announced plans to reward professors with funds that won’t become part of their base salaries going forward. The decision reflects a tension that’s spreading across higher education, where administrators and trustees are grappling with how to end two or three years of stagnant wages without building permanent salary hikes into budgets that are still being slashed.

At Auburn University, where salaries haven’t increased in the last two years, trustees recently approved the expenditure of $18.4 million for one-time, merit-based salary supplements of up to 6 percent at Auburn and Auburn University at Montgomery. Jay Gogue, Auburn’s president, said the university used one-time federal stimulus dollars to fund the pay packages.

“We want to act like we’re going to be here another 150 years, and the resource of faculty is absolutely critical,” said Gogue, referencing the university’s 2006 sesquicentennial.

Auburn's state budget has been cut by about $270 million, or roughly 31 percent, over the last three years, university officials said. While teaching loads have increased and pay has been flat, Gogue said the decision to move forward with a bonus of this kind wasn’t the result of pressure from disenchanted faculty. Indeed, he posits that faculty understand the university is hamstrung by a massive budget crunch.

“I was really kind of surprised you didn’t hear more fussing about compensation,” Gogue said. “We really did not get letters, comments, Faculty Senate folks all upset about that. This is beyond Alabama, beyond Auburn, beyond any of our control.”

While there may not have been much pressure from faculty, Gogue said the university's trustees pressed administrators to show appreciation for faculty and staff through a financial reward that was possible in an uncertain economic climate. As for the one-time nature of the funds, faculty don’t seem to be up in arms about that either, said Claire Crutchley, chair of the Senate and a professor of finance.

“I think faculty are really pleased, because we know how difficult it is. The state keeps cutting funding,” she said.

At the same time, however, the bonuses aren’t being viewed as an indication of an economic turnaround, Crutchley said.

“I think it’s more that the administration [and] the board of trustees feel faculty should be rewarded for working extra hard,” she said. “I don’t believe they feel we’re out of the financial [struggle].”

There are a few public universities that have given continuing raises, even in the face of significant cuts. The University of Florida, for instance, recently created a 4 percent merit raise pool for faculty. The raises were approved despite a reduction of about $140 million -- more than 20 percent -- in state funds over three years.

Similarly, Northern Arizona University recently went ahead with a $6.8 million raise package in the face of fiscal challenges. The university has seen its state budget reduced by $34.4 million, or 17.6 percent, since 2008, but officials said the “market adjustments” were needed to help bring employees closer to those in the university’s peer group. The university has lost some faculty to other institutions, and the salary boosts are part of a retention strategy, officials said.

“We remain last among our peers, and we’re in the people business. We can’t afford to stay at the bottom,” said Tom Bauer, a university spokesman.

Others, however, remain leery of permanent raises in this environment. The University of Virginia, for example, announced last month that all employees will receive a one-time 3 percent bonus, which would be the first bump in pay of any kind since 2007. The decision to provide the increase came in the wake of Gov. Bob McDonnell’s announcement that all state employees will receive 3 percent bonuses. The state will cover about 37 percent -- $2.9 million -- of the total cost of the bonuses for University of Virginia staff and faculty who are paid through state general funds and tuition. The remaining $4.8 million will come from set aside university funds, grants, auxiliary and private funds.

The one-time bonus trend has also taken hold at the University of Texas at Austin, which will allocate about $14 million toward that purpose in December. While some consideration was given to an ongoing salary adjustment, administrators decided the uncertain economic outlook made a one-time bonus the more prudent option. The university has cut 5 percent, or $15 million, from its budget this year, and plans are being crafted for another possible reduction of 10 percent, or $30 million.

“It’s just such a cloudy picture right now,” said Kevin Hegarty, vice president and chief financial officer.

While payouts for individual employees may vary widely based on merit, deans and vice presidents have been instructed to steer a minimum of 2 percent and maximum of 3 percent of their total salary budgets toward the bonuses.

By making the payouts a one-time allocation, Texas hopes to avoid folding an ongoing salary hike into its budget, only to have to lay off people if state cuts continue, Hegarty said.

“It was a way of not betting the farm, so to speak,” he said. “But still being as aggressive as we thought we could with [retaining] our people and trying to take care of them.”

 

 

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