'Never a Good Time'

There’s probably not a very good time to announce that a college president is going to be making $100,000 more than the year before. The California State University System probably picked one of the worst.

July 19, 2011

There’s probably not a very good time to announce that a college president is going to be making $100,000 more than the year before. The California State University System probably picked one of the worst.

Literally moments after the system’s Board of Trustees announced that it was going to increase next fall’s tuition by 12 percent, an additional $294 a semester, the board turned around and approved a salary of $400,000 for the new president of San Diego State, Elliot Hirschman -- $350,000 in state funds and $50,000 from the campus's foundation -- a bump of more than $100,000 from what his predecessor made last year.

“There’s never a good time to raise presidents’ pay,” said Michael Uhlenkamp, a spokesman for the Cal State system. “But when there are immediate needs, whether taboo or not, we have to fill them.”

The question of whether it's appropriate for higher education administrators to be making very large salaries (often in the hundreds of thousands of dollars) is highly contentious, with vocal advocates on both sides of the issue. Those for high pay say such salaries are necessary to attract top talent to run complex institutions. Working for private companies, such executives could probably make several times more. Critics say that higher education, however complex, isn't a profit-making business, and it sends the wrong message when its leaders treat salaries in the $200,000s or $300,000s (often with benefits like houses, cars, and retirement plans) as insufficient. Further, critics say that at a time when public colleges are continuing to cut budgets and limit raises, those at the top are hypocritical to accept more money while asking others to sacrifice.

The $300,000 presidential salary that had been in place at San Diego State could hardly be confused with a faculty salary there. According to the most recent data from the American Association of University Professors, the average full professor's salary was $99,800, while the averages for associate and assistant professors were $78,700 and $73,300, respectively. (Those figures don't, however, reflect lost wages due to furloughs or the considerably lower salaries of part-timers.)

The debate over presidential salaries has been relatively quiet since the start of the recession. Just prior to the economic downturn, executive salaries were rising at about 4 percent annually. The past few years have been especially bad timing for public colleges and universities to make such announcements, since decreased state revenues and an influx of conservative lawmakers have both contributed to big cuts in state funding accompanied by large tuition hikes. Many presidents not only skipped raises, but cut their salaries, sometimes by larger percentages than they asked of others on campus. Many also gave money to various campus programs, such as scholarships.

But recent decisions seem to indicate a shift. While the budget situation in most states hasn't changed, and has arguably gotten worse in states like California as federal stimulus dollars dry up, administrators at some institutions say the market demands that they start paying presidents more or run the risk of losing their current administrators or not being able to attract qualified candidates. At the same time, they're confronted with students and families angry about tuition hikes, faculty and staff upset by salary freezes and furloughs, and lawmakers looking for reasons to cut budgets further.

But since the market for presidential pay doesn’t seem to be slowing down, and the level of state funding institutions enjoyed in years past seems unlikely to return any time soon, institutions like California State University, the University of Louisville, and the University of Georgia are deciding that any potential political or public fallout that may result from increasing presidential pay is outweighed by the gains.

"We knew all along that there was the potential for this to be viewed in not the best light, but at some point we just have to make the decision," Uhlenkamp said. "This is the agreement we made to get the person we all recognized was not just a good leader, but the person who's going to go in there and be as successful as [former President Stephen L.] Weber."

CSU's decision was met with a public outcry. California has made severe cuts to its higher education budget, including a $650 million cut to the CSU system this year. At the same time, the system has been raising tuition to make up for the decrease in state support. The system, which has historically been open to any student who met minimum requirements, has considered capping enrollments.

The governor wrote a letter to the chairman of the board of trustees before the meeting, asking him to reconsider the salary increase. "At a time when the state is closing its courts, laying off public school teachers and shutting senior centers, it is not right to be raising the salaries of leaders who -- of necessity -- must demand sacrifice from everyone else," California Gov. Jerry Brown wrote. In tweets and press releases, legislators threatened to think long and hard about restoring funding when state revenue improved. The Sacramento Bee's editorial board lambasted the move, saying “This kind of tin-ear, boneheaded move gives pause to even those sympathetic to the cause of public higher education in this state. It will cost the CSU system support in the Legislature and in the public it can ill afford to lose.”

Now State Sen. Leland Yee, a Democrat from the San Francisco area, is pledging to introduce a bill that would prohibit large salary increases for CSU administrators during bad economic years. He introduced a similar bill in 2009; it received support from both chambers of the legislature, but was vetoed by Gov. Arnold Schwarzenegger.

Despite this rebuke, CSU officials believe they made the right decision. Three years without raises at the administrative level meant the system was paying administrators significantly less than the institutions it saw as its peers. To attract a strong candidate, the board decided it needed to increase the pay.

A report by Mercer, a company that consults on executive compensation, helped guide the board to Hirschman's final compensation. Measuring the CSU campuses against a group of 20 peer institutions determined that the market average was $425,945. CSU campus presidents made an average of $292,830 in 2010-11. A spokeswoman for Mercer said the company does not comment on their reports, but the analysis focuses solely on measuring the market and does not factor in issues such as state budget, tuition prices, or political ramifications.

When negotiating executive compensation, most firms evaluate the political realities surrounding the decision, said Steven Hall, managing director of Steven Hall & Partners, an executive compensation firm. But unlike measuring the market rate, predicting political fallout is more of an art than a science, Hall said. He said he has recommended executive compensation packages to boards at industries that rely on government contracts who summarily rejected them out of fear that they would look bad to lawmakers.

Whether or not there's a "good time" to increase salaries is debatable; even during periods of relative prosperity, the public, college faculty members, and lawmakers have criticized such decisions. But comparisons with other institutions reveal very different reactions by the public and by lawmakers to very similar decisions -- even within the California State system. Mohammad Qayoumi, who moved from president of California State University, East Bay to San Jose State University, will make about $52,000 more. The new president at California Polytechnic State University at San Luis Obispo will make $350,000 in state-funded salary, plus a $30,000 supplement from the campus foundation, adding up to a significant increase over the $328,200 salary of his predecessor.

The Board of Regents for the University System of Georgia, another state where higher education budgets have been cut for the past few years (including a general cut of about 9 percent this year and cuts to the state's HOPE scholarship program), also decided to provide raises to several presidents. Compensation packages for the presidents of Albany State University and Fort Valley State University will increase from $198,456 to $225,000. John H. Millsaps, a spokesman for the University System of Georgia, said the two were the lowest-paid administrators among comparable institutions. The hike puts them level with their peers.

The third raise was a $50,000 increase in deferred compensation given to long-serving University of Georgia President Michael Adams, who will make $660,000 next year, making him the highest-paid campus administrator in the state system. While the increase is the result of a gift from the university's athletic association, a legal requirement mandates that that money go into the university's general fund while state money pays for the raise.

"We're about to start a billion-dollar capital campaign and the supporters here at UGA wanted to make sure that Dr. Adams would stay through to the end of the campaign," Millsaps said, a spokesman for the University System of Georgia. "They wanted him to be president during that effort."

Millsaps said there has been little outcry over the salary increases in the state or among lawmakers.

In Kentucky, where state funds dropped about 1 percent this year after dropping about 9 percent over the past two years, the University of Louisville's Board of Trustees voted to increase Chancellor James Ramsey's $313,818 salary by 5 percent and give him a $114,033 bonus. It also recommended that the university's foundation increase the $142,314 supplement it gives Ramsey annually. Ramsey, like the university's faculty and staff, went without pay increases for the past three years, and said he would turn down a bonus or give it back to the university, a move that several local media outlets featured prominently. Unlike their counterparts at California State, however, faculty and staff at Louisville were eligible for merit raises of up to 5 percent.

Perhaps the most unusual budget and salary picture is that in North Dakota, a state that is in a dramatically different situation than almost all others. Bolstered by oil revenues and a relatively stable economy, it has actually seen its budget grow. In several of the past few years, the legislature has given more to the State Board of Higher Education than was requested.

After several years of small or no increases for top administrators, the board determined it was "behind" in its executive compensation, which was hindering its ability to attract top talent. Since that time, the state has driven up its administrative pay substantially from where it was three years ago. Grant Shaft, president of the State Board of Higher Education, said the board would not have pursued such aggressive hikes if the budget picture there were similar to that of other states. "A lot of what we did wouldn’t be possible without the turnaround the economy had," Shaft said.

Because public reaction varies so much depending on the economic climate, and because so few raises have been considered in the past few years, it's hard to deny that political factors play some role in the decision to hike administrative compensation. But some higher education officials question whether the rhetoric that lawmakers employ is genuine. It's easy to point to one or two high-paid presidents and scapegoat them instead of trying to deal with the real issue of college costs, they say.

Someone like Ted Lieu, who threatened not to restore CSU funding unless the board reconsidered its decision to increase the San Diego State president's salary, would be hurting his own district, which includes many college-going students and a CSU campus. "He disagrees with the Board of Trustee's decision to use $50,000 in state funding for this, so he's willing to take it out on 420,000 students?" Uhlenkamp said. "I don’t know if that's best way to manage it."

"Whether it’s a president or a football coach, one football coach at one school who makes too much money, or a climbing wall, it comes to symbolize waste and inefficiency in public higher education, and that's simply not the case," said Dan Hurley, director of state relations and policy analysis for the American Association of State Colleges and Universities. These institutions have had to cut hundreds of millions of dollars over the past few years, he said.


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