Hidden Costs of High Public Pay

By JULIANNE BASINGER and SARAH H. HENDERSON
Chronicle of Higher Education
From the issue dated November 14, 2003

In economic hard times, pay raises for public-university presidents have sometimes come at a high political price. The top-paid public presidents now earn salaries that approach those of the best-paid leaders of private universities. Board members and search-firm consultants say that in order to attract the best candidates, public research universities must offer compensation similar to that of private institutions, and the market rate for all presidents continues to climb. As a result, some public-university boards have increasingly turned to private funds to supplement presidents' state pay -- a controversial practice.

As a growing number of public-university leaders earn a half-million dollars or more, professors, lawmakers, and some higher-education experts are questioning whether such presidential pay is frivolous, particularly as states have increased tuition and slashed higher-education budgets, cutting programs and freezing pay for faculty and staff members.

In Florida, legislators this year imposed a cap on the state salaries of public-university presidents after a flurry of substantial pay raises for college leaders. A bill now under consideration in Ohio would limit the state contribution for presidential salaries to no more than what the governor is paid: $130,292. At Louisiana State University at Baton Rouge, faculty members and students passed resolutions last fall that harshly criticized a pay raise, using private funds, that more than doubled the compensation of the institution's chancellor, Mark A. Emmert, who now earns $590,000 a year.

"Unreasonably large salaries at the top place public universities in danger," says A. Ravi P. Rau, a professor of physics and astronomy at Baton Rouge. Such compensation "cannot but lose the trust that tax dollars are being wisely utilized," he adds, by sending a signal that institutions place a greater priority on "administrative overhead" than on teaching and research.

But the competition for top candidates for presidencies at doctoral institutions remains stiff, pushing the pay for leaders of those public universities higher. Among the 131 chief executives of state research universities and public-college systems surveyed by The Chronicle this year, Mary Sue Coleman, who became president of the University of Michigan in August 2002, topped the list. She will earn $677,500 in pay and benefits during 2003-4.

After Ms. Coleman, David P. Roselle of the University of Delaware was the second-highest-paid president in this year's survey. Delaware does not consider itself a completely public institution, and declines to release compensation information. Mr. Roselle's annual compensation of $630,654 in the 2002 fiscal year came from a mixture of public and private sources, and figures were obtained from the university's federal tax filings.

Richard L. McCormick, who became president of Rutgers University last December, was third in compensation, at $625,000. In his previous presidency, at the University of Washington, he earn $296,400 annually.

Twelve presidents in this year's survey earn more than $500,000 -- compared with only six last year. Just over a quarter of public-university leaders in this survey were paid more than $400,000. Among private institutions, the four highest-paid presidents earned more than $800,000 in the 2002 fiscal year, and 27 received compensation of more than $500,000.

While governing boards at public universities must compete with private institutions in hiring and retaining presidents, states are facing budget woes. Moreover, public institutions are always hit harder by economic recessions, says Patrick M. Callan, president of the National Center for Public Policy and Higher Education, in San Jose, Calif. "It's much more of a roller-coaster ride for them."

Even so, boards generally have opted to increase public-college presidents' pay, particularly when hiring new leaders. The new president of Oregon State University, Edward J. Ray, who was hired in June, earns $295,000 -- nearly twice what his predecessor did -- because state higher-education officials believed they needed to offer more to attract a good candidate. For the first time, the university's president receives a $100,000 salary supplement from the OSU Foundation. Yet state officials believed they were getting a bargain, because most presidents of public doctoral institutions earn far more.

About a third of leaders in this year's survey receive supplements from private sources. But those supplements have sometimes drawn criticism because private foundations are not held to the same laws of public disclosure as state entities. Paying a president with private funds also raises questions about presidential accountability. In many cases, the foundations providing substantial portions of a president's salary are not controlled by a university's trustees, who are supposed to guard the public trust. And some higher-education scholars worry about the increasing reliance on private donors, who could gain more influence over the educational direction and research at those institutions.

Such questions arose last fall at Louisiana State University at Baton Rouge after the Board of Supervisors in June 2002 used private funds to more than double Mr. Emmert's annual compensation, from $284,160 to $590,000. Only $259,160 now comes from state funds. The rest comes from private sources affiliated with the university: the LSU Foundation and the Tiger Athletic Foundation. Despite the protests from students and professors, board members said the raise was necessary to keep Mr. Emmert from leaving the university to take a more lucrative presidency at the University of South Carolina.

Among the 12 highest-paid presidents in this year's survey, five -- including Mr. Emmert and Mr. Roselle -- received substantial compensation supplements from private sources. Mark G. Yudof, chancellor of the University of Texas System, will earn $624,052 in 2003-4, and all but $70,231 comes from private sources. Michael F. Adams, president of the University of Georgia, earns $559,468 annually, and nearly 60 percent of it comes from private funds at the university's foundation. Michael M. Crow, president of the Arizona State University system, receives $518,394 -- about 25 percent of it from private funds.

The top earners who received all of their pay from state funds were Ms. Coleman and Mr. McCormick, as well as Evan S. Dobelle, president of the University of Hawaii System, who earns $599,500 annually; Robert C. Dynes, the new president of the University of California system, who receives $518,792; Karen A. Holbrook, the new president of Ohio State University, who gets $512,260; Robert M. Berdahl, chancellor of the University of California at Berkeley, who earns $504,400; and Peter W. Likins, president of the University of Arizona, with $503,394.

But generous compensation in some cases has prompted harsh scrutiny.

John W. Shumaker, former president of the University of Tennessee, would have been the highest-paid president in this year's survey had he not been forced to step down this past summer after lawmakers, faculty members, and media reports criticized his lavish compensation and high-flying ways. Mr. Shumaker earned $733,550 annually, about a third of which came from private funds. The university's Board of Trustees also came under fire for its search process in hiring Mr. Shumaker and for providing such high pay in a time of dire financial problems for the university. In June 2002, around the time the board and Mr. Shumaker signed his contract, the university was forced to finish classes a week early because of Tennessee's budget woes.

In Florida, governing boards at the state's universities engaged in a presidential-salary race, beginning in December, when Florida International University raised President Modesto A. Maidique's compensation from $237,296 to $324,200 a year. The University of Florida followed suit, bumping the annual compensation of its president, Charles E. Young, from $306,854 to $392,000. Then the University of South Florida increased the annual compensation of its president, Judy Genshaft, from $266,336 to $370,500. By winter's end, eight of the leaders of the state's 11 universities had received hefty pay raises.

The pay increases prompted sharp outcry from lawmakers and local newspapers. "Call me old-fashioned, but I always thought of university presidents as being a little bit above it all, especially when it came to grubby matters such as money," griped one columnist for the Fort Lauderdale Sun-Sentinel, Michael Mayo. "Times have apparently changed."

The presidents maintained that the salary increases merely made their pay more competitive with the national market rate. But in June, the Florida Legislature responded to those presidents' pleas for more money for their institutions by voting to cut spending on the state's universities by $40-million. The lawmakers also passed a measure capping the state's contribution to college-presidential salaries at $225,000 annually.

Some of the presidents already received salary supplements from their universities' affiliated foundations. In July, those supplements increased. When J. Bernard Machen takes office in January as the new president of the University of Florida, he will earn at least $450,000 in annual compensation, half of which will be paid by the university's foundation.

Amid the struggles over presidential pay, professors and some higher-education experts question the assumptions that are driving the sharp increases in the market rate for presidential compensation, such as search-firm consultants' assertions that few people are qualified for the jobs. The critics also worry about the growing gap between the pay raises for faculty members and those for presidents.

"While people talk glibly about higher-education chancellors and presidents being like CEO's, there's still a difference: These are nonprofit institutions," says Mr. Rau at Louisiana State, where professors this past year received 3-percent raises. "Presidential compensation should at least be comparable to what faculty members are paid."