Senators Flunk High CSU Exec Pay

FEB. 17, 2012

By DAVE ROBERTS

In California’s highly partisan political world, there are few issues on which most agree. But a rare unity was achieved last July when the California State University Board of Trustees awarded the new president of San Diego State University a $400,000 salary ($100,000 more than his predecessor) in the same meeting that they raised tuition by 12 percent. It was denounced from left to right.

The board’s tone deafness, by sticking it to poor students while gilding a fat cat, was a “let them eat cake” moment worthy of Marie Antoinette. Students had already been feeling dissed. The $294 per semester increase to $4,884 a year for undergraduates came on top of a previous 10 percent hike and a tripling of tuition in the past decade, according to the Los Angeles Times.

The CSU board caught flack for giving SDSU’s Elliot Hirshman $350,000 from the taxpayers along with another $50,000 from the SDSU Foundation and free housing in a $1.1 million home. But that compensation is not much of an outlier among CSU presidents, who are all safely ensconced in the 1 percent of top earners.

San Luis Obispo President Jeffrey Armstrong receives $380,000, plus free housing. San Jose’s Mohammad Qayoumi gets $353,200 plus housing. Los Angeles’ James Rosser manages on just $325,000, but gets $60,000 to help with housing. All of the presidents receive more than $300,000 in combined salary and housing benefits. But they are paupers compared to CSU Chancellor Charles Reed, who enjoys $451,500 plus, of course, free housing.

In response to the outcry, the CSU board did what boards do: pawn off the controversy on a committee with a grand sounding name. The Special Committee on Presidential Selection and Compensation met periodically in the second half of 2011 and came up with a proposal in January, which was again met with criticism.

Democratic Opposition

While Republican opposition to exorbitant government employee compensation is a given, more refreshing were the man-bites-dog attacks from Democratic state senators like San Francisco’s Leland Yee and Torrance’s Ted Lieu.

“CSU trustees should not be spending limited state resources granting $100,000 raises for executive positions,” Lieu said in a press release. “We must limit salaries to a reasonable level that is consistent with California’s and CSU’s fiscal conditions.”

Yee weighed in a week later, “The exorbitant executive pay practices of the CSU Trustees and UC Regents are appalling and reinforces the perception that they are completely out of touch. UC and CSU are public institutions designed to serve California’s students and not to be a cash cow for executives.”

Particularly noteworthy was Lieu’s scathing 10-page letter on Jan. 17 to the CSU committee. Lieu in essence charged that the executive pay proposal, which compared CSU president salaries with similar universities around the country, was an exercise in deliberate fraud designed to line the pockets of presidents while fooling the public.

“The … problem here is not just that the proposed policy compares apples to oranges,” wrote Lieu. “The problem is more insidious. Data was manipulated and relevant criteria excluded through a unilateral process designed to improperly raise executive salary levels.”

Lieu, citing findings by the Legislative Analyst’s Office, makes the following charges:

The comparison data focuses on base pay without taking into account the substantial noncash benefits offered by CSU to its presidents, such as an expensive housing allowance, a car allowance, generous health benefits and a stipend.

CSU selected a narrow list of comparison institutions through a unilateral process without collaboration with traditional stakeholders.

The data and comparison criteria handpicked by CSU are designed to improperly skew the average salaries higher. For example, research funding should not have been used as a comparison factor because CSU’s primary function does not include research. And CSU colleges were compared with schools with wealthy endowments like the University of Oklahoma, which has an endowment seven times the size of San Diego State.

“A valid set of comparison institutions would show that, in fact, CSU presidents are being compensated at or above the average of their comparable peers,” concluded Lieu in italics.

Justification

Chancellor Reed, in his report to the committee, justified the pay comparison this way, “Even in difficult economic times, the CSU must compete on a national level for highly qualified candidates to serve as presidents of its institutions. The pool of candidates with the appropriate level of executive leadership experience is limited and the competition for the best candidates is intense.”

Reed acknowledged that the previous system of comparing CSU with 20 other colleges around the country “was never a satisfactory comparison” because it included private institutions with very different standards and ability to compensate executives. So he proposed replacing that with five tiers of colleges based on location, enrollment, budget, percentage of students receiving Pell Grants, six-year graduation rates and research funding.

He included a limit of a 10 percent increase of taxpayer funds paid to a successor president. But that looks more impressive than it is. In Hirshman’s case, it only would have trimmed $20,000 off of his $400,000 salary, because 10 percent of his predecessor’s salary totaled $30,000 – instead of the $50,000 increase he received in taxpayer funds. The salary percentage from foundation sources remains without a limit.

Budgetary Realities

Lieu cited the committee’s goal “to attract, motivate, and retain the most highly qualified individuals.” Lieu responded, “That cannot be correct, because it would authorize multi-million dollar compensation packages in order to get the most highly qualified individuals. Rather, the policy should be for the CSU to attract, motivate, and retain the most highly qualified individuals as constrained by CSU’s and California’s budgetary realities.” (Italics his.)

Lieu testified at a committee meeting against the compensation proposal. He was heartened when several days later the board changed the comparison formula to make it a salary guide rather than the determining factor, and that they included a 10 percent cap on salary increases and inserted consideration of fiscal conditions into their policy.

“These three changes are significant reforms that will help rationalize CSU executive compensation decisions,” said Lieu in a statement. “I commend the Board of Trustees for moving in the right direction.”

Yee was also pleased with the changes to the pay policy, but argued that they don’t go far enough. “Those making hundreds of thousands of dollars should not receive double digit pay increases during bad budget times or when students are forced to foot the bill,” he said.

Yee and Lieu teamed up to introduce several bills cracking down on executive pay excess:

SB X1 27 prohibits pay raises for top CSU executives when the state’s general fund contribution to CSU is less than or equal to the prior year.

SB 959 requires that pay raises be voted on in open public meetings. It also specifies that presidents cannot be awarded compensation in excess of 150 percent of that provided to the chief justice of the California Supreme Court. Tani Cantil-Sakauye, the current chief justice, earns $228,856, so campus presidents would be limited to a maximum of $343,269. The bill also requires trustees to first consider executive applicants from within the CSU system and secondarily from among California residents before considering candidates from outside the state.

SB 967 prohibits CSU executive pay raises within two years of a student fee hike, and limits salary increases to no more than 5 percent above the previous executive in that position.

None of the bills has yet reached the committee level. But it appears likely the over-reach by the CSU board last year will result in reforms this year to rein in the executive excess.

“Time and time again, rather than protecting the needs of students and California families, the regents and trustees line the pockets of their top executives,” said Yee. “While these public administrators are making more than the president of the United States, many Californians are struggling. We deserve better.”