Executive Pay Increase for UC Executives Stirs More Controversy

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universitycat.pngLast week, the San Francisco Chronicle unleashed quite a stir with an article that reported that while the UC Board of Regents was voting to cut millions from UC Budgets through furloughs, pay cuts, layoffs, student fee hikes, and other campus cutbacks, they were also approving pay raises, stipends, and other benefits for more than two dozen executives.

Wrote the Chronicle on August 7, 2009:

“On the same July day that the UC Board of Regents cut $813 million from UC budgets – setting in motion pay cuts, layoffs and campus cutbacks – the board quietly approved pay raises, stipends and other benefits for more than two dozen executives.”

The spin from UC: the people who earned the pay increases took on new duties and thus deserve to be compensated.

The critics respond that everyone has been asked to take on new duties from the janitor to the professors, and most of them are not only doing so without extra pay, they are doing so being paid less money for their greater workload.

The article quoted Kathy Renfro who chairs the UC Berkeley Labor Coalition:

“These are outrageous actions, taken at the same time as UC has been pleading poverty, giving layoff notices, forcing staff and faculty to take furloughs and hinting at more student fee increases.”

In the meantime President Mark Yudof, who himself received received nearly twice what his predecessor received, has along with others defended the actions.

“UC typically gets $3 billion of its $19 billion budget from the state. The state is cutting $813 million, and critics say UC should use more of its substantial remaining budget to find ways to avoid cutting salaries and jobs. Yudof has declined, saying that UC could find itself in legal trouble if it used funds for purposes they weren’t intended for.

Meanwhile, campus officials defended the pay increases, saying they were in line with what other universities, including top private schools, pay for such work.”

The response to this news depends on who is doing the talking of course.  Chair of the UC Board of Regents, Russell Gould along with fellow Regent Bruce Varner wrote an Op-ed Wednesday that defends the decision entitled “UC Must Retain The Best Leaders.”

They write:

“The business of running a $19 billion, 180,000-employee enterprise – 10 campuses, five medical centers, research laboratories and a multitude of programs – does not come to a halt when the economy turns bad. People in leadership positions may leave or retire, but their institutional duties remain. Someone must run the medical center, head the academic department, oversee the research and administer the programs.”

They dismiss the notion that somehow this was done quietly:

“First, these decisions came to the board as informational items only. They had been approved at the request of campuses – case by case and over several months, after careful review and in some cases revision – by Regent Bruce D. Varner, chairman of the compensation committee, in consultation with UC President Mark Yudof.”

Moreover:

“Many of the items involved no new money whatsoever; others dealt with salaries paid from non-state sources, such as research hospital revenues; some created cost savings…  To classify some of them as “pay raises” is deceiving. Each item has its own backstory, but many involved individuals taking on significant new responsibilities – a head of a urology department named dean of the medical school, for example – or stepping in to perform a whole portfolio of additional duties because positions were eliminated.”

On the other hand, as one might imagine, Senator Leland Yee responded quite differently, likening the pay increases to the bonuses that many of the top executives at private companies received despite the fact that taxpayers had to bail out their companies to keep them afloat.

Said Senator Yee in a release:

“The public is tired of the UC administration acting like AIG.  It is imperative that we stop the UC Regents from turning our public university into a private country club.  We can ill-afford an administration that continues to disrespect the taxpayers, students, and their low-wage workers and faculty.”

The Senator is pushing SB 217, which would limit executive compensation increases in years in which the state budget allocation to the UC has not increased.

Lakesha Harrison, President of AFSCME 3299 which represents many of the service workers was also critical of the pay increases:

“Excessive pay raises and extravagant perks is yet another example of UC executive’s misguided choices and misplaced priorities.  Workers are being asked to put less food on their families’ tables while UC executives continue to enrich them themselves. Students are asked to pay more but get fewer services. This is outrageous and unacceptable. It is the reason why Californian’s need to reform the UC to make it accountable to taxpayers, not their own self interest.”

The pay increases have given increased momentum to SCA 21, a constitutional amendment which would require the UC to adhere to all state laws.  It does not as some suggest put UC under the control of the state legislature.

According to the release:

“SCA 21 has received over 6,000 letters of support from students, faculty, and taxpayers, and is endorsed by AFSCME, University Professional and Technical Employees (UPTE), University Council of the American Federation of Teachers (UC-AFT), California Nurses Association (CNA), Service Employees Trades Council (SETC), California Labor Federation, San Francisco Labor Council, State Building and Construction Trades Council, and the Phoenix Project for UC Democracy, among others.”

Commentary

From my standpoint, the claims by many that the executives are simply being compensated for increased duties rings hollow.  As the workers are quick to point out, everyone is being expected to take on additional duties to make up for layoffs.  Additionally, with furloughs, many are expected to do far more, in less time, for less money. 

As Jack Zwald, the Vanguard’s UC Davis student commentator put it, “UC students pay more to get less.”

He writes:

“All these raises happen in spite of the fact UC fees have doubled over the last ten years, excluding the recent 9.3% hike, even though the Regents and the University continue to cut back on services, hand out thousands to executives, and try to find new ways to cover their costs.”

But it seems that the rules that apply to all of the other employees do not apply to the top executives.

For intelligent people, the UC Regents have little understanding how these moves will play out in the public.  Or perhaps they simply do not care.  After all, they must have watched national news coverage of the outrage that people expressed when it was revealed that the same companies that received bailout money were giving out hundreds of thousands if not millions in bonuses to their top executives.

Certainly just as the bailout recipients attempted to, UC can logic and finesse an explanation that attempts to explain it away.  However, in the winter and spring, the public was not very sympathetic toward the explanation from the private companies, it seems unlikely that the workers who have received paycuts will be very sympathetic toward UC.

Right now UC is insulated from public opinion.  They are not held accountable by government agencies or the taxpayers.  However, what they fail to understand seemingly is that each time one of these issues arise, they place themselves closer and closer to the inevitable–more control by the government.

The constitutional amendment, SCA 21 does not place UC under control of the legislature.  That is mostly spin from UC itself.  What it does however is subjects UC to the laws passed by the legislature.  It makes them more accountable to the government which makes them in turn more accountable to the people.

If UC wishes to avoid the higher level of scrutiny, perhaps they ought to be more careful with how they proceed during times when they have had massive cut backs in wages, salaries, and layoffs.  It would seem that a multibillion industry would have someone advising them on how the public and their own workforce might respond if such actions saw the light of day, if they invariably will.

And yet despite this, UC continues to operate as though they were untouchable.  Perhaps that is what needs to change.  If you don’t like SCA 21, perhaps we can do as Mr. Zwald suggests and have the ability to recall Regents.  In other words, put the UC Regents under the control of the voters.  Wouldn’t that be a novel concept?

—David M. Greenwald reporting

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About The Author

David Greenwald is the founder, editor, and executive director of the Davis Vanguard. He founded the Vanguard in 2006. David Greenwald moved to Davis in 1996 to attend Graduate School at UC Davis in Political Science. He lives in South Davis with his wife Cecilia Escamilla Greenwald and three children.

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34 thoughts on “Executive Pay Increase for UC Executives Stirs More Controversy”

  1. Greg Kuperberg

    [i]The critics respond that everyone has been asked to take on new duties from the janitor to the professors, and most of them are not only doing so without extra pay, they are doing so being paid less money for their greater workload.[/i]

    Those critics happen to be wrong. I am a professor at UC Davis, and no one has told me anything about new duties. On the contrary, Yudof has been responsive to our concern that the furloughs would be fake and would amount to a pay cut for the same work. They are reducing the number teaching days, and otherwise the furloughs really will be less work.

    As for the janitors, in the math department there posted notices that they will only clean offices once a week this year. I have no problem with that: layoffs are layoffs and furloughs are furloughs. Our offices aren’t all that dirty either. But again, “critics” are turning around and claiming the janitors have to work more, and that’s just not true.

    People were also very worried that there would be no money for promotions this year. There will be promotions. I am getting a furlough, but I can still get promoted to the next step and get a modest raise; the furlough will just travel with it. So if the “critics” mean to imply that no one other than management is getting any kind of raise, again they’re just wrong.

    It would just be very bad policy to tell the entire roster of UC executives that no one gets promoted, no one gets a raise. Faculty and executives are routinely hired away by other universities. UC is doing what it can not to lose its best people. Of course there won’t be any stampede if we have executives that other universities wouldn’t touch with a ten-foot pole. I suspect that Yee and Harrison wouldn’t mind that solution.

    But as federal politicians are discovering with health care, just because many voters are wrong, that doesn’t let you off the hook from public opinion. One voter told a Congressman in South Carolina that “the government should keep its hands off of my Medicare”. The Congressman couldn’t tell him that Medicare is a government program; the guy just didn’t want to hear it. Public opinion is its own reality.

    [i]For intelligent people, the UC Regents have little understanding how these moves will play out in the public.[/i]

    No, they know full well what it’s like to be caught between the truth and public outrage. They know what Leland Yee is like. All of that is obvious; they don’t need experts to tell them. They also know that they can’t do much about it.

    It is true though that as the state pays UC less and less per student, UC will generally respond less and less to the state’s demands. The comparisons to AIG make it sound like there has been a bailout, but of course, it’s the opposite.

    [i]Right now UC is insulated from public opinion.[/i]

    It is true that UC has a degree of protection from the state legislature, and by extension from public opinion. Leland Yee is a great example of how that protection is useful. So are the comparisons to AIG. The state budget is what looks like AIG, it’s the entity that going broke, not UC.

    After all, CSU doesn’t get off the hook for paying its executives less or for this extra “accountability” to the legislature. No, CSU still gets blasted for executive compensation. You get it in the head for catering to the irrational. If they “jump through that hoop” and you jump through the hoop, the response is often, “Why didn’t you jump through that hoop as we demanded?”

  2. Citizen Q

    I must be missing something Greg, it seems that the only people not taking cuts here are executives. Please explain how they are in fact taking cuts?

  3. Greg Kuperberg

    [i]I must be missing something Greg, it seems that the only people not taking cuts here are executives. Please explain how they are in fact taking cuts?[/i]

    The truth is plain. All UC executives are subject to the same furlough formula as faculty and staff. They are all taking a cut of 10%. A fraction of executives are getting raises and promotions on top of their furlough cuts, which is the same as faculty and staff. As I said, I am still eligible for promotion, but my furlough will stay. It’s the same for management.

    In fact, in any given year about 1/3 of UC faculty go up for a small merit/seniority promotion called a “step”. If Nanette Asimov of the San Francisco Chronicle only found 25 executives who are getting raises, then that is a much smaller fraction than faculty.

    I agree that if you only read Asimov’s piece and similar material, it may “seem” that executives aren’t taking cuts. Well, perceptions don’t have to be true.

  4. Huh?

    For UC to use the same logic as the cities in CA is the very thing resulting in the huge compensation problem in the nation. The “keep up with the Jones” mentality is what is causing many cities to go belly up. The UC system is not immune to this phenomenon. It may go broke trying to keep its salaries in line with other colleges/universities. In point of fact, if the UC system is still “underpaying” its top execs as Yudoff/Regents claim, clearly the Yudoff himself/Regents themselves don’t believe the garbage about “keep up with the Jones” as sound fiscal policy.

    It is also a question of fairness. Yudoff talked about “shared sacrifice”. Where is the sharing, when 2 dozen top execs get salary raises, while everyone else at UC takes furloughs, cuts or layoffs and student fees are increased? And these top execs already make $250,000 or more, so they are hardly suffering economically as someone who is making $40,000.

    I want oversight – just not legislative oversight. I hope that is the end result of Yudoff and the Regents’s arrogance. Voter oversight would be great.

  5. Where Do I Begin?

    “They are reducing the number teaching days…layoffs are layoffs and furloughs are furloughs. “

    So you agree that UC is effectively cutting the pay of professors and staff, including janitors who make $20,000 a year or less.

    “There will be promotions. I am getting a furlough, but I can still get promoted to the next step and get a modest raise;”

    Who says you WILL be getting a promotion? Just because you have the ability to be promoted to the next step does not mean you will get a step increase in the middle of a severe economic downturn, no? Is it guaranteed? If I were you, I wouldn’t necessarily count on it. And what good does a step increase do you, if you are laid off?

    “Faculty and executives are routinely hired away by other universities. UC is doing what it can not to lose its best people.”

    In this economic climate, what university/college is going to hire anyone right now? From what I can tell, most univerisities/colleges have instituted a hiring freeze. Just because you hire someone for more money doesn’t necessarily make them more qualified. Look at Supt. David Murphy of the DJUSD, who made more than the current Supt. James Hammond. Need I day more?

    “It is true though that as the state pays UC less and less per student, UC will generally respond less and less to the state’s demands.”

    Unless the state decides to put restrictions on the UC Bd of Regents, with some oversight regulation. UC ignores the current rumblings at its peril…

    “All UC executives are subject to the same furlough formula as faculty and staff. They are all taking a cut of 10%.”

    And having it given right back with bonuses, pay raises and the like. Additionally, top execs can far more afford paycuts than lower paid workers. 4% off of $40,000 is a significantly bigger financial hit than 10% off of $500,000.

    My question to you is where is your sense of fairness?

  6. Ryan Kelly

    Staff have not gotten a promotion or step increase in many years. Staff received a meager 4% raise in pay a couple of years ago, but that is being taken away and more this year. Staff are being asked to take furloughs and increase productivity. The only way staff can increase their pay is to job hop within the University system. Raises for increased productivity or expertise within a job are non-existent.

    Greg’s explanations truly demonstrate how arrogant and out of touch some faculty are at UCD when it comes to staff working conditions.

  7. David M. Greenwald

    Throw out some more food for thought, the executives are we have to pay to keep good people, but what about paying our Professors? Well Texas Op-Ed talking about raiding UC talent.

    LINK ([url]http://www.statesman.com/opinion/content/editorial/stories/2009/08/12/0812barachas_edit.html[/url])

    [quote]This is a tragedy for California. Especially if Texas seizes the remarkable opportunity it presents.

    Why? Because this crisis will hollow out the University of California’s most important asset: its world-class talent.

    California now can’t compete in the global market for the best faculty. The University of California at Berkeley — perhaps the greatest public university in the world — usually hires 100 faculty members each year. This year, it hopes to hire 10. The University of California at San Diego — a bioscience powerhouse — will hire no new faculty. The University of California at San Francisco — a top-five medical school — will reduce its faculty by almost 15 percent. [/quote]

    I’m just of the mindset that I’d rather get world class talented scholars than admins and execs. But that’s just me.

  8. Greg Kuperberg

    [i]So you agree that UC is effectively cutting the pay of professors and staff, including janitors who make $20,000 a year or less.[/i]

    I agree that they’re cutting my pay and that of non-unionized staff. I don’t know that the janitors are getting pay cuts, because that is subject to union negotiations. Maybe they won’t see any pay cuts or furloughs; I have no opinion on that. Obviously there is some kind of change if they are only cleaning my office once a week. As far as I know it doesn’t need to be cleaned twice a week anyway, so again I have no opinion on that.

    [i]Who says you WILL be getting a promotion?[/i]

    I’m really not sure why you feel that you know more about my promotion schedule than I do. Especially if you’re anonymous. I’m not trying to out you or anything, you have the right to say what you want, but I don’t know why you’re saying it because it makes no sense. Each UC department votes on all merits for its faculty. A lot of people will be up for these merits this year and usually the department gets what it votes for. Why would the dean have us do all of these votes if the merits are all cancelled?

    [i]In this economic climate, what university/college is going to hire anyone right now?[/i]

    I just checked national listings for my job, research math professor, and the market is moving this year. It could be smaller than last year, but sure, there are openings. These search committees would love to poach UC faculty. Why would it be different for deans, provosts, and chancellors? There will be retirements and I’m sure that other states would want to poach UC executives — at least those that are any good.

    [i]And having it given right back with bonuses, pay raises and the like.[/i]

    They are all getting furloughs, but Nanette Asimov only found 25 that are getting anything back in the form of raises. This is 25 out of hundreds of people.

    [i]My question to you is where is your sense of fairness?[/i]

    I am all in favor of fairness. Since I’m a math professor, I like to refine my sense of fairness with logic. There is an attitude in certain parts that fairness is more important than logic. To me, that’s like deciding that gas pedals are more important than steering wheels.

    [i]Greg’s explanations truly demonstrate how arrogant and out of touch some faculty are at UCD when it comes to staff working conditions.[/i]

    I really don’t think that I deserve that interpretation of my views. I know that staff have to job hop in UC in order to get promoted. I have never liked it and I am completely on the staff’s side on this. Whenever my department can, it tries to create internal job hopping, because job hopping between departments is disruptive for operations. But still, there is a lot of staff job hopping as the way to get promoted. Furloughs do not mean that there are no promotions.

    I hope you understand that very little of what I have to say has been self-centered. I’m not arguing that I’m the big victim. I have no interest in becoming a dean or a provost in the forseeable future, and no chance either.

  9. earoberts

    “These search committees would love to poach UC faculty. Why would it be different for deans, provosts, and chancellors?”

    At the fat salaries they are demanding, I don’t think there will be a big rush. For instance, what university system would want to hire Yudoff away from UC at his fat salary in this abysmal economy?

  10. Greg Kuperberg

    [i]I’m just of the mindset that I’d rather get world class talented scholars than admins and execs. But that’s just me.[/i]

    David, I’m also all for world-class scholars. In fact, good colleagues is the number one reason that I’m here.

    The part that’s “just you” is that it isn’t good enough to pay a little below the median for a chancellor, we should only pay for half of a chancellor. There are some faculty members who see it the way you do. Many faculty however, I would hope a majority although I don’t really know, would rather have a whole chancellor than just half of one.

    It’s not that we are filled with admiration for chancellors, on the contrary we don’t really trust them. But attacking them just because they are well-paid works against the faculty and the students. It would be dangerous to tell your cardiologist, “you’re a bad doctor because you make eight times as much as I do.” Even if you don’t like your cardiologist very much, it would still be a dumb thing to say. It’s not a good way to hire a chancellor either.

  11. earoberts

    “They are all getting furloughs, but Nanette Asimov only found 25 that are getting anything back in the form of raises. This is 25 out of hundreds of people.”

    And doesn’t that bother you, from a fairness perspective? Only the top 25 fat cats are getting raises, while everyone else lower on the totem pole has to join in the “shared sacrifice”. Well don’t be surprised if that arrogance results in greater gov’t regulation. UC is a state institution after all.

  12. David M. Greenwald

    Greg: I’ve been around academia all my life, my father was in fact a math professor, I went through the rigors of a PhD program, just not convinced that we need to pay admins, chancellors, and the like what we are, especially at a time when we are laying people off, cutting salaries, and raising fee hikes.

  13. Greg Kuperberg

    [i]At the fat salaries they are demanding, I don’t think there will be a big rush. For instance, what university system would want to hire Yudoff away from UC at his fat salary in this abysmal economy?[/i]

    I have said several times that Katehi is paid below the median for a chancellor/president of a public research university. If you don’t want to believe that, well, you’re just not going to. But it’s true.

    If you actually want an answer to your question, you should read this chart ([url]http://www.suny.edu/communications/releases/CompensationComparison.pdf[/url]). If Ohio State hired Yudof with a 10% raise, they would still be paying him 2/3 of what they pay their president right now. They would save $400K a year, and Yudof would oversee a smaller system than he does now.

    More than 50 public research universities could hire Katehi with a raise over her UC Davis salary, and still save money compared to what they pay now. And private research universities pay even more.

  14. Citizen Q

    “I have said several times that Katehi is paid below the median for a chancellor/president of a public research university.”

    I doubt that’s the issue–questioning the fact you threw out. I think the real issue whether we ought to spend that kind of money, median price notwithstanding.

  15. Greg Kuperberg

    [i]And doesn’t that bother you, from a fairness perspective? Only the top 25 fat cats are getting raises…[/i]

    If it were true, it would bother me, but it’s not true. No one said that it was “the top 25 fat cats”. Asimov found 25 managers who got raises. She never referred to them as the “top”, because they aren’t at the top. They are 25 from the middle of the pack of the executives.

    The top two salaries at UC are those Jeff Tedford, the Cal football coach, and Ben Howland, the UCLA basketball coach. Yes it does both me, from a fairness perspective and for other reasons, that they are each guaranteed $1.9 million in compensation and on top of that get bonuses. They are paid five times what Katehi is paid, and yes that is a problem.

    [i]I went through the rigors of a PhD program, just not convinced that we need to pay admins, chancellors, and the like what we are[/i]

    If you want to believe that UC Davis should only pay for half of a chancellor, then that’s what you’re going to believe. I’m convinced that paying for only half of a chancellor would risks even more layoffs and lower salaries, and certainly fewer world-class scholars. But we can agree to disagree.

  16. Anonymous for good reason

    Trends with private sector executive and other employee compensation have been to put more “at risk” in the form of performance bonus. Personally, my compensation will be significantly lower (maybe 50% after the audited financial reports are complete) this year because the business I run is down due to the economy and is causing me to miss my financial performance targets (targets that were set before any of us could estimate the size of the recession). Thankfully I have not had to lay off anyone yet. Part of the reason I may not be required to do layoffs or furloughs is that my employees also have part of their compensation tied to a performance bonus that factors company performance. There are other non-financial performance factors for employees and fewer of these for the managers and none for sales people (their comp is 100% tied to the dollar sales volume they bring in). The combined nut provides a relief valve for uncontrollable ups and downs. Smart companies have been doing this for decades.

    One big problem I have with all this talk about mark-to-market for UC execs and employees is the lack of at-risk components to their compensation. College education costs have skyrocketed without equal improvements to the level of quality. I’m sure some highly-compensated execs would argue this point standing in front of one of the new UC shrine buildings on campus, but I do not find any measurable data that supports the idea that college education quality has improved 8-10% a year like the cost of education has.

    How about tying 30-40% of UC Chancellors’ and other execs’ comp to the following performance goals:

    – Reduce tuition costs by 5% each year for the next 4 years.
    – Goals for student satisfaction for academic and administrative services.
    – Target goal for the percentage of graduates seeking employment that land a job in their discipline.
    – Goals for employee satisfaction.
    – Other achievements?

    One more thing… all the saber rattling about people leaving for higher paying jobs is hogwash. It is a very well known fact that compensation is down the list for reasons that employees (including execs) leave a job. Satisfaction with the working condition, the level of responsibility and authority, leadership quality, the culture of the organization and the local community are all much stronger reason for someone to leave or stay. In fact, companies can discount compensation dollars with a well-managed company located in a desirable location. Even so, turnover numbers of 12-15% are optimal for organizations to inflow fresh blood and ideas. The correct response to someone claiming people will leave if they are not paid is to first check the turnover rate. If it is higher than 15% then fire the management and hire better leaders. If it is less than don’t worry about it.

  17. Greg Kuperberg

    [i]I doubt that’s the issue–questioning the fact you threw out. I think the real issue whether we ought to spend that kind of money, median price notwithstanding.[/i]

    What that commenter suggested was that UC executives are getting paid so much that other universities wouldn’t care to match their salaries. If Katehi is getting paid less than the median, that’s preposterous: Of course a lot of universities could very easily match her salary.

    But I understand what you’re saying. When people are angry out of sentiment, the so-called “real issue” can keep changing. I can tell you the real “real issue”. The real issue is to attack the messenger. If leaders bring bad news such as furloughs or layoffs, people feel a bit better if the leaders kiss their feet and get cut down to size themselves. Anyone who isn’t a leader can get paid any amount of money; it won’t create the same resentment.

    Consider for instance former UCLA coach Karl Dorrell. Apparently Dorrell did a really bad job and got fired in 2007. The next year he was paid $650,000 according to the Sacramento Bee. If Dorrell deserves to be paid $650,000 to do nothing, surely Katehi deserves two-thirds as much to do her job!

    Has Leland Yee ever complained about the compensation to terminated coach Karl Dorrell? No. I don’t know whether Dorrell is just later down on his list of targets, or whether he doesn’t care. I suspect that he doesn’t care. Yee likes to attack leaders, not the people with the highest salaries.

    [i]College education costs have skyrocketed without equal improvements to the level of quality.[/i]

    Maybe college education costs have “skyrocketed” in general, but UC actually gets less per student from fees plus the state grant than it did 10 years ago.

    [i]It is a very well known fact that compensation is down the list for reasons that employees (including execs) leave a job.[/i]

    It’s interesting that after people complain so bitterly about how greedy executives are, and about how bad the furloughs and student fees are, someone can claim that actually employees and executives don’t care all that much about money.

    I understand that there are other factors in job satisfaction. If not for that, I would quit right away and go to Silicon Valley. But what we are talking about is doing exactly the same job at a different university. Do you think that we can pay a chancellor half of the market rate because Californians are just darling people compared to Pennsylvanians or Texans or Oregonians?

  18. My View

    “I understand that there are other factors in job satisfaction. If not for that, I would quit right away and go to Silicon Valley. But what we are talking about is doing exactly the same job at a different university. Do you think that we can pay a chancellor half of the market rate because Californians are just darling people compared to Pennsylvanians or Texans or Oregonians?”

    No, but I think we can get perfectly qualified people to run UCD for far less than we are paying. You seem to think that more money automatically gets you a more qualified candidate. I would argue that just isn’t true, and point to the example of DJUSD Supt David Murphy vs Supt James Hammond. Just because you pay more for something does not necessarily mean it is somehow “better”.

    Furthermore, if Katehi could earn so much more elsewhere, then why did she choose to come here for less money? I suspect she knew she was in big trouble at UI, wanted to get out fast from under the scandal that was brewing, and quickly came to a university that wouldn’t look too closely at her ethics. In support of my contention is the loser from UC that left under a cloud to serve at U of Hawaii. Was it ever thus.

  19. Greg Kuperberg

    [i]You seem to think that more money automatically gets you a more qualified candidate.[/i]

    That’s not what I think. I think that you are more likely to get a qualified candidate if see the national job market, instead of promoting a local person with an ostrich search. Of course if you do resort to the national job market, you have to pay close to the market rate. And Murphy vs Hammond is the perfect example of that. Murphy was the local hero, Hammond was hired from outside, and actually they are both paid well above the median for school superintendents.

    What you’re saying with the example of Hammond vs Murphy is this: “I bought a Mercedes for $40,000 and it was a lemon. Then I bought a Camry for $30,000 and it was a great car. That proves that money doesn’t buy quality. So I don’t care that the median price of a new house in Davis is $400,000. I plan to offer $200,000 for a house in Davis because $400,000 is an outrageous figure.”

    I’ve never said that you make an executive better just by paying him more. Of course it’s not true. All I’m saying is that the median is the median, and you have to be realistic. Maybe you can drive a hard bargain and get a good candidate at 10% below the median. Far below that and you’re only buying half of a chancellor at best; at worst you’ll get an anti-chancellor.

    [i]Furthermore, if Katehi could earn so much more elsewhere, then why did she choose to come here for less money?[/i]

    Some of the people who are playing up Katehi as the greatest thing since sliced bread are making a mistake. Yes, she has a great record as an academic, but she hasn’t proven herself as a chancellor. She is a provost, and she has only been that for a few years. She is taking a raise to get here, and Davis is a nicer place to live than Urbana-Champaign. If she does a great job here, then yeah, in few years we will either need to give her a raise or she might well leave. We don’t want the chancellor’s office to be a revolving door for good people and a permanent home for mediocrities. Okay, that might well be useful to Lakeesha Harrison, but it wouldn’t be good for faculty or students.

    After all, look what happened with John Meyer. When he proved himself as city manager, he was bought out. The next city manager was fired. Is this the best way for the city to save money?

    Finally, if Katehi knew that she was in “big trouble” at UIUC, then she’s the only one who knows it. The Illinois Admissions Review Commission wrote a long report on everything that has gone wrong with their admissions in the past several years, but they didn’t even mention her once. If she was one of the guilty, then it’s amazing how many people fell on their swords for her.

  20. Anonymous for good reason

    There are two types of execs: one is good at playing defense, the other moves the ball down the field. Most public sector execs excel at playing defense and make little progress with transformative change. Yet, they demand the same pay as private-sector execs that are taking constant compensation and career risks moving and shaking their business just to stay in the game.

    Today, the college business game is all about satiating senior employee egos and providing them a sense of prestige within their peer group. It used to be a business focused on providing high-quality, affordable education. Get back to that and make big coin… that would be fine with me. Until then, soft-money compensated, risk-averse, defense-playing UC execs and other senior-level employees should accept lower pay.

    “After all, look what happened with John Meyer. When he proved himself as city manager, he was bought out. The next city manager was fired. Is this the best way for the city to save money?”

    John Meyer was hired away from the city by the university. You use this example to make a case that the city maybe wasn’t paying him enough. I see it as more of the same evidence that UCD (and colleges in general) ratchet up pay scales to irrational and unsustainable levels to attract talent, but then have little to show for it in the long run except bigger operating budgets and a few more shrines to satiate egos and maintain prestige.

  21. Greg Kuperberg

    [i]Yet, they demand the same pay as private-sector execs[/i]

    That’s just not true. University executives get paid much, much less than executives at for-profit companies. For instance the UCSF chancellor Susan Desmond-Hellman was hired from Genentech. When she was at Genetech, she had a base salary of $725,000, plus $1.3 million in bonuses, plus stock options on top of that. Now that she runs UCSF, she makes $450,000 and no bonuses. She took a 75% pay cut to go to academia from private industry.

    I don’t know where you got the idea that university executives “demand” the same pay as private-sector counterparts. Unionized janitors and similar get paid more than in the private sector. Faculty and executives get paid less at universities.

    [i]It used to be a business focused on providing high-quality, affordable education.[/i]

    I can’t tell whether this is meant as encouragement or if you just don’t like the University of California. But again, people are demanding an education that the state isn’t paying for, and fees haven’t made up for the cuts. Look at the chart at the bottom here ([url]http://www.universityofcalifornia.edu/budget/?page_id=126[/url]). Per-student funding in constant dollars, even including student fees, fell substantially even before the huge cut this year.

    [i]I see it as more of the same evidence that UCD (and colleges in general) ratchet up pay scales to irrational and unsustainable levels to attract talent, but then have little to show for it in the long run[/i]

    From what I’ve heard, John Meyer is doing a good job for UC Davis. I was told that he has streamlined middle management and saved the campus money. And since he is the development manager for the campus, it’s his job to build “shrines”. What other way could he possibly deliver? We wouldn’t be able to teach classes very well in Quonset huts, you know.

    Also, UC Davis pays Meyer $200,000 according to the Sacramento Bee database. For someone who oversees more than $100 million in annual construction spending, I’m sure that once again that is vastly less than the private sector.

  22. Against Keeping Up With The Jones

    “For instance the UCSF chancellor Susan Desmond-Hellman was hired from Genentech. When she was at Genetech, she had a base salary of $725,000, plus $1.3 million in bonuses, plus stock options on top of that. Now that she runs UCSF, she makes $450,000 and no bonuses. She took a 75% pay cut to go to academia from private industry.”

    I wonder why Desmond-Hellman left Genentech for such a low paying job? Perhaps money isn’t everything?

    “What you’re saying with the example of Hammond vs Murphy is this: “I bought a Mercedes for $40,000 and it was a lemon. Then I bought a Camry for $30,000 and it was a great car. That proves that money doesn’t buy quality. So I don’t care that the median price of a new house in Davis is $400,000. I plan to offer $200,000 for a house in Davis because $400,000 is an outrageous figure.””

    No, I think you are missing the point. If you can’t afford to pay for a Mercedes, then you don’t buy it, no matter how much you would like to have it. It is called living within your means. And interestingly enough, the Camry will get you from Point A to Point B just as well as the Mercedes, only in less grandiose style. Catch my drift? More expensive items don’t necessarily provide better ESSENTIAL QUALITY.

  23. Frankly

    Greg:

    From the information I can find, there were 21,916 UCD students enrolled in the 1998-99 school year. Ten years later it is 26,965 which is about 19% more.

    In terms of revenue, see the following chart:
    [img]c:TempUCD Revenue.jpg[/img]

    If shows total UCD revenue to have increased by 88% in this span, while the CPI was up 27%. The largest single revenue increase has been student fees… up 138%

    Finding historical spending information is much more difficult. I assume this is a strategic move by the university since the absence of past budget facts and figures stands in start contrast to the plethora of content demonstrating the history of declining state contributions.

    However, the overall UCD budget has increased significantly from 1998-99 to the current school year. During this time, the percent of UCD employee expense went from around 65% of a $1.5 billion operating budget to about 78% of a $2.5 billion budget. Crunch the numbers and you will note that this is about a 100% increase in employee expense over the last 10 years.

    So, UCD revenues increase 88%, UCD employee costs increase 100% and UCD student fees increase 138%… when we only have 19% more students.

    Now, although UCD appears to be at the high end of it, the pattern is similar for many colleges across the nation. I think there are two reasons for it: one – the more recent trends for colleges to increase their curricula, degree programs, PR outreach and infrastructure as a way to attract more students and increase the school’s profile; two – the tech-stock bubble and the latest housing bubble which put upwards pressure on professional wages thus causing colleges to respond in kind.

    The problem with wage pressure in the public sector, or when unionized, is that the contraction mechanism is either non-existent (like the auto industry) or much less fluid and dynamic. In my industry, top sales people were making $500k/year 2 years ago. Now they are making half that if they are lucky enough to still have a job. This change happened within the span of a few months. The same is true across many industries… wages have fallen and will take months if not years to recover. Despite the press reports of high CEO compensation, and a few real success cases, most execs are making much less today. Many of these high wages will never recover to similar levels because they were irrationally high because of general financial over-exuberance. Haven’t we learned our lessons on this?

    Without market forces automatically adjusting wages, and because of lower payments from the states, the public colleges are going to have to face the reality of administratively reducing employee costs. This means a lowering of compensation expectations at the top, and then through the ranks… without impacting service quality. Sounds difficult doesn’t it? Most surviving and capable companies have already done it. I agree with the previous anonymous person that changing the UC compensation program to make a percent based on performance goals would be the smart approach.

  24. Greg Kuperberg

    Jeff, I don’t know why your style is to separately cite ratios such as student growth and inflation, when the logical thing to do is to multiply them together. You make the impression that you have one kind of thinking cap for your job and a different kind of thinking cap for politics. (In fact, that is true of a lot of people.)

    I’m not sure where your chart went; it doesn’t display on the page. You’re right that it isn’t so easy to find historical spending, but it is possible. Here is one set of links to information.

    Campus Financial Schedules 2007-08 ([url]http://www.universityofcalifornia.edu/finreports/index.php?file=/07-08/finschd.html[/url])
    Campus Financial Schedules 1997-98 ([url]http://www.universityofcalifornia.edu/finreports/index.php?file=/archive/1998/finsch/welcome.html[/url])
    UC Davis Enrollment Reports ([url]http://budget.ucdavis.edu/data-reports/enrollment-reports[/url])
    California Consumer Price Index ([url]http://www.dir.ca.gov/dlsr/CAPriceIndex.htm[/url])

    So if you want to compare UC Davis in 2007-08 to UC Davis in 1997-98, here is a quick rundown according to the above:

    2007-08 Budget: $2.7 billion
    State grant: $489 million
    Tuition+fees: $312 million
    Enrollment: 30,685
    California inflation factor: 1.37

    1997-98 Budget: $1.492 billion
    State grant: $328 million
    Tuition+fees: $130 million
    Enrollment: 24,554

    So if you put all of that together, the total UC Davis budget grew by 5.7% per student, in constant dollars, from 1997 to 2007. But this includes a lot of non-student activities such as the hospital and the Mondavi Center. The total state grant plus fees grew by 2.1% per student, in constant dollars, from 1997 to 2007. This is not growth per year, this is total change over the whole decade.

    Now, this is not the same as the shrinkage reported at the UCOP web site, but it looks like they calculated it differently, by using only the “educational” part of the state grant and student fees. I’m not sure how that is defined, but they may well have in mind valid distinctions such as excluding student housing.

    The idea that salaries have somehow skyrocketed because there are no market forces is a crock. A 2% increase over the course of a decade isn’t any kind of rocket, and that comes before the huge cut this year. Moreover, the lion’s share of the UC Davis payroll is not unionized. The salaries of faculty and executives certainly are set by market forces between universities and between states. From grad school to postdocs to tenure-track, most faculty have been all over the country. UC Davis is Katehi’s third university as an executive. The bottom line is that you can’t wish away Linda Katehi’s salary or faculty salaries just like you can’t wish away the price of a house in Davis. It [b]is[/b] market forces.

  25. Frankly

    “The idea that salaries have somehow skyrocketed because there are no market forces is a crock.”

    Greg, I might need to buy you lunch and continue this conversation =)..

    Using your numbers, I’m still having a very difficult time reconciling a 80% increase in operating budget and a 100% increase in employee-related expenses with a 20% increase in student population even when factoring inflation. I don’t have access to specific pay increase data per employee/role. And I cannot find reports on the number of UCD employees in 1998 and 2008.

    Are you considering the increased costs in benefits into a “2% increase over the course of a decade”? Despite the lack of pay increases you cite, total employee costs HAVE skyrocketed. So, either UCD managers were guilty of empire building (hiring more employees than they really needed), or the cost of benefits have drastically increased, or some employees/roles have had a big jump in pay… or maybe it is a combination of one or more of these things.

    I don’t work there, and so my thoughts are speculative at best; however I can’t see how anyone can make a case for higher compensation under these circumstances regardless of where they think they are relative to their peer group. The drop in government soft money is an irrelevant excuse just as would be the decrease in other types of revenue. It just means the business model needs to change. Most of my experience is in the private sector where any exec letting this happen on his/her watch would get the axe; and any new exec leadership hired would be tasked to clean it up. A 5% reduction of $2.5 billion is $125 million. You could divvy up half of that in performance bonuses to a smaller workforce and still lower student fees. A smaller workforce could be paid higher wages, but then they would have to work more efficiently and possibly do more work.

    I have heard that professors at UCD have been spending less and less time in the classrooms over the years; supposedly leaving this work to teaching assistants and graduate students. This being the case would explain some increase in employee expense relative to the number of students.

    These are just an outsider’s slightly informed views.

  26. Greg Kuperberg

    [i]Using your numbers, I’m still having a very difficult time reconciling a 80% increase in operating budget and a 100% increase in employee-related expenses with a 20% increase in student population even when factoring inflation[/i]ase per

    It’s just a matter of multiplying the numbers together instead of rounding and rough . I am not sure what “employee-related” expenses means, but let’s take the 80% increase in the operating budget:

    1.81 increase in nominal costs
    divided by 1.37 California inflation
    divided by 1.25 student expansion
    = 1.057 real increase per student
    = 5.7% over a decade

    Again, this is the wrong ratio because core academics is less than half of the operating budget of UC Davis. The hospital has grown faster than the campus, the Mondavi Center is entirely new, etc.

    Even if it were the right ratio, you can’t convince me that a 5.7% increase over 10 years can be called “skyrocketing”.

    [i]I have heard that professors at UCD have been spending less and less time in the classrooms over the years[/i]

    Well there has been some shift in that direction, because the faculty have moved up somewhat in research caliber. Getting a tenure-track position on the basis of research is extremely difficult; it’s a bit like making it into the NFL. If you hire people like that, and if they then get a lot of research funding, you can’t expect them to also spend all of their time in the classroom. I certainly don’t think that faculty should be snobs who don’t talk to undergraduates; it’s not like that. But in order to really be competitive at research, some of the teaching will shift to graduate students.

    That’s a good example of how your formulas are an oversimplification. If someone gets a $10 million grant to design a modern telescope, your formula counts that towards the cost of the university. And then you can say, geez, that guy isn’t teaching much. What is really going is that if the university is paid to do research, it will do research; if it is paid to house and counsel students, it will do that; and if it paid to teach, it will teach. According to UCOP, the university has been paid less and less to teach since the 1990s, and more and more to do other things.

  27. earoberts

    Greg, if you can’t afford to buy a Cadillac, you settle for a Chevy Impala. It will still get you from Point A to Point B, just not in as grand a style. But it will still get you there at the same speed and just as safely. Just because you paid considerably more for the Cadillac, does not mean the engine underneath was all that different. Most of the difference was in the outside trappings, which are nonessential. Catch my drift, as it relates to UC exec salaries?

  28. Frankly

    I must be a masochist to publicly debate a math professor on statistics…

    “I am not sure what “employee-related” expenses means”

    You will find that on the UCD budget reports. It is a combination of all wage and benefit costs. I’m not sure if other more obscure costs like employee training are included.

    I think you understate the the UC employment cost inflation factor by using 80% and not 100%. However, for the sake of this debate, let’s assume your 5.7% figure.

    5.7% annual employee cost inflation is significant. The UC’s total compensation over the last decade has exceeded the average US total non-farm compensation inflation by at least 2%. Couple that fact with the poor economy, and you should understand why many of us cannot support any UC wage increases without some commensurate return on this investment.

    The US Bureau of Labor Statistics reports 2009 total compensation for the private-sector teachers is $52.35 per hour, while for government employed teachers it is $54.37. This also compares to a $48.66 hourly comp for non-education civilian “Management, professional and related occupations”. At a macro level, these stats seem to indicate that public-sector employees in the education profession are doing very well despite their arguments to the contrary.

    A more bothersome statistic for me is the divide between all civilian (non-farm) total comp ($29.39 / hour) and state and local government comp ($39.51 / hour). Now this difference has remained relatively consistent over the last 20 years (government comp gaining about 1.2% on the civilian comp); however, over the last six months the private sector has eliminated about 1% of its workforce every month. However state and local government workforce during this time has actually increased a few 10th of percent. In fact, I cannot find any historical evidence that state and local government employee headcount has ever shrunk. We also need to factor the growing trend for government to supplement their workforce with outside contractors.

    Certainly these are macro national statistics and cannot be directly correlated with the situation at UCD; however, they are illustrative of my larger issue of relatively high government employee compensation and lower efficiency when compared to the private sector… and I have my own perspective that UCD’s business model is similarly inefficient. Tax-payers and students cannot continue to fund pay increases. If they are necessary, then UCD leadership needs to implement efficiencies (do more with less) and then increase compensation for a smaller workforce that contributes to making this happen.

  29. Greg Kuperberg

    [i]I must be a masochist to publicly debate a math professor on statistics…[/i]

    You shouldn’t think of it as either masochism or a debate. If we both interpret our homework correctly, we will get the same answer. And all of this arithmetic is a lot simpler than your job or my job.

    [i]5.7% annual employee cost inflation is significant.[/i]

    Yeah it is, but I didn’t say annual. I said that the UC Davis total budget increased by 5.7% per student in constant dollars, cumulative over 10 years. If you would like to annualize that, it was 0.55% per year, i.e., half of a percent.

    Half of a percent per year is not significant. And again, this is charting everything that UC Davis does, including things that have nothing to do with students. Some student-related expenses, such as housing, aren’t strictly instructional either. According to UCOP, the net growth rate in instructional funding per student in constant dollars, including both state money and student fees, has been negative in the past decade. I believe them.

    [i]however, over the last six months the private sector has eliminated about 1% of its workforce every month. However state and local government workforce during this time has actually increased a few 10th of percent.[/i]

    All that reflects is that government employment is more stable than the private sector. In boom times, the private sector races ahead. In bust times, the private sector shrink back, but the government walks forward at a steady rate. And that’s as it should be.

  30. Frankly

    “Yeah it is, but I didn’t say annual. I said that the UC Davis total budget increased by 5.7% per student in constant dollars, cumulative over 10 years. If you would like to annualize that, it was 0.55% per year, i.e., half of a percent.”

    I did miss that little difference. If I had, I would have commented that I don’t accept the student increase factor in your calculation. This would mean absolutely no economies of scale for incorporating student growth. Also, employee costs as a percent of the entire operating budget has increased, so using the total budget increase factor I think understates comp inflation.

    I did find a report on Academic Salary Scales. A professor grade-V made $96,700 in 1997 and $119,800 in 2007. This is a 23.9% increase over 10 years. This equals a 2.17% annual increase (assuming my HP calc and I agree this late at night). This does not include benefits. I think UCD’s benefit package is on the strong side and I would expect some significant inflation for PERS and health care costs.

    However, let’s assume that UCD executive and/or academic employees are under compensated. There are certainly plenty of UC reports making this case. What should be done in your opinion? Assuming you support upward comp adjustments, how should these be funded?

  31. Greg Kuperberg

    [i]This would mean absolutely no economies of scale for incorporating student growth.[/i]

    You can’t expect a whole lot more economy of scale if you expand from 24,554 students to 30,685 students. Sure, if a university expands from 1,000 students to 10,000 students, certain things become cheaper per student. But if you go from 24,000 to 30,000, what changes? Maybe you could make some argument that educating 30,000 students should be 23% more work rather than 25% more work. Maybe.

    Anyway, as I keep saying, discussing economy of scale is incongruous when you divide non-classroom activities, such as heart surgery at UCDMC in Sacramento, by the number of students.

    [i]I did find a report on Academic Salary Scales. A professor grade-V made $96,700 in 1997 and $119,800 in 2007.[/i]

    Yes, the historical academic salary scales are posted here ([url]http://www.ucop.edu/acadadv/acadpers/historic.html[/url]). The relevant scale that applies to most faculty is Table 1, professor series academic year. Professor Step V was $83,300 in 1997, while Professor Step V (including the so-called “market adjustment”) was $103,300 in 2007. This is a nominal 24% increase in those 10 years. But remember, there was 37% inflation in California in those 10 years. In constant dollars, the Professor Step V salary is down by 9.5% from 10 years ago.

    We are reminded every time we do a faculty search that the academic salary scale is more and more out of step with the job market. If we took the scale at face value, we would find ourselves asking job candidates to pass up salary for the privilege of living and working in Davis, instead of Ann Arbor or Austin or wherever. The solution has been to use off-scale adjustments, and to move up the salary scale faster. All of this is before the furloughs this year.

    Yes, we can also argue that the benefits are competitive — or at least that they were before the alarm bells this year.

    [i]What should be done in your opinion?[/i]

    It’s really not clear how UC should handle the madhouse in Sacramento. To some extent every state government is a madhouse, but because of the state proposition system, California is the worst.

    I don’t know that there is a solution. A better state compact is politically unacceptable. Raising fees even more is politically unacceptable — and they would have to give back some of it with increased financial aid. Closing UC Merced is politically unacceptable — and many of their problems are a sunk cost anyway.

    Maybe the most politically acceptable step is to shrink enrollment to fit what the state pays for. After all, federal courts are trying to force the state to do the same thing with prisons.

    It is true that there are ways that UC wastes money, just like all public and private bureaucracies waste money. Many faculty are hoping that they find the self-discipline, this year of all years, to end reorganize or eliminate certain marginally useful campus units. But it is wishful to expect UC to become the perfect bureaucracy just because money is short.

    One of life’s lessons is that not every problem has a solution. The unsentimental answer might be that California will simply get what it’s asking for, a multi-year exodus of talent from UC to other states.

  32. Frankly

    This is a nominal 24% increase in those 10 years. But remember, there was 37% inflation in California in those 10 years. In constant dollars, the Professor Step V salary is down by 9.5% from 10 years ago.

    Doesn’t the CPI include the cost of real estate? Looking forward I think the UC salaries would “catch up” a bit compared to the private sector just by staying the same.

    It is true that there are ways that UC wastes money, just like all public and private bureaucracies waste money. Many faculty are hoping that they find the self-discipline, this year of all years, to end reorganize or eliminate certain marginally useful campus units. But it is wishful to expect UC to become the perfect bureaucracy just because money is short.

    One of life’s lessons is that not every problem has a solution. The unsentimental answer might be that California will simply get what it’s asking for, a multi-year exodus of talent from UC to other states.

    I think there are solutions for every problem if we have the will, talent and work-ethic to make the necessary changes. Look at the complexity and mess faced by any incoming CEO of a troubled publically-traded multinational company. I think the UC challenge pales in comparison. Granted the political and academic-side pressures make business-side transformative change more difficult than most like-sized private companies, but I don’t accept the pessimistic view that things can’t improve without more money from the state.

    It is difficult to visualize this kind of work if you haven’t lived through it before. I have several times. Basically the organization has to reinvent itself… challenging every old assumption and embracing the “do more with less” creed. Current structures have to be destructed so that new more efficient structures can evolve. In the late 80s and early 90s there was “TQM” and “reengineering”, today there is “Six Sigma”, “ERP” and other similar best practices for achieving optimum organizational efficiencies.

    Today I think there is a plentiful supply of capable business leadership talent that would be attracted to Davis and the job at Katehi’s level of pay… especially if the regents would consider adding a goal-based performance bonus to the employment contract. Otherwise, maybe Katehi has the talent and drive to do this job. We will see.

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