BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: SB 217
AUTHOR: Yee and Romero
AMENDED: April 20, 2009
FISCAL COMM: Yes HEARING DATE: April 29, 2009
URGENCY: No CONSULTANT:Nancy Anton
SUBJECT : Higher Education: Executive Compensation.
SUMMARY
This bill prohibits the Board of Governors of the
California Community Colleges (BOG CCC) and the Trustees of
the California State University (CSU) from increasing the
monetary compensation or approving payment of a bonus for
any executive officer in any year in which the amount of
General Fund moneys appropriated to that segment is less
than or equal to the amount appropriated in the immediately
preceding fiscal year. The bill also requests the Regents
of the University of California (UC) to follow this
prohibition.
BACKGROUND
The University of California has 10 campuses, five medical
centers, more than 200,000 students, and over 100,000
employees. The California State University has 23
campuses, more than 400,000 students and over 50,000
employees. The Chancellor's Office of the California
Community Colleges oversees approximately 165 employees.
ANALYSIS
This bill:
1) Prohibits the CCC BOG and the CSU Trustees from
increasing the monetary compensation of or approving
payment of a monetary bonus to any executive officer
in any fiscal year in which the amount of state
General Fund moneys appropriated in the annual Budget
Act to that segment is equal to or less than the
amount appropriated in the immediately preceding
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fiscal year; the bill also requests the UC Regents to
comply with this prohibition.
2) Defines "executive officer" as including but not
limited:
a) For CCCs: The Chancellor of the California
Community Colleges, an executive vice chancellor,
a senior vice chancellor, the general counsel of
the colleges and individual campus president.
b) For CSU: The CSU Chancellor, a vice
chancellor or an executive vice chancellor of the
university, the general counsel of the
university, the trustees' secretary or a campus
president.
c) For UC: The UC president, a vice president,
the treasurer or assistant treasurer, the general
counsel, the regents' secretary and the
chancellor of an individual campus.
3) Defines "monetary compensation" as including but not
limited to a salary, a vehicle allowance and a housing
allowance.
4) Applies these compensation restrictions only to
executive officers entering into a new or renewing an
existing employment contract on or after January 1,
2010.
STAFF COMMENTS
1) Clarification needed . The bill links increases in
executive monetary compensation to levels of state
General Fund annual Budget Act appropriations,
however, it is not clear which appropriations are
intended to be used. There are numerous Budget items
which appropriate General Fund moneys to the various
higher education segments, including local assistance
and state operations. Some are discretionary, some
are not. Staff recommends that the bill be amended to
clarify which specific items are to be used or to
specify that all such items are to be added and it is
the cumulative total that is to be used.
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2) Are local community colleges to be included ?
Although the bill appears to address only the
compensation of selected employees of the state-level
Community College Chancellor's Office, page 2, line 19
appears to imply that these controls may be also
applied to local colleges. Staff recommends that this
be clarified.
3) Are "General Fund Appropriations" a reasonable
measure ? A General Fund appropriation from
year-to-year does not necessarily reflect the fiscal
health of the state or of a particularly higher
education segment and the change in such an
appropriation is an even less reliable measure. For
example:
a) Debt Service. General Fund (GF)
appropriations include the amounts needed to pay
for existing debt service obligations (e.g.
lease-revenue bonds). Bonds for such projects
may be sold at different times and, therefore,
for different rates. As a result, the amount of
General Fund appropriation needed to be for an
identical level of debt will likely differ
significantly. A bond sold at a much better rate
may result in significantly lower debt service
payments resulting in a lower General Fund
appropriation. Should such a "savings" to the GF
be cause to limit executive compensation?
b) Deferral. The state, generally for its own
fiscal needs, often defers millions of dollars of
General Fund (GF) moneys from one year to the
next. How should such deferrals be accounted for
in determining if a GF appropriation is more or
less than from one year to the next? Staff
recommends that this be addressed.
c) CCCs. The GF appropriation/s which the bill
proposes to control executive compensation for
the CCC Chancellor's Office appears to include
appropriations which go directly to local CCC
districts (appropriations which to a large part
are also controlled by Proposition 98). Is this
the author's intent? Staff recommends that this
be clarified.
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4) Index based on future legislative action . By
conditioning executive compensation to future general
fund appropriations, the bill is basically
conditioning this compensation on future legislative
actions. Is this tying future Legislature's hands?
5) Unintended consequences . By linking executive
compensation to General Fund appropriations, the bill
could result in some unintended consequences
including:
a) Non-aligned compensation. Because the bill
limits only increases in executive compensation,
the bill could have the effect of having lower
executive administrators and/or faculty
compensation (which is collectively bargained at
most CCCs and the CSU) begin to approach and
ultimately even exceed these executive's
compensation. Does this make sense?
b) Brain drain? If executive salaries are
unable to keep pace with those of comparable
institutions, is it reasonable to expect that
California will be able to attract and/or retain
the caliber of professionals desired to fill
these positions?
c) Irregular but larger salary increases? In
order to compensate for the unpredictability of
future salary increases or foregone raises in
prior years, will executives simply be "made
whole" in those years when compensation increases
are allowable? If so, what ultimately is this
bill accomplishing?
d) Reduced flexibility. Having an absolute
prohibition reduces the institutions flexibility
to make decisions that may be cost effective or
result in cost savings. For example, would
institutions be able to compensate individuals
for taking on additional duties? Would
institutions be able to eliminate or consolidate
positions and spread the duties among other staff
who would be compensated? Staff recommends that
this be discussed.
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6) Position or person . It is not clear is the
compensation limitations are to be applied to a
specific position or to the individual filling
specified positions. Staff recommends that this be
clarified.
7) How is Executive Compensation set now ? Although it is
currently the purview of the institutions to set the
compensation levels for executive personnel, such
levels typically reflect compensation levels paid at
comparable institutions nationwide (the average of
salaries at an established set of comparable
institutions, generally the same set of institutions
used to set faculty salaries).
An October 2004 report from the California Postsecondary
Education Commission (CPEC) titled "Executive
Compensation in California Public Higher Education,
2003-04", its' most recent survey of executive
compensation, found that Presidents of the State
University (CSU) lagged national comparators by 37.8%
while UC Chancellors earned 37.5% less than their
colleagues in other states.
A November 2008 annual salary and compensation survey of
college presidents conducted by the Chronicle of
Higher Education found, in part:
a) The median (half above/half below) salary
for presidents of public four-year colleges was
$427,000. All but one of the UC and CSU
presidents fell below the median.
b) Of the 184 public four-year institutions
with student enrollments of more than 10,000, 52
of the presidents had total compensation which
exceeded that of any UC or CSU president. Those
with the largest total compensation included:
University of Virginia ($797,048); University of
Michigan ($760,196); University of Colorado
($740,415); University of Florida ($731,811);
(Arizona State ($728,750); Georgia State
University ($727,487); Auburn University in
Alabama ($725,684); and Ohio State University
($1,346,225).
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8) What if ? If this bill had been in effect in prior
years, staff found:
a) UC. Would have had no executive raises in
2002-03, 2003-04, 2004-05, 2008-09 and 2009-10.
b) CSU. Would have had no executive raises in
2003-04, 2-0-4-05, 2008-09 and 2009-10.
c) CCC Chancellor: Would have had no executive
raises in 2003-04 and 2008-09 (reflects local GF
appropriations).
According to CPEC, "there were no increases in
salaries for UC and CSU executives between the 2002-03
and 2003-04 years."
9) Recent legislative hearings . In 2006 and 2007, the
Senate Education Committee held several hearings on
the subject of UC and CSU executive compensation.
These hearings largely focused on the issues of
transparency, accountability and adherence to stated
policies. A variety of reviews and studies were
conducted and a number of changes made.
SUPPORT
California Faculty Association
California Nurses Association
California State Student Association
OPPOSITION
California State University
Chancellor's Office, California Community Colleges
University of California