BILL ANALYSIS
SB 217
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Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 217 (Yee) - As Amended: May 6, 2009
Policy Committee: Higher
EducationVote:8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill prohibits the California State University (CSU) Board
of Trustees 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 monies appropriated to
CSU is less than or equal to the amount appropriated in the
immediately preceding fiscal year, and also requests the
University of California (UC) Board of Regents to comply with
comparable provisions. Specifically, this bill:
1)Defines "executive officer" as including, but not limited to:
a) For CSU: The CSU Chancellor, a vice chancellor,
executive vice chancellor, general counsel, Trustees'
secretary, and individual campus presidents.
b) For UC: The UC president, vice president, treasurer,
assistant treasurer, general counsel, Regents' secretary,
and individual campus chancellors.
c) For both segments, "managerial employees," defined in
current law as those having significant responsibilities
for formulating or administering policies and programs.
2)Defines "monetary compensation" as including, but not limited
to, a salary, a vehicle allowance, and a housing allowance.
3)Applies these compensation restrictions only to executive
officers entering into a new contract or renewing an existing
employment contract on or after January 1, 2010.
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FISCAL EFFECT
1)Attempting to isolate the potential fiscal effects of this
bill is speculative at best. Under the current circumstances,
UC's and CSU's General Fund appropriations have been reduced
significantly and the segments' actions to freeze senior
management salaries and implement furloughs go beyond even the
restrictions in this bill, thus one could argue that the
segments' severe budget constraints served the same purpose as
this bill without deleting all discretion.
2)The segments contend that having a statutory compensation
limitation will to some extent increase staff turnover,
including for example, employees leaving one CSU campus for a
similar position at another campus in order to avoid the
salary freeze. The segments estimate that the one-time cost
of turnover is about 60% of the cost of the position being
vacated. This includes costs for recruitment, moving
expenses, training and productivity impacts, and the need to
temporarily reassign duties of the position on an interim
basis. These additional costs are somewhat offset by salary
savings for the months each position is vacant, however, the
segments believe that replacement candidates would likely
negotiate harder for higher initial salaries, knowing they are
subject to a potential salary freeze. A 10% increase in staff
turnover at UC attributed to this bill would result in total
costs of about $900,000, though only about 13% of UC's current
budget is General Fund. A similar impact on turnover at CSU
would result in General Fund costs of about $1.2 million. It
is not likely that the state would budget additional General
Fund monies to the segments to cover these costs.
3)Absent the authority to increase compensation, however,
savings are all but inevitable. According to CSU, its General
Fund support has declined in seven of the past 20 years, and
by an average of about 6%. UC's budget history is likely very
similar. Assuming that in at least some of these years, many
senior management did receive compensation increases, this
bill would have resulted in significant savings-probably at
least several million dollars-in those years. The savings
would likely offset the additional costs described above. (UC
believes that this bill would effect about 530 positions and
CSU believes the bill effects around 3,000 positions.)
4)More significant than any potential fiscal effect of this
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bill, however, is the policy issue of placing compensation
limitations in statute rather than leaving such decisions to
the UC Regents and CSU Trustees, and the attendant potential
impacts related to retention, recruitment and system
management.
COMMENTS
1)Purpose . According to the author, "Like every nearly every
other higher education stakeholder (students, faculty, and
service workers), executives who make upwards of $200,000 and
enjoy other generous compensation (such as housing and car
allowances, relocation expenses, etc.) should also have to
share the burden during difficult budget years."
The California Federation of Teachers argues, "While we
understand the need for the University to pay comparable
salaries to similar institutions, we believe the Regents need
to consider the extraordinary constraints of our present
economic condition."
2)Opposition . UC and CSU indicate that, in response to
significant decreases in General Fund support, they have
already addressed executive compensation, among other budget
reduction measures. Both segments have frozen salaries of top
administrators and instituted furloughs impacting all
employees, including senior management. UC and CSU argue that
SB 217 will jeopardize their ability to attract and retain the
best available staff.
3)UC/CSU executive salaries : In its most recent survey of
executive compensation (October 2004), the California
Postsecondary Education Commission found that CSU Presidents
lagged national comparators by 37.8% while UC Chancellors
earned 37.5% less than their colleagues in other states.
Based on a November 2008 salary and compensation survey of
college presidents conducted by the Chronicle of Higher
Education, all but one of the UC and CSU presidents fell below
the median salary of $427,000 for presidents of public
four-year colleges.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081