BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 952
AUTHOR: Alquist
AMENDED: March 14, 2012
FISCAL COMM: Yes HEARING DATE: March 21, 2012
URGENCY: Yes CONSULTANT:Kathleen Chavira
SUBJECT : California State University Compensation.
SUMMARY
This bill, an urgency measure, prohibits the trustees of the
California State University (CSU) from entering into or renewing
a contract for a compensation increase of more that 10 percent
using General Fund monies for any administrator, as defined,
beginning July 1, 2012, and sunsets these provisions on July 1,
2018.
BACKGROUND
Current law establishes the California State University trustees
and requires that they administer the California State
University. (Education Code 66600) Current law also outlines the
authorities, responsibilities and requirements of the trustees
relative to personnel matters. (EC � 89500 et. seq.)
Current law requires that proposals for the compensation package
of specified executive officers (the Chancellor, president of an
individual campus, vice chancellor, treasurer, general counsel
and the trustee's secretary) occur in open sessions of a
committee of the trustees and the full board of trustees, as
specified. (EC � 66002.7)
ANALYSIS
This bill, an urgency measure :
1) Prohibits the CSU board of trustees, beginning July 1,
2012, from entering into or renewing a contract that
provides for a compensation increase greater than 10
percent over that paid in the immediately prior contract
for the same position.
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2) Defines administrator to include, but not be limited to,
the Chancellor, a vice chancellor or an executive vice
chancellor, and general counsel of the CSU, the trustee's
secretary and an individual campus president.
3) Sunsets these provisions on July 1, 2018.
STAFF COMMENTS
1) Need for the bill . In July 2011, the CSU Board of Trustees
(BOT) took action to approve a $100,000 increase over the
predecessor's salary of the newly appointed President of
the San Diego State University. Prior to the action of the
BOT in July, the Governor submitted a letter to the
trustees expressing concern that their approach to
compensation was setting a pattern for public service that
the state could not afford, rejecting the notion that
qualified leaders for the university could not be found
unless paid twice that of the Chief Justice of the United
States, and asking the trustees to rethink the criteria for
setting administrator's salaries. The Trustees also
announced that they would appoint a special committee to
review the policy regarding the selection of presidents, as
well as the policies and practices with respect to
executive compensation. According to the author, it is the
intent of this bill to codify the subsequent policy on
executive compensation adopted by the CSU Board of Trustees
in January 2012.
2) CSU Presidential Compensation Policy . According to the CSU,
the Special Committee on Presidential Selection and
Compensation met several times throughout the fall of 2011
to consider information provided by outside experts on the
subject of Presidential Selection and Compensation. In
January 2012, the BOT adopted a new compensation policy for
the CSU which, among other things, expressed the intent of
the trustees to compensate in a manner that was fiscally
prudent in respect to the system budget and state funding,
to evaluate compensation based on periodic market
comparison surveys, to have presidential compensation
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guided by the means of the appropriate tier of comparison
institutions, as well as other factors, and until otherwise
determined by the Board, to cap the amount of the initial
base salary paid to a new campus president from public
funds at ten percent of the previous incumbent's pay.
3) Goes beyond codifying BOT actions . Staff notes that the CSU
policy adopted by the BOT, to cap any successor's salary to
10 percent above the previous incumbent's pay, only applies
to campus presidents. This bill defines its provisions to
apply to "administrators" and explicitly includes a number
of executive positions beyond the campus presidents.
If it is the desire of this Committee to codify the BOT
actions, staff recommends the bill be amended to delete the
expanded definition of administrators and to apply its
provisions to campus presidents only.
4) Senate Informational Hearing . In response to the actions of
the CSU trustees around executive compensation in July
2011, several bills were introduced at the end of the
legislative session to statutorily implement conditions and
limitations on the compensation paid to university
executives. As a result, this Committee held an
informational hearing on Executive Compensation Policy and
Practices at the UC and the CSU on Wednesday, September 28,
2011, to more
thoughtfully consider this issue. Among the items raised by
the committee were concerns about the appropriateness of
the comparison institutions used for setting salaries,
whether the definition of compensation being used to
determine "comparability" to other institutions was broad
enough to capture non-salary benefits, and whether the
compensation being paid to executives was tied to any
outcomes relative to the state's goals and objectives for
its four year universities.
5) Comparison institutions . Since 1993, a list of comparison
institutions, developed though the collaborative efforts
and inputs of the California Postsecondary Education
Commission, Department of Finance, the Legislative
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Analyst's Office (LAO), and the UC and CSU, has been used
to evaluate and guide faculty and executive salaries. In
reviewing their compensation practices, among other things,
the CSU revised this list/process and has identified four
sets of comparison institutions for purposes of considering
presidential compensation.
In response to a CSU request for input into these efforts,
the LAO acknowledged that the CSU approach responds to some
concerns about the existing methodology for identifying
comparison institutions. However, the LAO also expressed
concerns over the weighting and comparison with research
institutions, and the focus on the use of the methodology
to measure cash compensation only, as various studies show
that while CSU salaries fall short in comparisons, noncash
benefits tend to exceed the average. In addition, the LAO
opines that any effort to develop a comparison methodology
for purposes of guiding state policy and budget decisions
should involve a collaborative process that involves the
Legislature and the Administration.
6) Similar legislation . SB 967 (Yee), also on the Committee's
agenda for today, proposes a 5 percent cap on executive
compensation increases, links any increase in compensation
to student fees and general fund appropriations, and unlike
SB 952, requests that the UC comply with these provisions
and does not limit prohibitions on monetary compensation to
public funds.
7) Prior legislation . Though never heard, special session
bills SBX1 25 (Alquist), SBX1 26 (Lieu), and SBX1 27 (Yee)
were all introduced in August 2011. Those bills were
substantively similar to SB 952 (Alquist) and SB 967 (Yee),
which are both before the Committee today.
In addition:
a) SB 217 (Yee, 2009), which was similar to SB 967
which is before the Committee today, was passed by
this committee in April 2009, by a vote of 7-2, but
was subsequently held in Assembly Appropriations.
b) SB 86 (Yee, 2009) also almost identical to SB
967, was vetoed by Governor Schwarzenegger in October
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2009, whose veto message read, in pertinent part:
This bill would limit the ability of the UC and the
CSU to continue to provide a high level of quality
education that our students deserve when they choose
to attend California public universities. A blanket
prohibition limiting the flexibility for the UC and
CSU to compete, both nationally and internationally,
in attracting and retaining high level personnel does
a disservice to those students seeking the kind of
quality education that our higher education segments
offer. The Regents and the Trustees should be prudent
in managing their systems, given the difficult fiscal
crisis we face as a state, but it is unnecessary for
the State to micromanage their operations.
SUPPORT
None received.
OPPOSITION
California State University.