BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 967
AUTHOR: Yee
INTRODUCED: January 13, 2012
FISCAL COMM: Yes HEARING DATE: March 21, 2012
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Public postsecondary executive officer
compensation.
SUMMARY
This bill 1) prohibits the California State University
Trustees from increasing the monetary compensation (defined
as salary, vehicle and housing allowance) of, or approving
payment of a monetary bonus to, any executive officer for
two years if there was a systemwide fee increase or a
decrease in the general fund appropriation to the CSU in
the immediately preceding fiscal year, 2) caps the salary
of an incoming officer at 5 percent above the monetary
compensation paid to the immediate executive office
predecessor, and 3) requests the Regents of the University
of California to comply with these same conditions on
executive officer compensation.
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.)
The California Constitution establishes the University of
California as a public trust to be administered by the
Regents of the UC with full powers of organization and
government, subject only to such legislative control as may
be necessary to insure the security of its funds and
compliance with the terms of the endowments of the
university and such competitive bidding procedures as may
be made applicable to the university for letting
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construction contracts, selling real property, and
purchasing materials goods and services. (Constitution of
California, Article IX, Section 9)
Current law also 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)
Current law declares the Legislature's intent that no
proposal relating to the salary, benefits, perquisite,
severance payments (except in the case of a dismissal or
litigation settlement), retirement benefits or any other
form of compensation paid to an officer of the UC become
effective unless specified notice requirements have been
met and action taken in an open session meeting of the
regents. (EC � 92032.5)
ANALYSIS
This bill establishes conditions on the granting of
executive compensation increases by the CSU and the UC.
More specifically it:
1) Prohibits the CSU Trustees from increasing the
monetary compensation
of, or approving payment of a monetary bonus to any
executive officer for two years if, in the immediately
preceding fiscal year:
a) Mandatory systemwide student fees increased.
b) General fund appropriations to the CSU
decreased.
1) Caps the salary increase of an incoming officer at 5
percent above the monetary compensation paid to the
immediate executive office predecessor.
2) Requests the Regents of the University of California
to comply with these same provisions.
3) Applies these provisions to executive officers who
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enter into or renew contracts with the CSU or UC on or
after January 1, 2013.
4) Defines "executive officer" of the CSU to include, but
not be limited to, the Chancellor, a vice chancellor,
an executive vice chancellor, the general counsel, the
trustee's secretary and individual campus presidents.
5) Defines "executive officer" at the UC to include, but
not be limited to, the President, the chancellor of a
campus, the chief executive officer of a university
hospital or medical center, a vice president, the
treasurer, the assistant treasurer, and the general
counsel of the university, and the regent's secretary.
6) Defines "monetary compensation" to include, but not be
limited to salary, vehicle allowance, and housing
allowance.
STAFF COMMENTS
1) Rationale for the bill . According to the author, both
the UC and the CSU have "hiked executives' pay while
raising student fees." The author opines that, in an
era of diminishing resources, the Legislature has an
active interest in controlling costs.
2) Related CSU activity . 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. As a result of the
concerns raised by their actions, 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.
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3) 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
guided by the mean 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.
4) Senate Informational Hearing . In response to the
actions of the 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) Is this the right solution ? This bill would eliminate
the discretion of the governing bodies of the four
year institutions to determine appropriate
compensation for specified executive level positions
by placing compensation restrictions in statute rather
than leaving these decisions to the UC Regents and CSU
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Trustees. As currently drafted, the bill raises a
number of questions:
Will these provisions affect California's
ability attract and/or retain the caliber of
professionals necessary to fill these positions?
Should fee levels and general fund
appropriations be the controlling basis upon
which compensation decisions are made? How do fee
levels and general fund appropriations link to
the management and leadership needs of the
institutions?
The fee levels set by the institutions
are historically tied to the funding decisions
made in the annual Budget Act by the Legislature
and the Governor. Should the discretion of the
governing bodies of the four year universities to
identify and compensate appropriate leadership be
tied to budget related decisions of the
Legislature and the Governor, factors which they
do not control?
As drafted, this bill would restrict the
use of funds for compensation regardless of the
source. Should the Legislature restrict the
discretion of a foundation to use private funds
to supplement public funding for executive
salaries?
As noted in #3, the CSU BOT has already
adopted a policy which attempts to reflect their
understanding of, and concern for, the fiscal
condition of the state, while maintaining an
ability to attract qualified leadership for the
institution. Would it be more appropriate to
request the UC to adopt a similar policy
statement?
1) Similar legislation . SB 952 (Alquist), also on the
Committee's agenda for today, proposes a 10 percent
cap on executive compensation increases until July 1,
2018, codifying one component of the recent resolution
on executive compensation adopted by the CSU Board of
Trustees. Unlike SB 952, this bill extends its
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provision to include the UC and does not limit its
prohibition on monetary compensation to public funds.
2) 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 this
bill 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
this bill, was vetoed by Governor Schwarzenegger
in October 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
Academic Professional of California
American Federation of State, County and Municipal
Employees, AFL-CIO
American Federation of State, County and Municipal
Employees, Local 3299, AFL-CIO
Associated Students of University of California, Davis
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California Faculty Association
California Federation of Teachers
California Nurses Association
University of California Student Association (UCSA)
OPPOSITION
California State University
University of California