BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 967
AUTHOR: Yee
AMENDED: April 11, 2012
FISCAL COMM: Yes HEARING DATE: April 18, 2012
URGENCY: No CONSULTANT:Kathleen Chavira
NOTE : This bill was previously heard by this Committee on
March 21, 2012, and failed passage by a vote of 4-3. The bill
was granted reconsideration and has since been amended to
incorporate a January 1, 2023 sunset on the bill's provisions.
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 California State
University (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, 4) sunsets these provisions on January
1, 2023.
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
SB 967
Page 2
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 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
SB 967
Page 3
comply with these same provisions.
3) Applies these provisions to executive officers who 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.
7) Sunsets these provisions on January 1, 2023.
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
SB 967
Page 4
committee to review the policy regarding the selection of
presidents, as well as the policies and practices with
respect to executive compensation.
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 this 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
SB 967
Page 5
these decisions to the UC Regents and CSU Trustees. As
currently drafted, the bill raises a number of questions:
a) Will these provisions affect California's
ability to attract and/or retain
the caliber of professionals necessary to fill these
positions?
b) 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?
c) 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?
d) 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?
e) 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?
6) 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 provision
to include the UC and does not limit its prohibition on
SB 967
Page 6
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 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
None received on this version.
OPPOSITION
None received on this version.
SB 967
Page 7