BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Carol Liu, Chair
2013-2014 Regular Session
BILL NO: SB 8
AUTHOR: Yee
AMENDED: February 11, 2013
FISCAL COMM: Yes HEARING DATE: April 3, 2013
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Public postsecondary executive officer
compensation.
SUMMARY
This bill establishes conditions on the granting of executive
compensation increases by the California State University
(CSU) for any employment contract entered into or renewed
beginning January 1, 2014; requests the Regents of the
University of California (UC) to comply with these same
conditions on executive officer compensation increases and
sunsets these provisions on January 1, 2024.
BACKGROUND
Current law establishes the CSU trustees and requires that
they administer the CSU. (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 UC 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 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
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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 California State University
(CSU) and the University of California (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 UC 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, 2014.
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.
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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, 2024.
STAFF COMMENTS
1) Rationale for the bill . According to the author, both
the UC and the CSU have granted executives substantial
raises in years where they are raising systemwide
student fees. The author opines that, in an era of
diminishing resources, the Legislature has an active
interest in controlling costs.
2) CSU Presidential Compensation Policy . As a result of
concerns raised by actions taken to increase campus
presidents' compensation in July 2011, the California
State University Trustees appointed a special committee
to review the policy regarding the selection of
presidents, as well as the policies and practices with
respect to executive compensation. In January 2012, the
Board of Trustees 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. In addition, in November 2012
the new Chancellor of the California State University
(CSU) system voluntarily took a 10 percent reduction in
the compensation package he was offered by the CSU Board
of Trustees.
3) Senate Informational Hearing . In response to the actions
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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.
4) 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 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?
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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 Board of Trustees 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?
5) Similar legislation . SB 495 (Yee), also on the
Committee's agenda today, requires the CSU and UC to
increase the compensation of student health center
physicians until the compensation across all campuses is
comparable.
6) Prior legislation . SB 967 (Yee, 2012), which was
identical to this bill, failed passage upon
reconsideration in this committee by a vote of 3-2.
In addition:
a) SB 952 (Alquist, 2012), proposed a 10 percent
cap on executive compensation increases until July
1, 2018, codifying one component of the resolution
on executive compensation adopted by the CSU Board
of Trustees in January 2012. SB 952 was passed by
this committee by a vote of 6-2, but was
subsequently held in the Assembly Appropriations
Committee.
b) 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.
c) 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
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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
American Federation of State, County and Municipal Employees
California Federation of Teachers
California Nurses Association
OPPOSITION
California State University
University of California
Baybio