According to the Austin American-Statesman, the University of Texas System and other Texas public universities have for decades had to find creative ways to adequately compensate their chancellors and presidents. That's because of a 1951 state law that severely limits how much tax money can be used for this purpose: no more than about $70,000 for a chancellor and $66,000 for a president.
But in 2000, the university's Board of Regents determined that to be competitive, it ought to pay the president of the Austin campus a base salary of $233,000. How does the board make up the difference? The university routinely raises money from private sources and asks its foundation for financial help to pay competitive salaries to its top leaders.
This practice is not unique to Texas. For some time, private foundations affiliated with public universities have been supplementing the compensation of highly paid university personnel, including presidents, chancellors, coaches, and some high-profile professors.
Public universities, like their private counterparts, have been growing in size and complexity over the last couple of decades. Many public universities have budgets that exceed $1-billion a year, enroll large and diverse student populations, employ large numbers of people, operate major research enterprises, and contribute substantial numbers of well-educated graduates to the work forces of their states. In a word, these are serious and important enterprises to every state in the union.
The governing boards that oversee public universities look for the best and most highly qualified and experienced "managers" to run the state universities on a day-to-day basis. Such high-quality individuals not only are hard to find, but they also demand significant levels of compensation in both the public and private sectors.
At the same time, many state legislators -- faced with competing demands for state dollars in the areas of health, employment, highway construction, law enforcement, public welfare, etc., and fully aware of the political implications of their decisions -- have mostly voted to keep the compensation levels of public presidents below comparable levels in the private sector.
How then are public universities to compete for the best talent available? Clearly, those who manage and direct American universities, whether public or private, are not motivated by compensation alone. If they were, we would be seeing salaries in the seven figures rather than in the six figures on a routine basis. There has been, and continues to be, a strong commitment to public service among university presidents, both in the public and private sectors.
In order to attract top-notch executives and pay them salaries comparable to what they could earn at a private university, about a third of all foundations affiliated with public institutions have, like Texas, used private dollars to supplement their presidents' compensation.
How does this work in practice?
For those individuals who seek to become presidents of public universities, it is quite awkward for them to begin discussions with the foundation about their own compensation. Generally, the head of the governing board approaches the foundation for a compensation supplement before discussing the matter with a presidential candidate. In most cases, foundations work hand-in-glove with the board to put together a compensation package that will be competitive in order to attract the best candidates. Some foundations have more money available than others, and can assist with several aspects of a president's compensation package, helping to pay the new leader's salary or contributing to a deferred-compensation benefit. Foundations that are less well-heeled might narrow their support to such things as purchasing an automobile for the president's use or providing the upkeep for the university-owned president's home.
If a foundation can't come up with enough money, it can be a deal breaker. In one recent case, a state university that wanted to recruit a big-name president was unable to do so because its foundation didn't have enough money to buy out his unvested retirement plan.
The amount of financial support a president might receive from a particular foundation can vary from as little as $10,000 or $20,000 to hundreds of thousands of dollars. In the 2001 fiscal year in Virginia, for example, the compensation supplements provided by campus foundations ranged from a low of about $65,000 for the president of Norfolk State University to $155,000 for the president of the Virginia Military Institute. The salaries authorized by the state legislature also varied: For example, the president of Christopher Newport University earned a salary of about $110,000 in that year, and received an additional $100,000 from his university's foundation; the president of Radford University had a salary of $121,000 and a supplement of $77,000.
The actual amount contributed by a foundation in any specific case will depend upon several variables, including the amount of the total compensation package that the candidate and the board agree on, and the amount the state legislature authorizes for the president's salary. Some state legislatures, such as Virginia and Wyoming, are well aware that the private foundations affiliated with their state universities will supplement the president's salary, so they set that salary artificially low and shift the burden of supporting the president's compensation from the state's taxpayers to alumni of the university. This is a practice that ought to be discontinued because it is important for the legislators in every state to openly recognize the value of top management for public universities and then to pay competitive salaries. Tom Smith, the head of Public Citizen in Texas, put it this way: "If we want to have first-rate universities in this state, we should be willing to appropriate enough funds to be assured we can attract top-flight personnel."
There is a debate as to whether the compensation supplements paid by private foundations should be made public. At present there is no legal requirement in most states for that to take place. Some governing boards or presidents of public universities routinely make this information available, while others do not. Often, faculty members who themselves do not receive such supplements react negatively when they read in the local newspaper about the foundation supplementing their president's compensation package. Such faculty members may not know or do not care that the university itself, through its board, determined that it had to offer compensation at that level to attract a high-quality person as the university's leader.
As for the future, as long as the coffers of related foundations grow, and as long as state legislators are unwilling to authorize compensation packages that are comparable to those paid by private universities, the foundations will continue to supplement salaries and other aspects of compensation. Former Lt. Gov. Ben Barnes of Texas, perhaps speaking for all of higher education, has said, "We need the finest people to run our colleges and universities, and we are in competition with private industry ... and you've got to pay big salaries."
