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UC System Admnistrative Growth and Budget Analysis

December 7, 2009

Reposted from the Faculty newsletter website: http://www.uclafaculty.org/FASite/Admin._Growth.html

UCLA FACULTY ASSOCIATION  NEWSLETTER,  SPRING 2008

The 2007-08 UC Expense Pyramid Upside Down

UC: 10 campuses,5 Med Ctrs, 3 Nat’l Labs   $18.1B

(Total Enterprise)

$5.4B         Revenue & Expenses (R&E)         100%

(Core Funds: State Gen Funds, Stud Fees, UC Gen Funds)

$3.83B Faculty & Admin Salaries & Benefits 71% R&E

$2.04B     Salaries for Administrators    38% R&E

$792M Salaries for 8,851 Excess Admin 17% R&E

(or nearly 40% of $2.04B)

$68M  UC Goal for Admin Savings 1.3% R&E

$45.9M 4% COLA for Faculty 0.85% R&E

$8.73M 4% COLA or 0.16% R&E

for UCLA

Faculty

Executive Summary

Over the past decade, the numbers of Administrators in the UC almost doubled, while the number of faculty increased by 25%. The sharpest growth took place among Executives and Senior Managers: 114%. Because Administrators command high salaries and benefits, any increase in their number higher than the expected growth rate for the University results in high costs: rough estimates of the costs of carrying extra administrators at UC range around $800M. While costs spent for administrators have risen sharply, UC faculty salaries have continued to slide in real dollars, with the result that average UC faculty salaries now lag the Comparison 8 Institutions by 14%. Cutting back on the bloated size and salaries of the UC administrative group would permit the University to give the faculty a 4% COLA, which would begin to narrow the gap between UC and comparable institutions. UCLA and UCB faculty perform at the highest levels of teaching, research, and service and make these campuses the highest ranked public universities in the nation. That unique status is imperiled, however, by the state and the University’s continued failure to keep faculty salaries competitive. The Faculty Association at UCLA calls for UC to re-adjust priorities and take steps to bring UC faculty salaries in 2008-09 up to the level of its comparison institutions by formulating and following the simplest and fairest of salary plans: offer an annual COLA of 4% to all faculty.

The High Cost of Administrative Growth

How to respond to California’s nearly $20B budget deficit without harming academic quality, and, in particular, to the ever widening gap between UC faculty salaries and those provided by comparable institutions, are the central issues facing UC. Recognizing the difficulties of the moment, the FA advocates a strategy that will achieve cost savings by substantially curbing the growth of administrative jobs and salaries, while, at very modest cost, providing a COLA for faculty.

A COLA for all faculty is a far more effective strategy in bridging the salary gap than raising the Salary Scale a second year. As explained in the last FA newsletter, the salary increase implemented last fall was principally designed to raise the Salary Scale.   Since the Salary Scale has been depressed for so long, this increase was useful for a campus like UC Riverside, where roughly half the faculty is Onscale, but of very limited relevance to UCLA faculty because 85% are Offscale.  UCLA Offscale faculty at ranks from Assistant I to Professor IX only received a 2.5 % COLA increase, which did little to bring salaries up to market levels.  In fact, because average salaries at most public and private doctoral institutions are going up about 4.5% while ours essentially stagnate, the net result of last Fall’s “scale increase” will likely increase the average UC Full Professor salary lag from 14% at the start of the current academic year to close to 16% or higher in 2008-09. Note: See the meeting with Vice Chancellor Rice, page 7, for more about why raising the Salary Scale is the wrong approach to making UC faculty salaries more competitive.

The Governor proposed that UC find savings of at least $32.3M by cutting from campus and OP administration. Not only is UC committed to finding these administrative efficiencies, the University intends to cut another $36M, bringing the savings to $68M. Although doubling the Governor’s estimate is a noble goal, the Faculty Association is convinced that much greater savings can be found by curbing the level of administrative growth.

First, the High Number of Executives

The decade at UC from 1997 to 2007 is marked by high growth in numbers of Executives, Managers, and Middle Managers that has outpaced both the growth of Ladder Rank Faculty as well as the University as a whole. Chart 1 below shows the growth at UC of three groups of highly paid employees: Executives (SLG or Senior Leadership Group); Senior Managers (MSP or Management Senior Professionals) and Middle Managers (FMSS or Fiscal Managers and Service Staff). The Middle Manager category includes job titles like Computer Operations, Admin. Budget/PES Analysts, Management, Employment & Fiscal Services. In this study, we did not include Academic Administrators like Deans and Provosts because their numbers have remained relatively constant over time.

Over this decade, the numbers of Executives and Senior Managers grew by 114% and Middle Managers by 91%. In contrast, the Ladder Rank Faculty grew by about 25%, just under the Total Growth Rate for the University of 32.1%. At a mature campus like UCLA, the growth of faculty was closer to 14%. Most of the high growth occurred in the first five years. At UC, Executives and Senior Managers grew by 57%, but between 2002 and 2007 growth slowed to 37%. Middle Managers grew 55% between 1997 and 2002, while growth dropped to 23% in the next five years. UCLA shows a similar pattern of rapid growth followed by a leveling off period.

Administrative growth is not unique to UC, but the rate of growth is higher at UC than most public or private universities. In 2006, in public universities across the country, 49% of the professional full-time employees, excluding the medical school, were faculty members. At UC that percentage was about 25%. As shown in the chart below, in 1997, there were almost 2 faculty to every Executive and Senior Manager; by 2007 the numbers are nearly the same for both groups, while the Middle Manager group steadily grows higher.

Chart 1: Administrative Growth at UC

Source: www.ucop.edu/ucophome/uwnews/stat/headcount_fte/

Second, the High Administrative Salaries

Salary Grade Range Increases (SGRI) for Executives and Managers

UC Executive salaries grew so much between 1996 and 2004 that newspapers like the San Francisco Chronicle and the Sacramento Bee featured stories that illustrated runaway UC executive compensation and the high “Above Base Pay” supplements and “Additions to Pay,” and even provided searchable databases listing the salaries of all UC employees. In the wake of these accusations and some internal attempts at reform and transparency, UC created Salary Grade Ranges (SGR) to clarify the steps and the range of salaries for its Executives, Senior Managers, and Middle Managers. These tables are elaborate matrices of up to 18 steps and 5 salary levels. Table 1 below shows the mid-step Salary Grade Ranges for 3 groups of administrators and 3 salary levels from October 2005 to 2007.

These Salary Grade Ranges show midpoint salary levels; both higher and lower steps exist for each category. For example, in 2007 the highest step for Senior Managers (MSP IX) had a minimum salary of $128,500, a midpoint at $209,000, and a max of $289,200. At the highest step of the Executive Range, the min. was $148,900; the midpoint $374,500; and the max $935,900.

While UC has stated that increasing the Salary Grade Ranges upward every year does not automatically increase admin. and exec. salaries, a random sample of the salaries of some UC Executives and Managers who had no above-base-pay supplement shows that they all received at least the Salary Grade Range Increase and most more than that. Some may not receive the annual increase, but it appears that most do. Auditors noted that because UC does not call these SGR increases COLAs or annual range increases, there remains confusion between SGR increases and other annual increases like merits or equity.

Since the implementation of Salary Grade Ranges, one can estimate the average increase over the last two years of base pay–10.12%. If we eliminate executives, the total increase over 2 years is 7.5%. Over the same two-year period from 2005- 2007, the total salary increase for UC faculty was 4.5%, but the total for faculty at UC’s Comparison 8 Institutions was 7.9%, very similar to the salary increases received by UC Senior and Middle Managers.

Increases of 4% for Execs and Managers are in keeping with national averages for administrators in 2006, although a salary raise on the order of 20% at the lower end and 11% at the midpoint for the UC Executives are the kinds of figures that led to claims of executive compensation abuse at UC. The increase for the following year of 2.8% shows an attempt at reform.

Table 1:Mid-Step Salary Grade Range Increases (SGRI)

*For SLG , the % change from 2002 to 2006 was calculated and divided by 4 to estimate the figures for 2005.

Source: www.ucop.edu/humres/TPP/SLCGGrade07.htm

“Additions to Regular Pay”:    Offscale & Above-Base-Pay

About 85% of the UCLA faculty receive some kind of Offscale increment. The funding for faculty Offscale comes largely from unfilled FTE and the accompanying merit funding. UC receives state funding for the number of faculty FTE determined by a formula dependent on student enrollment. In the College, Divisions are allocated FTE, which are then distributed to Departments. The ratio between filled and unfilled FTE determines available Offscale funding.

Execs and Managers receive additions to their regular pay called above or non-base-pay, but because of the high growth of admin. FTE, there are no unfilled FTE and merit slots to fund above-base-pay. Funding comes largely from Core Funds (student tuition and fees, state appropriations). Auditors reported that UC paid $11.3M in Above-Base-Pay Additions to Regular Pay in 2004-05, with about $9M coming from core funds and $2.3M from federal and other grants and contracts, endowments, and auxiliary operations (CA State Auditor Report 2006-103).

Maintaining Offscale funding for faculty requires raising the student to faculty ratio and hiring part-time & adjunct professors and lecturers at lower cost than filling faculty FTE, but sustaining above-base-pay for administrators means taking additional resources from other programs and activities that depend on core funding.

“Additional Pay”: Bonuses, Stipends, Private Agreements, Misc. Payments

Staff also receive several kinds of “Additional Pay” that can vary from year to year, most of which are not part of covered compensation as are “Additions to Regular Pay.” Stipends, however, are included in retirement calculations. In 2004-05, staff received $46M in bonuses; $58M in private agreements; $26M in stipends; and $9M in misc. payments, to total $139M (CA State Auditor Report, 2006-103). Adding $11.3M in above-base-pay brings the total of additional payments to about $150M. If the % of extra administrators hovers about 34%, then about $51M in additional pay to highly paid but unnecessary administrators could be redirected to more important uses, one of which would be to offer all UC faculty a COLA of 4% that might cost about $46M.

Faculty and Staff Merits

With public attention focused on COLAs and the largely administrative category of Additional Pay, UC Executives and Managers have looked more carefully at merits as a means of raising salaries and achieving goals of rebal-ancing total compensation for executives in keeping with the intent of REI 61, passed by the Regents in 2005.

Before 2006, UC maintained a clear distinction between COLAs and merits, a useful distinction because COLAs are based on cost of living and are distributed independent of any kind of merit review, while merit increases are based on performance criteria. After 2006, UC budget language lumped COLAs and merits together, along with continuation costs and increases to health benefits and equity, thus blurring the lines between categories of salary increases devoted to different purposes.

For faculty, merits are available every 2 or 3 years, and the step on the ladder determines the increase—higher steps, higher increases. For example, in 2006-07, faculty received a 2% COLA and about 1/3 of the faculty received merits according to the rate at which they advanced up the salary ladder. Merit and promotion evaluations require extensive performance evaluations, consisting of a rigorous review of publications, teaching, outside references, etc. The Regents proposed that $27.5M would be spent on faculty merits in 2008-09, but they supplied no specific figure for staff merits.

For staff, merit increases are normally awarded annually, in accordance with university-wide funding guidelines. Less clear is the rigor of the evaluation process and performance criteria. The role of equity or applying general principles of fairness to even out disparities plays a large role in staff and administrator arguments to justify higher salary increases because of the high costs of health care and the generally high cost of living in Los Angeles.

During 2006-07 the state budget combined with other university revenues provided a 4% pool for all employee

compensation increases, including merit-based and equity-based salary increases. The University announced that faculty would received a 2% COLA, but distribution of this funding for other categories of employees, like administrators, varies by individual and is not transparent. One can assume that a fortunate (but not rare) Executive, Senior or Middle Manager could receive a 3.5% merit increase, and perhaps a .5% equity increase to total 4% in Oct. 2006; combined with a 3.5% Salary Grade Range Increase that totals 7.5%, while the faculty received a 2% COLA and about 1/3 were eligible for merits. In Oct. 2007, the compensation pool was increased to 5%, and faculty received a 2.5% COLA.

Third, the Cost of Administrative Growth

Because of the scope and complexity of the UC enterprise, the FA can only offer rough estimates of the costs of the administrative growth at UC.  The combined cost of extra administrators at the OP and UC levels is about $800M.

Table 2: Cost of High Administrative Growth at UC

We use simple formulas to determine cost: first determine the excess FTE by multiplying the FTE in 1997 by the 10-year growth rate to get the expected 2007 FTE; then subtract this number from the actual FTE in 2007; then multiply the number of excess administrators times the midpoint salary.

The cost would be higher if we had used salaries at higher steps than the mid-level steps. Also FTE tables combine Executives and Senior Managers, so Senior Manager midpoint salaries are given, which are considerably lower than those for Executives. But concentrating on the midpoint as an average, UC could find much greater efficiencies in the numbers of Executives and Managers than $68M if it looked carefully at the cost of the growth of its own Executives, Senior Managers, and Middle Managers FTE as well as system-wide.

Meanwhile, Faculty Salaries Fall

Between 1997 and 2007, UC faculty have received a total salary increase of 17.9%, which is the equivalent of at least a 9% cut in pay when inflation is factored in. About 85% of the UCLA faculty receive Offscale supplements to their base salary, but these Offscale supplements are not sufficiently large to put UC salaries at parity with those at the comparison institutions. Consequently, the average salaries of faculty still lag the Comparison 8 by at least 14%.

Table 3; Survey of Annual Faculty Salary Increases from 1998-2008

Sources: National US Average data, Continuing Faculty, All Ranks  & Change in CPI are from AAUP’s Academe.. * For “All Faculty,” the US Average increase was 3.8%, which results in a salary cut of -0.3% in real terms. Figures for Continuing Faculty represent the average salary change for faculty at the same institution in both years over which the salary change is calculated.

UC Salary Increase, Comp 8 data,  and UCLA Lag data from CPEC (California Post-Secondary Education commission), annual published reports.

Over the course of the past decade, these successive differences in pay raise have produced increasingly large differences in base pay. The graph below starts with the same base salary of $80,000 in 1997-98 and traces how it grows each year under three different scenarios–the change in the CPI, the Comparison 8 increase, and the UC COLA. As the graph shows, the UC faculty COLA produced the lowest salary–$95,437, leading to a gap of almost $25,000 behind the Comp 8 salary that rose to $118,989, while the $80,000  base salary increased each year by the change in the CPI  rose to $104,289, still about 10% higher than UC’s modest $95,437 base salary.

Chart 2: The Impact of Faculty Salary Increases on the Same Base Salary

Offscale may be the factor behind the scenes helping UCLA maintain its competitive advantage, but the campus is losing the bigger battle if the averages for most faculty are still 14% below comparable institutions. Without Offscale, UC would lag even further behind, but Offscale is not enough. The end result of UC’s failure to adequately raise average salaries is easy to predict: many faculty, especially younger and mid-level faculty concerned about the costs of raising a family in Los Angeles, will head for greener pastures elsewhere. This pattern is playing out nationwide, where more and more top-notch faculty are lured away from public universities to higher-paying privates. See the Chronicle of Higher Ed, April 18, 2008, “Gap Persists Between Faculty Salaries at Public and Private Institutions” and “Wisconsin’s Flagship is Raided for Scholars: Public institutions can’t match job offers from private universities”.

The high cost of too many Executives, Senior Managers, and Middle Managers highlights the low cost of a 4% COLA for all UC faculty–$46M– and the even lower cost of a 4% COLA for UCLA faculty –roughly $8.73M. No words speak louder than these numbers. The expense pyramid at UC points to the deteriorating situation of the faculty in a top-heavy administration. UC needs to trim down unnecessary costs and with those substantial savings, reprioritize its goals, reorganize to achieve greater efficiencies, and revitalize its mission to promote the welfare of the faculty and the students

and the core mission of the university.

FA MEETINGS

WITH CHANCELLOR GENE BLOCK, FEB. 26, 2008

Members of the Executive Board of the Faculty Association, Professors Dwight Read , Jody Kreiman, Steven Lippman, Mike Lofchie, Karen Orren, and Exec. Dir. Susan Gallick, met with Chancellor Gene Block on Feb. 26, 2008. The Board wanted to introduce the organization to the Chancellor and to present information about faculty salaries and the growth of administration at UC and UCLA.  Our goal was to shift the priority of the University back on to the faculty especially in times of budget crisis, when the university has the most to lose if its best faculty are lured away by private institutions.

The Chair of the FA spoke about some of the activities of the FA over the past 30 years.  He noted, for example, the role the FA played in UC’s legal history: FA participation in the 1988 lawsuit to preserve the privacy of the peer review process at UC; and in the 1991 lawsuit to restore merits to those faculty who did not receive them during an earlier budget crisis. The FA has also been active in lobbying for UC. In 2005, the FA proposed a pension initiative to exclude UCRP from attempts to privatize California public employee pension systems. And one of the biggest, if not the biggest, contribution to faculty welfare has been our newsletters, which highlight the FA’s independent voice as we offer facts and ideas about salaries, benefits, and other employment issues of interest to faculty.

Chancellor Block seemed candid, friendly, and interested in the organization, its role at UC and UCLA, and our data about lagging faculty salaries and administrative growth. He spoke generally about the importance of

increasing diversity in the UCLA student and faculty population and civic engagement in the larger community.

WITH VICE CHANCELLOR THOMAS RICE, FEB. 1, 2008

Vice Chancellor Rice met with the FA Board on Feb. 1, 2008. At this time, the FA was particularly interested in discussing the issue of Offscale salaries and funding. The FA also raised the issue of the 8% market increase to the Salary Scale and the failure of this plan to benefit the 85% of the faculty who are Offscale. FA Board members mentioned the unexpected but expensive consequence to UCLA of increasing the Salary Scale of the medical school faculty who are all Onscale. Since most of them have a negotiated salary, when their Onscale Salary rose by up to 8%, their practice income decreased a corresponding amount to maintain the target level of the negotiated salary; therefore, the medical school faculty benefited primarily by increased retirement benefits not meaningful salary increases. The FA Board members emphasized their view that any future plans to increase the Salary Scale should be abandoned in favor of the simpler, more effective strategy of a higher COLA for all faculty.

Vice Chancellor Rice seemed open and receptive and tried to answer our questions frankly, particularly about funding Offscale supplements.

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