Dec. 18 (Bloomberg) -- The Ohio State University President E. Gordon Gee lives in a 9,630-square-foot Tudor Revival mansion that was renovated for him, featuring a great hall, pool, elevator and tennis court.
Gee made $1.9 million last year as the highest-paid public university president in the U.S. He also logged $1.7 million in expenses in fiscal 2011, including trips in private jets, country club dues and fundraising parties at his residence.
“He’s overpaid,” said CJ Jones, 19, a junior public affairs major at Ohio State, whose tuition has risen 9.7 percent during her 2 1/2 years at the university, based in Columbus, the state capital. “You should want that job for a sense of Buckeye pride. Why do you have to suck so many resources from our budget? I know kids graduating from OSU with $90,000 in debt, and it’s a public university.”
Gee was among 47 administrators, athletic officials and hospital faculty who earned more than $1 million in 2011, according to payroll records compiled by Bloomberg for about 216,000 employees at flagship universities in the 12 most populous states. Much of the compensation came from non-public sources. Gee’s expenses and home renovations weren’t funded with taxpayer dollars, and his performance justifies his compensation, said Gayle Saunders, a university spokeswoman.
Salaries for the highest-paid public university employees from California to Virginia rose as state appropriations per student fell to the lowest in a quarter century, faculty pay stagnated and the default rate on student loans hit a 15-year high. Record expenses for higher education are prompting lawmakers to scrutinize how the institutions spend their money.
“There’s a mythology promulgated by people in administration that you have to pay competitive salaries to attract the best people,” said Benjamin Ginsberg, political science professor at Baltimore-based Johns Hopkins University and author of a book detailing how universities are adding administrators even as state funding drops. “In point of fact, no one can show there is any relationship between what these people are paid and the quality of the work they do.”
The public-university data show that top administrators, coaches and hospital physicians continue to enjoy compensation far above that of the best-paid state employees outside higher education, even as rising tuition squeezes the middle- and lower-class students the institutions are meant to serve. And as officials complain that declining funding from cash-strapped states is forcing them to raise student tuition and fees, university endowments continue to grow.
The data provide previously undisclosed detail about how much university employees earn and where the money comes from. Unlike other state employees, the best-paid workers in higher education derive some or all of their compensation from non-public revenue such as endorsement deals with product makers, radio and television appearances and speeches for coaches, patient fees for doctors, and donor gifts and endowments targeted for coaches and top administrators.
Yet a significant share of other university employees’ compensation does come from taxpayers, the data show. According to a Sept. 12 presentation by University of California Provost and Executive Vice President Aimée Dorr to the Board of Regents, 97 percent of the faculty in the system receive at least a portion of their salary, benefits and retirement from a combination of state funding and tuition.
Data compiled by Bloomberg as part of a review of public employee pay in the 12 biggest states includes these flagship institutions: Ohio State; the University of California at Los Angeles; Florida; Texas; Michigan; Virginia; Penn State; Illinois at Urbana-Champaign; North Carolina at Chapel Hill; Stony Brook in the State University of New York System; the Georgia Institute of Technology and Rutgers, The State University of New Jersey. All are members of the Association of American Universities, a group of 62 research schools.
The highest-paid at those universities last year was William “Mack” Brown, coach of the University of Texas Longhorns football team, who reaped $5.3 million, as funding per bachelor degree at the university fell to last among a group of schools tracked by the Fort Worth-based Texas Coalition for Excellence in Higher Education.
About $2.7 million of Brown’s compensation comes from athletics revenue, with $2.6 million from donor gifts specifically designated for coach salaries, according to figures provided by his university.
Brown’s pay is comparable to other top-tier coaches, university President William Powers Jr. said in a statement.
“Mack’s 147-41 record, four BCS appearances, two national championship game appearances and 2005 national championship have directly driven the Athletic Department’s increased revenue, more than $30 million of which has been used for academic programs, facilities, faculty and libraries since 2005,” he wrote.
The highest-paid public university doctor among the 12 states was employed at Ohio State, with total compensation of about $2 million: Steven Kalbfleisch, a cardiologist and professor of clinical medicine, who came to the university hospital six years ago from a competing hospital with four colleagues as Ohio State sought to establish a world-class heart-care program.
Kalbfleisch, co-author of a book called “The Pocket Guide for Cardiac Electrophysiology,” had regular pay of $658,000, plus $1.38 million in deferred compensation related to his move from the rival hospital, Riverside Methodist. All his compensation came from patient revenue, according to a breakdown provided by the university.
The deferred compensation was from five years as a one-time payout last year, a medical center spokesman, David Crawford, said. Besides his clinical research, teaching and practice responsibilities, Kalbfleisch is director of the medical center’s electrophysiology lab and does outreach on behalf of the center at hospitals around Ohio, Crawford said.
Ohio State president Gee’s base salary of $834,530 is derived from public funds, including tuition, fees and state appropriations, as is $225,000 in deferred compensation that is payable after completion of his term and $100,500 in retirement benefits, according to a breakdown provided by university.
As tuition rose by 3.3 percent at Ohio State in the 2011-2012 school year, and 3.1 percent in 2012-2013, Gee got raises. During his annual review, The Ohio State University Board of Trustees voted Nov. 9 to increase his salary by $25,036 and approved performance compensation of $333,812. In 2011, trustees increased Gee’s salary by $16,363 and allotted him performance compensation of $143,179. Both performance increases came from non-public funds.
Gee’s also enjoys perks not received by other public officials. He lives rent-free in a fully staffed house. He rides private jets, including a $7,191 flight covering the 107 miles (172 kilometers) from Columbus, Ohio, to Cincinnati, according to expense reports obtained by Bloomberg. He billed the university for everything from $2,427 for a cabin upgrade during a 2008 alumni cruise in the Baltics to vitamins. School officials said Gee’s expenses are paid by endowments or other non-public discretionary funds, not by tuition or tax dollars.
The Dayton Daily News wrote about Gee’s expenses in September after obtaining records from the university.
Gee’s fundraising prowess is part of what makes him so valuable, said Saunders, the university spokeswoman.
“President Gee is one of the most experienced and respected leaders in higher education, having served as a university president for more than 30 years,” Saunders said in an e-mail. “He has been instrumental in moving Ohio State from an excellent public higher-education institution to the eminent model for what public higher education should be for the state and the nation.”
“Since arriving in 2007, President Gee has helped raise $1.6 billion,” she said. “In addition, he has worked to secure $1 billion in new resources over the past two years and has been recognized as a leader in finding alternative revenue to support students, faculty and staff.” Last year, Ohio State became the first public university to issue 100-year bonds to raise money for capital projects, Saunders said.
The top-paid public school administrators earned less in 2011 than their counterparts at some private institutions. The highest-compensated private school president in 2010, the latest year for which figures were available, was J. Robert Kerrey, former head of New York’s New School, whose total compensation was $3.05 million, according to a survey published this month in the Chronicle of Higher Education. Second place fell to Shirley Ann Jackson, president of the Troy, New York-based Rensselaer Polytechnic Institute, who earned $2.3 million in 2010, the report showed.
As they watch college debt mount, there’s a growing awareness among Ohio State students that Gee makes more than some of his public-university peers, said Thomas Lee, a recent graduate of Ohio State and an organizer at the Ohio Student Association, a student advocacy group. In 2011, students held sit-ins on campus and marched on Board of Trustee meetings protesting tuition increases.
Employees at other public universities, including those not serving in top management positions, also were well-paid last year. More than 1,900 workers at the dozen flagship schools made more than $300,000 in 2011, while 324 of them made more than $500,000, the Bloomberg data show.
Some of the 12 universities paid far better than others, the data show. For example, about 576 UCLA employees earned more than $300,000 in 2011. At Michigan, 445 public servants reaped more than $300,000; at Florida, 221; at Texas, 102; and at Rutgers, 33, according to the data.
Top earners at Illinois, which served a similar number of students last year as UCLA, collected far less than their counterparts on the West Coast. The highest-paid at the University of Virginia and at North Carolina also brought in less than their peers at UCLA and Ohio State.
As state appropriations dwindled, endowments at all 12 universities reported gains in 2011 -- in most cases by 10 percent or more, according to a survey by the Washington-based National Association of College and University Business Officers, an organization of higher education providers and the Wilton, Connecticut-based Commonfund Institute, an institutional investment firm. UCLA’s endowment posted the biggest gains, with a 49 percent jump to $1.5 billion in fiscal 2011 from $995 million in fiscal 2010, the survey found.
With student debt increasing to pay for higher tuition and fees resulting from falling state funding, momentum is building in Congress to compel universities to spend endowments to help struggling pupils.
“Universities are wholly incapable of controlling their costs,” said Dean Zerbe, an attorney who helped U.S. Senator Charles E. Grassley, an Iowa Republican, scrutinize college spending. “Endowments continue to grow, and there is very little spend-out. They could tax endowments, and we could raise billions of dollars and give more Pell grants and use the money to help poor children.”
As the schools complain about declining revenue from the states, they also benefit from tax breaks that companies and individuals don’t get. Exemptions include tax-free charitable donations, tax-free endowments and billions in federal research grants that indirectly subsidize salaries for the university officials, Zerbe said.
Some states limit the percentage of university executive pay that can come from public funds, forcing institutions to use money from donor gifts and endowments to pay a shrinking pool of talented administrators what the market demands, said Raymond D. Cotton, a Washington-based lawyer with Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC who specializes in presidential contracts.
Texas law limits public allotments for president’s pay to $78,000 and Florida caps its compensation at $225,000, he said. Data compiled by Bloomberg reflects this, with Powers, the Texas president, earning $65,945, or 10 percent, of his $613,612 salary in 2011 from state appropriations and the remainder provided by endowments.
Escalating pay for public university presidents in California -- particularly a decision by University of California Regents to pay the incoming UC Berkeley chancellor a base salary of $486,000 -- prompted state Senator Leland Yee, a Democrat, to reintroduce a bill on Dec. 3.
The measure would prohibit executive pay increases using state or foundation money at the UC or California State University systems within two years of a budget year in which UC or CSU did not see an increase in their state budget allocation. Yee introduced the bill twice before. Last session it died in a legislative committee.
“Every time there were raises you would hear the regents talk about raising tuition and fees,” Yee said. “It seemed as if what was going on is that the students were paying for these increases.”
As schools raised administrator pay, inflation-adjusted published prices for tuition and fees at public four-year universities increased by 5.2 percent a year, on average, from 2002-2003 to 2012-2013 -- a higher growth rate than either of the two preceding decades, according to an October report by the New York-based College Board Advocacy & Policy Center.
Over the past decade, costs to attend public universities grew at more than twice the rate of those at private colleges, which recorded a 2.4 percent annual gain -- lower than either of the preceding 20 years, according to “Trends in College Pricing 2012.”
Even as pay and endowments grew at many public universities, their administrators complained about diminishing funding from their states. In speeches, budget presentations and newspaper editorials, university presidents said declining appropriations forced them to make tough choices between saving faculty jobs and upgrading half-century-old buildings.
“A severe backlog of facilities maintenance caused by the elimination of state support has the university on the precipice of crisis,” said University of Florida President Bernard Machen in an April 25 statement, decrying a 25 percent decline in state support, or $230 million, to the school by the legislature since 2007.
Machen earned $807,819 in 2011, fourth in total compensation among his peers at the 12 universities. Athletic officials at Florida ranked second and third in the database overall, with men’s basketball coach Billy Donovan earning $3.6 million from April 2010 to April 2011 and football coach William Muschamp pulling down $3.3 million from December 2010 to January 2012, according to contracts obtained by Bloomberg through a public records request.
Machen declined to comment through Janine Sikes, a university spokesman. Sikes said his compensation last year included a $300,000 retention bonus for eight years and a $75,000 retirement payment. Donovan and Muschamp declined to comment through a spokesman for the Florida athletic department, Steve McClain.
A shrinking pot of money to pay university employees -- whose compensation consumes more than half of most schools’ general-fund budgets -- is evident among custodians at UCLA, said Adam Keigwin, chief of staff for Yee, the California state senator.
“UCLA janitors are some of the lowest-paid maintenance workers throughout the country,” he said. “You have these individuals who are making millions more than at comparable universities and then you have people doing the grunt work making less than their peers at comparative universities.”
UCLA paid 876 custodians $24.5 million last year, or an average of $27,961, the Bloomberg data show. Rutgers paid 573 custodians $19.5 million, for an average of $33,637 each.
University of California officials said they negotiated a starting salary of $14.42 an hour for UCLA custodians with the American Federation of State, County and Municipal Employees.
Pay disparities among faculty and athletic officials caused dissent at the University of Texas at Austin, where professors protested when Brown -- the country’s second-highest-paid college football coach, after Alabama’s Nick Saban -- received a $2 million raise in 2009 amid cutbacks in academic programs.
“At a time when students are facing a deteriorating academic environment in the form of declining class offerings and increasing class sizes, and lecturers, teaching assistants and staff are facing job terminations,” the faculty council wrote in a resolution, “we believe a permanent raise of $2 million (a sum greater than the entire career earnings of a typical university employee) offered to any member of the university community is unseemly and inappropriate.”
Multimillion-dollar coaching salaries highlight misplaced priorities at public universities at a time when boards should focus on how to stretch thinning budgets, said Robert Atwell, president emeritus of the American Council on Education.
“I find it reprehensible that coaches make as much money as they do versus the faculty,” Atwell said. “People on the governing boards at some of these institutions are known primarily for their athletic priorities and it becomes a top priority of the university.”
The balancing act between finding money to pay executives what the market demands and dwindling state appropriations is getting trickier, said Ronald Ehrenberg, a professor of economics and director of the Higher Education Research Institute at Cornell University.
A good example of this phenomenon is the State University of New York, he added. In the 1970s and 1980s, SUNY salaries were among the nation’s highest, said Ehrenberg, who is a trustee. As the state’s budget was squeezed over the past two decades, salaries fell, he said.
Now compensation at the Stony Brook university is far lower than at flagship schools in others states. Twenty-four of its 5,978 employees earned over $300,000 last year, including its president, Samuel Stanley, who brought in $650,000, including a $400,000 base salary and $250,000 in deferred compensation, the data show.
Stanley makes about half as much as the university’s highest-paid employee, Mark Stephen, a physician and medical school faculty member who earned $1.2 million in 2011, records show.
“Dr. Mark Stephen is a highly-trained spinal cord surgeon who often treats badly injured and critically ill patients,” a university spokesman, Lauren Sheprow, said in e-mail. “ He runs a successful and active practice, from which the greatest portion of his salary is derived.”
Stanley, she said, “is grateful to be able to work in a job he loves, and believes he is fairly compensated.”
How much of medical personnel’s salaries is derived from taxpayer funds varies between, and even within, schools. About 8 percent, or $89,506, of Stephen’s compensation came from public money and $1.1 million from clinical practice, according to a salary breakdown.
Medical personnel at Ohio State and UCLA were six of the top 20 highest-paid university employees in 2011, according to data compiled by Bloomberg.
Ohio State compares salaries at about 130 academic medical centers when setting compensation for its doctors, said Crawford, the medical center spokesman. The source of funding is based on each employee’s role, with the majority coming from patient revenue.
Public universities use a lower percentage of revenue to provide services than nonprofit organizations do, and salaries of administrators should be tied to performance, rather than fundraising, said Robert E. Martin, emeritus professor of economics at Danville, Kentucky-based Centre College.
“If they are going to get these salaries there must be a link to their productivity and that does not exist,” Martin said. “Most of them are being compensated for raising more money rather than using the money they have wisely.”
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