Good morning. I am Jay Smith, President of the University of Wisconsin Board of Regents. I’m joined by Regent Fred Mohs and Regent Tommie Jones.
We appreciate having this public forum on AB709. We welcome your questions. Our job as Regents is to make sure this state has one of the best university systems in the nation. Our work to insure that brings us here today.
Today, we represent past as well as present members of the Board of Regents. Three recent board chairs have signed a letter protesting the proposed legislation that is in your background packet noting that leadership salaries have been a concern for some time.
In November, from our $3 billion university budget, the Board reallocated $185,000 to fix five serious salary problems. No new state money was requested or needed. The funds were reallocated from our base budget just as they are routinely for faculty and staff adjustments. To put this in perspective, last fall we reported to state government that we reallocated $7.2 million last year to faculty and staff to recognize competitive factors. The funds in question represent less than one-thousandth of one percent of our budget.
I am here to tell you WHY we made these changes and why we did it WHEN we did it.
People ask: “What do Regents do?”
One, we set policies for the university system. Another is to keep faculty and academic staff salaries near the midpoint of their peer institutions – peer groups are set by us and approved by the state.
We approve new academic programs. We set tuition. And we hold the university accountable to the taxpayers and the public.
One of the most important things we do as Regents is to hire and hold accountable the men and women who manage the UW System and its 15 institutions. Until recently, however, these 35 people were in the state executive salary program designed for state political appointees. As a result, we were unable to set salaries based on our policies, based on our competition.
As the Department of Employment Relations study of four years ago acknowledged; “Salaries for senior executives at the UW, on average, lag the median salaries of the peer institutions, placing the University at a disadvantage in recruiting and, in limited cases retaining senior executives.”
One consequence has been an exceedingly high rate of turnover in the past four years – ten of our 15 chancellors, three of our four vice presidents and all our academic vice chancellors. This high degree of turnover was directly related to compensation. Normal turnover is good but high turnover is disruptive and expensive.
Our 35 top leaders are measured against a national market, not a state market. They are selected from a national market, not a state market. National market forces determine our candidates and finalists just as they do our coaches, doctors and hospital administrators.
The legislature helped us by finally giving us the authority to set salaries within the Regent ranges. The Regents used that authority sparingly. In November, our board decided to provide 3.2 percent increases for 30 of the 35 people in this category – the same raise as faculty and staff received. But we decided we had to do more for five others. I want to talk about those five individuals for a minute.
Our Senior Vice President David Olien. He has had a distinguished career here and at the University of Illinois. In the past few months, he has been inducted into the Illinois Hall of Fame and received the national Swede Johnson Award. Our action brought him to the bottom of his peer group range.
UW-Milwaukee Chancellor Nancy Zimpher. She has instilled a new sense of pride and purpose in that institution. The Milwaukee Journal Sentinel just singled her out as one of the city’s top leaders. And yet, her salary had been frozen. With our adjustment, she is making $215,000. Last year in her peer group, the head of University of Louisville made $248,000 and the head of the University of Cincinnati made $265,000. Dr. Zimpher’s salary is just below the midpoint of our pay range, but still $13,000 below the median salary paid to chancellors of comparable institutions. Some might say the Regents didn’t do enough – some feel she deserves to be in the top half of her peer group.
UW-Eau Claire Chancellor Don Mash and UW-Stout Chancellor Charles Sorensen. Sorensen is our longest serving chancellor. He just brought home to Wisconsin the first national Malcolm Baldridge Award for excellent performance in higher education. Mash is a national figure in higher education. He’s raised more than $11 million for UW-Eau Claire. Both are sparkplugs for economic development in the Chippewa Valley.
With the adjustment we made, Dr. Sorensen and Dr. Mash both make $168,000 per year. Last year, the heads of Northern Michigan University made $200,000; Michigan Tech, $199,000, Eastern Illinois, $190,000. We placed Mash and Sorenson exactly at the midpoint of our range, which is still $9,000 below their peer group median. Some might say the Regents didn’t do enough – some feel they deserve to be in the top half of their peer group.
But I believe this fuss isn’t over our senior vice president or 3 of our 15 chancellors. I believe it’s about one person – Katharine Lyall – the longest serving university system president in the nation. I believe this bill and this hearing are about our decision to bring the university leader’s salary to within a competitive market range.
Let’s talk about what her peers make. With the Regent adjustment, our president makes $299,000 which is $750 more than the UW-Madison Chancellor who reports to her, but still $15,000 below the median of her peer group. The president of the University of Minnesota System makes $350,000; Illinois, $335,000; Michigan, $326,550. This is salary only.
They also get perks that Katharine Lyall doesn’t get – country club memberships, first-class travel, performance bonuses, and, in some cases, free tuition for their kids, and deferred annuities. She gets none of those things. Some might say the Regents didn’t do enough – many feel she deserves to be in the top half of her peer group.
What did Katharine Lyall do to deserve this catch-up pay?
She heads the eighth largest state university system in the U.S with 30,000 employees and 160,000 students.
She runs the most efficient university system in the nation. Under her leadership, administrative costs have declined from 6.4 to 5.8% while nationally that percentage has risen from 9.5 to 10.4%. You could argue that she saves the state $17.3 million annually due to that efficiency.
Most recently, she has put the university system to work helping to revive the state economy promoting regional economic stimulus programs and co-chairing two statewide economic summits.
Her qualifications are facts. Her accomplishments are facts. What her peers make are facts. The question is should the UW System president be paid at a market rate? The Regents believe strongly that she should.
As a businessman, I didn’t build a world-wide company by paying my executives 60% of the market and long-term, the state can’t keep quality universities with that strategy either.
So the next issue is timing of the increases.
We are sympathetic with the budget issues you are dealing with – and we are making sure the university does its part to meet the budget shortfall while preserving programs that fuel the state’s economy. We need quality people to lead us in these tough times.
In November, the Regents were faced with three choices.
One, do nothing. Let our leadership salary remain 40% below the market. Some said wait until our leaders leave, then raise the salary. I say shame on anybody with that thought. It is blatantly unfair. It punishes loyalty and it’s bad business.
Our second choice was to phase in the increase. In the President’s case, that would have required a raise of at least $38,000 per year for three years. I’m sure that all of us would have been hearing from the public each time one of those adjustments got made.
Our third choice was to bite the bullet and fix the problem all at once. That’s what we did. We reallocated existing funds to fix the problem.
Some would argue that with the economy in recession, manufacturing job layoffs rising, and state budget balances falling, it was no time to use the new authority the Regents were granted. I submit that when you are in economic trouble, you need to make sure your leadership is secure. As was identified this weekend at the World Economic Forum in New York: you “need leadership in fragile times.”
I think you and I both know that in Wisconsin, there is never a good time to raise a public employee’s salary – even if no new tax dollars are being spent.
We worried that the timing wasn’t good because of the September 11th disaster and the softening state economy. Now it isn’t good because of proposed municipal budget cuts. There are always reasons not to spend money on public salaries but sometimes you just have to do what is right.
Now that the longstanding inequities have been addressed, there will not be a need for adjustments of this size in the future. Thus we hope you will agree that we should give this arrangement a little more time to work. Let the Regents use this authority judiciously to manage salaries in a very competitive market environment to make sure that Wisconsin remains a place where national leaders in higher education want to come to work.
Preserving excellence in the university system should be an important priority for us all. Believe me, the quality of our leadership is critical to attracting quality faculty and staff. It is critical to attracting private and federal funds and to insuring accountability to students and the public for how those institutions are run.
The motto for Wisconsin is FORWARD. It’s a good motto. I hope this committee will let the Regents and the University move forward – not BACKWARD. To do so, the university community needs your vote against this bill. Your vote is about our future, not our past.
Thank you for your attention. We’d be glad to answer any questions.