University Senate Budget Committee White Paper: A Plan for Sustained Competitive Parity in Instructional Faculty Compensation 15 March 2000

 

Executive Summary

The University Senate Budget Committee (SBC: David Frank, Mike Kellman, Nathan Tublitz, Wayne Westling), in consultation with the Faculty Advisory Council and the University Administration has developed a plan to significantly augment instructional faculty compensation (salary and benefits) to levels competitive with peer institutions. Three related papers, describing the overarching principles underlying salary distribution, details of the salary augmentation plan (this White Paper), and the implementation of the plan for the first year, have been generated. In addition to the plan to increase instructional faculty salaries, this White Paper provides background, financial information, and salary data as a foundation to the salary. Specifically in this White Paper we: (N.B. The complete text of this paper + supporting data are posted on the SBC Website http://darkwing.uoregon.edu/~uosenate/dirsen990/SBCfinal.html).

 

University Senate Budget Committee White Paper: A Plan for Sustained Competitive Parity in Instructional Faculty Compensation 15 March 2000

INTRODUCTION

The University of Oregon stands at a true crossroads as we enter the new millennium. The strengths of the University lie in the superior quality of its faculty and the institutional commitment to academic excellence. However, the University has seen years of declining financial support from the state. Although partially mitigated in the current biennial budget, the fallout from this long-term declining support has had far reaching impacts across campus, affecting campus infrastructure, work space, faculty and staff workload, equipment, and institutional support for students and faculty to a name few specifics. Foremost among these is faculty compensation (salary + benefits), a situation unfortunately not rectified by recent increases in state support and which has clearly reached a crisis point. We are presently at only 82.1% of parity [1] in compensation with the group of institutions used by the Oregon University System as our comparators [2], and have lost a further 6.5% in relative compensation since the passage of Measure 5 [3]. The University Senate has charged the Senate Budget Committee to investigate campus-wide faculty compensation, and this report addresses this important issue.

The Senate Budget Committee, working intensely with the University Administration and all segments of the faculty community, has developed a plan to increase faculty compensation to a level competitive with our peers. Our goal is to achieve sustained competitive parity by bringing average instructional faculty compensation to 95% of parity relative to our comparator institutions. This increase is over and above cost of living allowances. The funds supporting this increase will be devoted to significantly improving the compensation of the vast majority of faculty, with an emphasis on rectifying the problem of salary compression.

The goal of sustained competitive parity in compensation is designed to maintain competitiveness in academic quality with our comparator institutions, all of which are distinguished, internationally recognized comprehensive public research universities. To maintain and improve academic quality and remain competitive with our national peer institutions, it is imperative that we enhance the national and world standing of the individual disciplines, and the overall academic reputation of the University of Oregon. This requires that faculty be compensated in accord with national norms for distinguished public institutions.

The 95% parity goal is realistic because of the new state higher education financing structure, which gives us an unprecedented window of opportunity to halt the negative trends of the recent past, and to build on our considerable strengths. Success will require fresh thinking on the part of everyone employed in the University -- faculty, staff, and administrators -- to respond positively to the opportunities -- as well as hazards -- of the new financial realities in which the University operates.

It is essential that all our campus faculty colleagues understand and consider the salient aspects of this new funding environment as well as the philosophy that lead us to proposing this plan. The plan presented in this White Paper is based on a set of overarching principles of compensation described in an accompanying document entitled Basic Principles of Compensation for Instructional Faculty at the University of Oregon. In addition to describing the sustained competitive parity plan, this White Paper discusses background information and presents a rationale for this plan. The implementation details for the first year of the plan can be found in a third document entitled White Paper Implementation Guidelines 2000-2001. All three documents can be found though links located on the University Senate Budget Committee home page (http://darkwing.uoregon.edu/~uosenate/dirsen990/budgetcom9900.html).

In this White Paper we: (1) Frame the faculty compensation issue using quantitative data; (2) Describe the new Oregon University System funding model; (3) Propose a specific goal for competitive faculty compensation; (4) Outline a path to the future, highlighting benefits and tradeoffs of each route to our goal; (5) Discuss principles of implementation of the plan for sustained competitive parity, with attention to merit and cost-of-living issues; and, (6) Consider the communal implications of improving instructional faculty compensation.

1. THE FACULTY COMPENSATION ISSUE

Faculty remuneration involves issues of compensation, comparison, compression, process, and equity.


In summary, University of Oregon faculty at all ranks are badly undercompensated relative to faculty at our comparator institutions. Salary compression is a serious problem at the senior ranks. We recognize that the process of compensation and considerations of equity are also important issues that merit thoughtful consideration. Some of these issues are raised more fully in the accompanying Principles and Implementation documents. Because faculty salary improvement is directly linked to funding, the following section discusses the new funding model of the Oregon University System.

2. THE NEW FUNDING MODEL: OPPORTUNITIES AND HAZARDS

Under the new model, State general funds are distributed by a relatively simple "matrix" model [4] for state support per student at various matriculation levels (e.g., lower class undergraduates, upper class undergraduates, post-bacs and masters, doctoral students) and fields of study (e.g., science, law, architecture, journalism, etc.). Student enrollment and retention becomes even more critical to adequate funding with the new model. With the new model, the University retains all tuition brought to campus by each of our students. We have much greater flexibility in the educational programs we offer. Finally, in the future, we may have greater autonomy in setting tuition.

The new funding model presents risks as well. If we retain or enroll fewer students than expected, we will face budget shortfalls. Enrollment is down modestly from the late 1980s; from 1985 - 1989 we averaged 17,515 students; from 1995-1999 we averaged 17,022 students in our regular academic program [5]. For 1999-2000, we have 16,716 students. This is a drop from the 1998-1999 level of 16,780, and a shortfall of several hundred students from projections. This means a budget shortfall this year of $2.2 million. Occasionally, enrollment has in recent years exceeded expectations. A fluctuation of 100 in-state undergraduate students equals a budget shift of approximately $0.8 M; 100 out-of-state undergraduate students equals a shift of approximately $1.3 M; 100 in-state doctoral students equals approximately $1.6 M. Obviously, it is necessary for the University to be prepared for largely unforeseeable year-to-year fluctuations in enrollment.

In funding the new model, the legislature slowed the trend of disinvestment that began with Ballot Measure 5. During the post-Ballot Measure 5 years we fell 6.5% further behind our comparators, but fortunately the new model has slowed that trend and we are no longer losing ground annually with our competitors. The 1999 budget allocation from the state did not, however, return our compensation to pre-Ballot Measure 5 levels.

It is not unreasonable to expect the legislature to make up this 6.5% loss in the next session, and the OUS and UO administration are working toward that end. Our plan in this White Paper is independent of that legislative effort, however.

The new funding model provides a straightforward framework for understanding the role of student enrollment and retention in shaping the overall financial picture of the University. Our future is now much more clearly in our own hands. For the first time, this gives us the opportunity to formulate a long-range plan to achieve the goal of sustained competitive parity.
 

3. THE GOAL: SUSTAINED COMPETITIVE PARITY

We recommend the following objective: average faculty compensation will be brought to and maintained at 95% parity with our comparator institutions. These increases will be over and above increases that merely keep us level with our comparators, and will focus on salary improvement, with a major emphasis on redressing compression inequities. It is expected that the vast majority of faculty across campus will enjoy significant increases in compensation. The 95% figure is realistically attainable and also sufficient to bring us to reasonable competitiveness with our comparator institutions.

The goal of sustained competitive parity means that not only will we attain 95% parity in relation to the current level of our comparators, but that we will sustain the 95% level in the indefinite future so as to maintain our competitiveness with other quality institutions who will undoubtably continue to build aggressively for the future.

It is obvious that sustained competitive parity will be achieved only if salary raises exceed the performance of our comparators during the lifetime of this proposal. It therefore follows that both maintenance of our current position relative to our comparators and the 2.5% annual increases above this level must be fully funded to achieve the 95% goal. It is the expectation of the SBC and the administration that maintenance of our current relative position will be fully funded by the State through the new funding matrix. It is also our hope that the State will fund some or all of the 6.5% ground that was lost relative to our comparators in the aftermath of Measure 5. However, it is clear that funding sources other than the state will be needed to raise faculty compensation above the performance of our comparators until we achieve parity

Sustained competitive parity is an immensely desirable goal. Attaining this objective requires a clear path with a realistic plan. The next section delineates five funding sources that we are proposing be tapped to fund this proposal. Please note that each source comes with its own set of tradeoffs.
 

4. THE PATH TO THE FUTURE

What will it take to achieve 95% parity relative to our comparators? An estimate developed by the University Office of Resource Management is that to bring the average instructional faculty salary to 95% parity will require approximately $6 million per year in new, recurring funding. (N.B. There are three groups of UO employees with faculty status: instructional faculty, officers of administration, and officers of research. While this plan refers specifically to instructional faculty, we recognize the need for competitive salaries for all faculty level personnel and this is discussed in Part 5 of this White Paper). The $6M is over and above the level needed to sustain us at our current, noncompetitive level. The $6 million estimate is for the funding that would be needed now to bring us to 95% parity; this number could change somewhat in response to developments at our comparator institutions, a point to keep in mind in connection with the goal of sustained parity.

An annually recurring increase of $6 million may seem like a daunting goal. However, to put this in perspective, the current unrestricted budget of the University (funds, mainly from tuition, fees, and state appropriation, over which the University has complete discretion) is about $170 million per year. This is a significant challenge, but we would not be proposing it if we did not believe it is attainable.

There is no single source for the $6 million/year. The Senate Budget Committee has identified five sources of new funds to be used for salary improvement. These are: 1) Reallocation of current funds; 2) Enrollment increases; 3) Increased tuition; 4) New endowment; 5) Auxiliary enterprises.
 

  • A. Reallocation of current funds to Instruction. There has been a gradual drift of unrestricted funds (mainly, tuition and state support over which there is complete control in expenditure) away from Instruction, the official budget category out of which faculty salaries are drawn [6]. A goal of gradually restoring Instruction to a higher defined percentage of the unrestricted budget will reverse the current trend and provide additional unrestricted funds for salary improvement. This reallocation will help us reach a significant fraction of our target. Reallocation of current funds is a major source of funding for the first year of this plan and is detailed in the separate Implementation document.

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  • B. Enrollment increases. Just as small enrollment shortfalls can have a serious budget impact, modest enrollment increases, through recruitment and/or retention mechanisms, can be a large step toward our goal. For example, each additional resident undergraduate represents approximately $8000 in additional revenue, each non-resident undergraduate $13,000, and each resident doctoral student $16,000. Looking at this from another viewpoint, 100 additional resident doctoral students would produce a $1.6M increase in annual revenue, bringing us one-quarter of the way towards our goal. We propose that significant efforts be made by the administration and the faculty to modestly increase student enrollment with an emphasis on improving graduate student numbers. We also suggest strengthening of current plans to improve student retention at all levels.

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  • C. Increased tuition. Currently there is a tuition freeze that ends in June, 2001. After that, there may be some ability to reset tuition. Even a small per year increase would produce significant revenue, e.g., $100/yr/student X 17,000 students = $1.7M/yr. We suggest that a modest increase in tuition be seriously considered as a source of funds to underwrite this plan in future years.

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  • D. New endowment. The University in recent years has become much more aggressive in private fund-raising. This will continue to grow in importance in the future. The issue of faculty salary augmentation must be given the highest priority in planning for future fund-raising. It is essential that a significant portion of recurring income from any new endowment campaign be earmarked towards meeting the goals of this White Paper.

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  • E. Auxiliary enterprises. Auxiliaries include student housing (dorms + food service), athletics, student health, the EMU, parking, and other activities. The University provides a variety of services to these auxiliary enterprises and currently assesses an average fee of about 2% for these services. A modest increase in the level of assessment would result in additional revenues. A related issue is the University subsidy received by some auxiliaries. In the case of athletics, $2.2M of University funds are used per year to support non-revenue sports and Title IX compliance programs within the athletic department. With the expansion of Autzen stadium, the University has assured the SBC that the current $2.2M subsidy will be eliminated completely as increases in athletic revenues are realized. As detailed in the accompanying White Paper Implementation Guidelines 2000- 2001, funding for the first year of this plan utilizes funds from this source. Auxiliaries will also provide funds to support this plan in future years.

  • Taken together, over several years, these sources give us a very realistic chance to attain our goals. An advantage of reliance on a variety of sources is that this helps mitigate the risk that a shortfall in any single source could keep us from attaining our goal.

    TRADEOFFS. The path towards the 95% parity goal certainly cannot be a "zero-sum game". In the best of worlds, we would achieve our goals without making any difficult choices. However, this is not likely to be possible given the UniversityÝs current fiscal situation. Most of the realistic sources of new salary revenue involve choices and tradeoffs that merit careful discussion. Internal reallocation of funds, increased enrollment, or increased tuition each come with a cost to some portion of the University community. The following examples of tradeoffs are presented only for the purposes of discussion (their inclusion does not imply that the SBC are in favor of these examples):
     

    1. Small increases in overall student-faculty ratios (e.g., from 20:1 to 21:1)
    2. Selectively increasing class size at the lower or upper division level
    3. Redirection of private fund raising to emphasize faculty salaries at the expense of academic support (e.g., research funding, libraries, computer support, building improvements, etc.)
    4. Less institutional support
    5. Increased use of technology and web-based courses


    None of these tradeoffs necessarily means huge adjustments, since the total funds needed for instructional staff are $6 M compared to a current unrestricted budget of $170 M. Furthermore, we must and will aim to mitigate unavoidable tradeoffs, and optimize the overall benefit of our strategy. For example, continuation of the current trend to higher SAT scores may result in higher student retention, with the bulk of any increased enrollment after the freshman year, where it might be more easily accommodated. Judicious use of increased revenue can result in more attractive educational programs, mitigating effects of increased tuition. However, there is no completely painless way to our goal, and the various tradeoffs need to be carefully considered when each funding source is utilized.

    After hearing faculty views in public meetings, receiving individual communications, and reviewing the faculty survey results, we are convinced that many of the specific tradeoffs can not and should not be decided centrally. Different units have different needs, and we need to preserve flexibility for each unit to make choices which are best for it. Specific issues regarding any tradeoffs should be made at the unit level, with appropriate consultation with the Dean and Provost.
     

    5. PRINCIPLES AND IMPLEMENTATION OF THE PLAN OF SUSTAINED COMPETITIVE PARITY: MERIT AND COST-OF-LIVING ISSUES

    The SBC, with support from the Administration, has produced separate documents detailing the Basic Principles for Instructional Faculty Compensation and Implementation Guidelines for 2000-2001. Through these documents we are committed to the overarching principle that the overwhelming majority of faculty, who are performing satisfactorily and meritoriously, should partake in the salary increases proposed here. We also subscribe to the principles that meritorious performance should be rewarded appropriately, and that faculty compensation should be protected against inflation. It is the expectation that all satisfactorily performing faculty will receive annual salary increase from all sources (COLA and Merit) that at minimum is equal to the cost-of-living increase.

    The SBC and the administration are united in supporting the principle that any funds available to support salary increases must equally address both COLA and merit raises. With regard to COLA, a portion of every salary adjustment pool must be allocated to cost of living adjustments for all faculty performing satisfactorily using the following criteria:
     

    1) If the total salary adjustment pool in terms of percentage is equal to or greater than 200% of the cost of living increase in the previous calendar year (as determined by the Portland-Salem OR-WA consumer price index published by the US Bureau of Labor Statistics), then all faculty who perform their duties satisfactorily will receive a salary increase equivalent to the cost of living for that previous year. For example, if the total salary pool in 2000 is a 5% increase and the CPI for 1999 was 2%, then 40% of the salary pool will be designated a COLA with the remaining 60% to be used for merit increases.
    2) If the total salary pool in terms of percentage is less than 200% of the cost of living increase in the previous calendar year, then half of the current salary increase will be distributed as a COLA for all satisfactorily performing faculty. For example, if the total salary pool in 2000 is a 5% increase and the 1999 CPI was 3%, then 50% of the salary pool will be designated a COLA and 50% will be used for merit increases.


    The salary improvement funds that remain after COLA will be distributed on the basis of merit and the commitment to rectifying group and individual inequities based on the principles set forth in the accompanying Principles document. To demonstrate their commitment to these Principles and to the doctrine of shared campus governance, the administration has committed that the proportional distribution of any funds available for salary improvement will be discussed and agreement sought with the SBC prior to disbursement.
     

    6. COMMUNAL IMPLICATIONS

    We recognize that all stakeholder groups in our community -- instructional faculty, officers of administration and research, classified and non-classified professional personnel, and graduate teaching fellows -- are critical to the achievement of academic quality. The Office of Resource Management has developed a preliminary estimate that the University would require additional funds of $4M annually (on top of the $6M discussed above for instructional faculty for a total of an additional $10M) to bring up all sectors of the University to 95% parity. It is essential to the long-term health of our institution that the University provide competitive compensation, based on appropriate comparative standards, to all stakeholder groups.

    SUMMARY AND CONCLUSIONS

    At 82% of the level of our comparators, and with much ground lost just since 1992, instructional faculty compensation in all units at the University of Oregon has become a critical issue which must be dealt with in a coherent long-range plan. We have proposed the goal of sustained competitive parity, which we believe can be attained by raising instructional faculty compensation to 95% of the level of our comparators over and above cost-of-living and maintaining that level into the foreseeable future. The vast majority of instructional faculty across campus will be positively affected by this proposal. This proposal also presents a mechanism to positively address the salary compression issue. The new funding model of the Oregon University System offers a window of opportunity to strive for this goal, in an environment in which we will have much greater control and responsibility for our own destiny. It is realistic to seek to achieve our goal over five years, with revenue sources whose variety mitigates the risks of relying too heavily on any one source of funds. To be sure, there are tradeoffs which will have to be considered, whatever the exact strategy that we choose. There are also communal implications of our plan which should be considered, with a view to bringing all segments of the campus community to a compensation level competitive with our peers.



     

    REFERENCES
    The data supporting each reference in this White Paper are posted on the University Senate Budget Committee website at http://darkwing.uoregon.edu/~uosenate/dirsen990/dirextra/SBCWhite.html.
    1. 1998-99 Average Faculty Total Compensation Among Peer Universities, based on data provided in American Association of University Professors, ACADEME: The Annual report on the Economic Status of the Profession, 1998-99. March/April 1999. Summary prepared by Oregon University System, Office of Institutional Research.
    2. University of California, Santa Barbara; University of Colorado, Boulder; Indiana University, Bloomington; University of Iowa; University of Michigan; University of North Carolina, Chapel Hill; University of Virginia; University of Washington.
    3. Annual Percentage Changes in Faculty Salaries and Compensation, based on data provided in Oklahoma State University, 1998-99 Faculty Salary Survey by Discipline. Summary prepared by Oregon University System, Office of Institutional Research.
    4. 1999-2000 State Revenue per Cell: Legislatively Approved Budget. Summary of State Funding Matrix prepared by Oregon University System, Office of Finance and Administration.
    5. Enrollment History. See http://www.ous.edu/irs/factbook98/WEBstudent/hchist.htm
    6. University of Oregon, Historical Trends in Unrestricted Expenditures. Summary prepared by University of Oregon, Office of Resource Management.
    7. Changes in Tuition Compared to Changes in Enrollment. See http://www.ous.edu/irs/factbook96/student/tuienrl.htm


    This document will be presented to the UO Senate at the 29 March 2000 meeting as resolution US9900-13Related Web Pages:
    1. Statement of Principles
    2. Senate Budget Committee White Paper
    3. Implementation paper
    4. Home page of the Senate Budget Committee
    5. UO Senate Home Page
    6. The February 2000 University of Oregon Instructional Faculty Survey and banner tables - see also archival copy


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