An audit report of California State University system’s employee compensation practices was released Nov. 6 for the first time to the public, sparking responses from the faculty union and state legislators who hold the purse strings.

The California Faculty Association and higher education policy makers viewed the report as a long-awaited catalyst for administrative change, likening it to ammunition as the CSU prepares to submit its support budget request for the coming school year.

“The audit report confirms everything we have been saying for months,” said CFA Political Action Chair John Travis. “We have been asking for an explanation of the pay for years, and now we can make a budgeting time table.”

University officials have promised students that they would push for more funds from the state this year in order to avoid raising tuition fees. In many cases, State Auditor Elaine Howle’s report and the CSU’s response to it illuminated wide differences in policies regarding compensation, golden handshakes and how spending should be monitored.

In the time that the CSU had to study the audit before it was released to the public, it crafted a carefully itemized response that agrees with many of the recommendations.
Assemby Member Anthony Portantino, who is chair of the Committee of Higher Education, said he viewed the university’s reaction with skepticism.

“We can’t let them get away with loving the report to death and agreeing with everything,” he said. “They need to give us a plan of action for what they are actually going to change.”

In the 2006-07 fiscal year, the school system had a $4.2 billion budget and spent $2.6 billion of it on faculty, managers, presidents and high executives. Executive compensation increased by 25.1 percent since 2002.

Travis said the report reveals a “nonchalance in the use of public funds, especially in regards to executive pay.”

The audit said that university employment policy shouldn’t remain under the discretion of campus presidents or the Chancellor because it has led to “generous” and “questionable” post-employment packages.

For example, in July 2004, when Marvalene Hughes retired as president of CSU Stanislaus, she exercised a right in her contract to return to her previous position as faculty member only to immediately retire and take advantage of faculty retirement perks, Howle wrote.

The CSU reaction countered that the university believes in “administrative flexibility” and that delegation of hiring practices within campuses to individual presidents is “the best administrative practice.”

But Portantino expressed hope that the audit “gets [the CSU] to stop fighting oversight.”
The auditor recommends the CSU finds a way to generate “accurate, detailed and timely compensation data” if it wants to have better oversight over the way employee groups are being paid.

The CSU has also taken flack for using data from the independent Mercer Report, which some call shaky, to justify pay increases.

“The CSU is charged with shifting the public trust by using questionable data and methodology,” Portantino said.

For example, CSU administrators compared salaries of school systems only through cash compensation, leaving out housing and housing allowances—a practice the auditor warned against. The auditor said that the public school system should work with the commission on higher education and the legislative analyst—instead a private for-profit company—if it wants to compare its salaries to those of other institutions.

Asked during a Nov. 6 press conference what he felt was the “most egregious” discovery in the audit, Portantino cited the CSU’s practice of “disregarding coordination with the legislative office." The Board of Trustees has repeatedly shown that it is unable to watch over the Chancellor’s compensation policies in a way that is “prudent” and “cost-saving,” the auditor said.

As part of the bargaining agreement struck with the faculty union this spring, the CSU promised to push legislators for full funding of ACR 73, a hugely under-funded Assembly bill designed to help more faculty get on tenure track.

The auditor also suggested the need for “statutory change”—new laws that would force CSU leaders to implement compensation policy changes.

But with the audit, legislators are now in a better position to second-guess the CSU’s ability to make financial decisions, Portantino said.

“The assembly plans to raise some questions during budgeting process to introduce legislation that will bring accountability,” he said, “and to reaffirm that education is number one as opposed to enticing top executives.”