Grassley: Private College Salaries Soar as Tuition Goes Up

Press Release

Sen. Chuck Grassley today expressed concern that private college presidents' salaries continue to go up even as tuition increases for students, according to a new survey from The Chronicle on Higher Education. Grassley keeps an eye on tax-exempt organizations such as colleges to ensure adherence to their charitable mission in keeping with their special tax-exempt status.

"The executive suite shouldn't be insulated from belt-tightening," Grassley said. "The pressure on students and families gets greater all the time. The fact that these salaries are growing right now is out of sync with the reality for most parents and students who are trying to pay for college in the midst of high unemployment and after savings for education were either wiped out or greatly diminished last year due to the stock market falling."

Presidents at private colleges and universities had their median pay increase by 6.5 percent to $358,746 for 2007-8, according to The Chronicle of Higher Education's annual executive compensation survey, published today. Presidents at the major private research universities had their median pay increase by 15.5 percent. Some of the colleges are paying former officers high salaries, and 58 private colleges now charge more than $50,000 a year in tuition, room, board, and fees, compared to only five last year, according to the Chronicle.

"It's stunning that so many schools are paying high six-figure salaries to former officers," Grassley said. "You wonder if these colleges are giving away the store when they sign contracts with employees. A college's mission as a tax-exempt entity is to educate students, not subsidize former employees."

Grassley's interest in tax-exempt organizations comes from his position as ranking member and former chairman of the Committee on Finance, with exclusive Senate jurisdiction over all tax policy. Grassley's oversight of tax-exempt groups involves whether tax-exempt laws are current and protect the groups from individuals who might abuse them for personal gain, and whether tax-exempt groups use their resources in keeping with the charitable mission they state to the Internal Revenue Service when granted their tax-exempt status. Grassley has looked at broad categories of tax-exempt groups, such as colleges and universities, non-profit hospitals, and media-based ministries. He's also looked at individual organizations such as the American Red Cross and the Nature Conservancy.

In September 2007, Grassley began looking at soaring endowment growth at several colleges and secured testimony from two witnesses at a Finance Committee hearing. One of the witnesses said college tuition at many well-financed colleges increased, even as their endowments grew dramatically. After Grassley began asking whether some of these colleges could spend a little more of their endowments to keep tuition down, several prominent colleges announced more generous student aid policies. Grassley continues to study whether colleges and other asset-accumulating non-profit entities should face a mandatory pay-out requirement.

Grassley also continues to consider whether the existing tax rules governing charitable executive compensation make sense. These rules currently allow charities to look at salaries of executives at for-profit organizations to determine reasonableness and insulate charities from IRS scrutiny of executive compensation when a board rubber-stamps compensation packages. Grassley proposed changes to these rules in an amendment to the health care legislation recently considered by the Finance Committee. The text of that amendment and his statement are available at finance.senate.gov.

Here's the Chronicle of Higher Education's press release on the private colleges' survey:

Private University & College Executive Pay Continues to Climb, According to
The Chronicle of Higher Education's 17th Annual Executive Compensation Survey

One in five of the 419 private institutions surveyed paid $200,000 or more to "former officers"

Presidents at private colleges and universities saw their median pay increase by 6.5 percent to $358,746, according to results of The Chronicle of Higher Education's annual executive compensation survey, published today. For one subset of the 419 institutions surveyed--the major private research universities--median pay was 15.5 percent higher in 2007-8 ($627,750).

Twenty-three college presidents on that list made over $1-million in total compensation, and one in four of all those in the survey were over the half million mark. New this year is The Chronicle of Higher Education's analysis of "former officer" pay as reported on federal tax forms: 85 of these institutions (20%) were paying at least one former officer or key employee more than $200,000 in compensation in 2007-2008, several with as many as four still drawing pay checks.

The Chronicle of Higher Education's analysis of federal tax documents covers the 2007-8 fiscal year, the most recent data available. Note that since then, college campuses have been hit hard by the current fiscal crisis and salary increases have leveled off, with some presidents even taking pay cuts this year, which are not reflected in this analysis. [NOTE that The Chronicle of Higher Education's annual look at executive compensation of public universities is slated for publication in January 2010.]

"While the pay of private-college presidents continues to increase, our reporting shows that the economy is clearly having an impact on their paycheck," said Jeffrey J. Selingo, editor of The Chronicle of Higher Education, which first published the executive compensation survey in 1989, and has done so annually since 1993. "Presidents are giving back some of their pay or trustees are freezing salaries. Both groups are worried about how the public perceives a high salary at a time when budgets are being slashed and tuition continues to increase. In fact, 58 private colleges now charge more than $50,000 a year in tuition, room, board, and fees, compared to only five last year."

Highest paid college and university presidents
The highest compensated private university executive was Shirley Ann Jackson, Rensselaer Polytechnic Institute in Troy, N.Y., whose package totaled $1,598,247 in fiscal year 2008. Next on the list after her were: David J. Sargent of Suffolk University in Boston, who held the top spot for fiscal year 2007 and took in $1,496,593 this past year; Steadman Upham of the University of Tulsa took third place with $1,485,275.

Highest paid former officers
Three private institutions paid a "former officer" more than $1 million in 2007-8: George Washington University's former president Stephen J. Trachtenberg got a package totaling $3,664,569; Oberlin College paid former president Nancy S. Dye $1,460,420; and Emory University's Michael M.E. Johns received $1,006,188. The remaining seven former officers on the top 10 list all were paid well over $600,000 in 2007-8.

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