Solving California's higher education budget -- with word problems!

Are you in the mood for some word problems? Let's go, and please remember to show your work for full credit!

1. Read this passage from Inside Higher Ed:

University of California administrators announced Thursday that the system will centralize payroll and human resources for its 10 campuses and five medical centers at a new site in Riverside. The new center is part of a system-wide initiative designed to save $500 million in administrative costs and direct them back toward the university's academic mission. UC officials said the new center would save "as much as $100 million annually" and create up to 600 jobs when fully deployed, which they hope to be within three years. Part of the savings will come from eliminated positions on the individual campuses, but officials would not say how many people would be losing their jobs.

(a) Assume the scenario where the net change in jobs is zero (that is, where each of the HR jobs lost at another UC campus is completely offset by a job created at the new site at Riverside). Also, neglect non-salary costs (on the assumption that salaries are a much larger total cost). Calculate the average salary of the 600 HR employees required to save $100 million annually.

(Hint: Let the average pre-consolidation HR salary equal x.)

(b) Now assume the best-case scenario where the new site at Riverside results in net creation of 600 jobs in the UC system. Again, neglect non-salary costs (on the assumption that salaries are a much larger total cost). Calculate the average salary of the 600 new HR employees required to save $100 million annually.

(c) Propose a strategy for recruiting HR specialists willing to work for the salary you found in (b). For bonus points, propose a strategy that does not require the use of Schedule I drugs.

Extra-credit: Explain why it makes sense to describe this cost-cutting plan as "creating jobs".

2. Read this passage from California Watch:

In the first test of the California State University system's recently approved executive compensation policy, the presidents appointed to lead CSU East Bay and CSU Fullerton are slated to each receive the maximum salaries allowable under the new rules.

After CSU trustees approved a large pay increase for the new San Diego State University president last summer on the same day that they raised student tuition, the university system faced a chorus of criticism from legislators, the media and the public. Trustees approved a base salary for SDSU President Elliot Hirshman of $400,000, including $50,000 from the university foundation. That's $100,000 more than his predecessor's salary.

In response, the CSU trustees in January approved a new executive compensation policy [PDF] that limits new presidents' base pay to no more than 10 percent above their predecessors.

In a pay package [PDF] slated for review at this week's Board of Trustees meeting, newly appointed CSU Fullerton President Mildred Garcia will get $324,500 in base pay, plus housing and a $12,000-per-year car allowance. That's exactly 10 percent more than her predecessor, Milton Gordon, who in 2011 had a base salary of $295,000. 

It's also 10 percent more than Garcia earned in base pay at her previous post as president of CSU Dominguez Hills, according to CSU's executive compensation summary [PDF].

Leroy Morishita, the new president at CSU East Bay, will get $303,660 plus $60,000 per year for housing and a $12,000 annual car allowance. That's 10 percent above predecessor Mohammad Qayoumi's base pay in 2010, as well as a 10 percent raise for Morishita, who had been serving as interim president in Qayoumi's stead since July.

(a) For a CSU campus whose outgoing president has a base salary of $300,000 per year, what is the minimum number of new presidents that must be hired before the base salary reaches $1 million?

(b) Given 23 campuses in the CSU system, and assuming an average presidential base salary of $150,000 per year, how many years of hiring a new president at each campus annually would it take to double annual presidential salaries?

(c) How many lecturers could you hire per year with the amount of money required for each of the 23 CSU campuses to hire a new president at the maximum 10% increase of base pay? (Assume an annual lecturer salary of $36,000.)

(d) If a new CSU campus president gets a 10% increase in base salary and faculty on that campus cannot get a 1% increase in base salary, what percentage of the faculty's grading should the campus president take on?

Extra credit: Not all compensation for campus presidents comes in the form of salary. If housing renovations are included in campus executive compensation packages, and if such renovations can be paid for out of campus Foundation funds, explain why Foundation funds cannot be used for faculty salaries or for non-salary compensation for faculty (e.g., to pay for house or car repairs).

10 responses so far

  • astronomer says:

    Let's be fair and admit that when the fine journalists at IHE said the center would "create" 600 jobs, they were misquoting the UC fact sheet, which only says that eventually 600 staff would be located there and that current staff who will be laid off at the campuses would have priority for hiring. UC never said that the goal was to "create" jobs -- they are very clear that cost savings come from reductions.

    • Janet D. Stemwedel says:

      Fair enough. I'm happy to shift the question to why IHE described it that way.

  • Pascale says:

    My brain hurts. I'm going to go drink and try to forget that I ever read and considered this mess.
    Sheesh. Should have had a trigger warning up top.

  • DJMH says:

    I know! ANSR KEY PLZ.

    Though for 1 c, I think sadly the answer is that in this economy, even a negative paying job (??? Did I get it???) is attractive....

    • Janet D. Stemwedel says:

      "Will pay to go to work."

      See, one more reason I'm totally not cut out for an HR job.

  • Jim Thomerson says:

    A mistake I made, from time to time in my younger years, was to get all upset over bad things happening in the university. Things which I could not influence, and, sometimes, things which had no effect on me. This foolishness made my life less happy and productive. Fact of the matter is that we do not live in a perfect world. Much of what goes on is beyond our influence or control. Those things are just part of life, and we need to suck it up and live the best we can under the circumstances. Very occasionally, something bad will be trivial enough that we can thwart it. We should do so.

  • DJMH says:

    Solving it with hunger strikes is more of a statement...

  • Tony Lima says:

    Great stuff here, Janet.

  • Rugosa says:

    Can someone explain why people earning hundreds of thousands of dollars need extra allowances for housing? Yes, I know college presidents need fancy digs to impress the alumni into donating, but $300k per year will buy a pretty nice shack in most parts of the country.

  • Murfomurf says:

    You guys & your private universities & state funding & stuff & things... it's hard enough getting any sort of job at a university without paying the people who already HAVE jobs more money! At least our public system of education tends to level things out a bit! [Australia].