Analysis of the 2007-08 Budget Bill: Education

California Postsecondary Education Commission (6420)

The statutory mission of the California Postsecondary Education Commission (CPEC) includes analysis of long-term higher education needs, evaluation of policies and programs, and collecting and disseminating relevant data and other information. The commission has 16 members, representing the public and private university segments, the State Board of Education, students, and the general public.

Proposed Budget. The Governor proposes total General Fund expenditures of $2.2 million, which is an increase of $9,000 from the revised current-year level. The proposed budget funds 21 positions, including an executive director, staff counsel, 7 policy and programs analytical staff, 6 information services staff, and 5 administrative and support staff. Two positions are supported with federal funds.

Reassessing CPEC Responsibilities

State law assigns to CPEC a number of different responsibilities related to higher education coordination and oversight. In general, statutory direction is broad and permits CPEC considerable latitude in defining the scope and frequency of its activities. In addition to its statutory tasks, CPEC is occasionally asked to perform other duties (such as convening working groups or studying a particular issue) by the Governor or Legislature. The commission also initiates some work on its own.

Earlier Budget Reductions Prompted Examination of CPEC’s Focus

In an effort to cope with declining General Fund revenues in 2002-03, CPEC’s funding was reduced by $1.6 million, or 43 percent, from the prior year. Recognizing that such a reduction would affect CPEC’s workload, the Supplemental Report of the 2002 Budget Act directed our office to re-examine CPEC’s statutory functions.

Legislative Analyst’s Office (LAO) Report Found Conflict Among CPEC’s Roles. In our response to the supplement report (released in January 2003), we found that CPEC generally was fulfilling its role as a clearinghouse of higher education information, but was unable to effectively carry out a number of its other statutory functions. Among other reasons for this, we found that tension exists between some of CPEC’s responsibilities. Some of these responsibilities put CPEC in a coordination and advocacy role that requires it to work cooperatively with the higher education segments—gathering and processing information on issues that are generally more technical in nature (such as academic program review) and facilitating communication on cross-segmental issues (such as transfers). Other responsibilities, however, require CPEC to play more of an oversight role—dispassionately evaluating higher education performance and analyzing each segment’s effectiveness in delivering services to students. We recommended to the Legislature that the commission focus on only one of the two roles (coordination/advocacy or oversight/analysis). We also noted the benefits to the state of maintaining CPEC’s data management capacity, which we consider a core function of the commission.

2007-08 Proposal Would Focus CPEC’s Responsibilities

The 2007-08 Governor’s Budget maintains CPEC’s General Fund support at approximately its current-year level, and also includes language that would make three responsibilities the highest priority for CPEC:

Focus on Coordination Role Makes Sense. By placing priority on reviewing the need for new institutions and programs, the proposed budget bill language would emphasize CPEC’s role as a coordinator of the state’s higher education system. The third priority in the proposed language—recommending a new faculty compensation methodology—is consistent with CPEC’s role as a higher education data clearinghouse.

We therefore think the Governor’s approach is a good start. Reviewing the need for additional campuses, centers, and other institutions will continue to be important as the college-age population and participation rates continue to change. Reviewing proposals to expand academic programs also will be important as workforce needs continue to evolve. However, as discussed below, we recommend the Legislature adopt substitute language that (1) assigns priority to these coordination roles and CPEC’s data management responsibilities, and (2) directs CPEC to report specified compensation data for UC, CSU, and a broad range of other institutions.

Other Data Management Responsibilities Should Be Retained

We recommend the Legislature include among the California Postsecondary Education Commission’s priorities its data management responsibilities.

We believe that CPEC’s level of staffing is sufficient to perform other duties beyond those identified in the Governor’s proposal. In particular, we think CPEC should be expected to continue its core data management responsibilities. We therefore recommend the Legislature adopt substitute language assigning priority to the maintenance of CPEC’s comprehensive higher education database, as well as performing new campus and program reviews. Moreover, we recommend a different approach to faculty compensation than that proposed by the Governor, as discussed below.

New Approach to Faculty Compensation Needed

The Governor’s proposed budget bill language directs the California Postsecondary Education Commission (CPEC) to recommend a new methodology that compares total faculty compensation at the University of California and the California State University, as well as options for assessing the appropriateness of these compensation levels. We agree that CPEC’s current approach to faculty compensation is flawed. However, we recommend the Legislature rethink the basis for comparing faculty compensation and direct CPEC take an alternative approach to collecting and reporting specified faculty compensation information.

In most years, CPEC produces a report on faculty salaries at UC and CSU. The report compares these salaries with the salaries at a selected group of other public and private universities. The CPEC selects these “comparison institutions” in consultation with a Faculty Salary Advisory Committee that includes representatives of the segments, the Department of Finance, and our office. The comparison institutions are intended to represent the segments’ competitors in the labor market.

Among other things, the faculty salary reports identify “parity figures” for UC and CSU which, represent the percentage difference between the segment’s current faculty salaries and the projected average salary of its comparison institutions for the coming year. In other words, the “parity figure” represents the percent increase in the California segment’s salaries that would be required to match the average of the comparison institutions in the budget year. In its most recent report (from March 2006), CPEC estimated that CSU’s faculty salaries would need to increase by 18 percent to match its comparison institutions, while UC’s would have to increase by 14.5 percent. We have two major concerns with the current methodology, as discussed below.

Other Forms of Compensation Should Be Included. The CPEC’s faculty salary reports only measure base salaries. Faculty typically receive various other forms of compensation as well, including retirement and health benefits, sabbaticals, housing allowances, and bonuses. Several studies commissioned by the segments have found that the nonsalary benefits provided to UC and CSU faculty are worth considerably more than the average of their comparison institutions. In fact, when all forms of compensation are considered, UC and CSU appear to be at or above their comparison averages. Thus, reporting a parity figure based only on salaries can be misleading.

Basis for Comparison Needs to Be Rethought. The comparison institutions currently used in CPEC’s methodology were last updated in 1993 (for CSU) and 1988 (for UC). Five of CSU’s comparison institutions are private, as are four of UC’s.

We believe it is time to rethink the basis for comparing faculty compensation. The UC and CSU are large, diverse, multicampus systems, while most of their comparison institutions are single campuses. While some UC and CSU campuses may appropriately be compared with the institutions listed in Figure 1, many UC and CSU campuses are far different in terms of selectivity, national ranking of programs, and other factors. A very general illustration is provided by US News & World Reports’ 2007 academic rankings of the nation’s top research universities. The highest-rank UC campus (Berkeley, at 21) is in the middle of the CPEC salary comparison institutions (4 are ranked higher and 4 are ranked lower). But other UC campuses do not compare as well, with UC Riverside, for example, ranked lower (at 88) than all but one comparison institution. Variation within the CSU system is similarly broad. For example, CSU campuses are spread fairly evenly among the four quartiles of “master’s universities” ranked by US News. While rankings of any individual institution in this or any other survey is subject to debate, they do give a rough relative measure of a school’s standing. In other words, they provide one reasonable indicator of who the segments are competing against in the labor market.


Figure 1

Current Comparison Institutions

California State University Comparison Institutions

Public Institutions

Private Institutions

Arizona State University

Bucknell University

Cleveland State University

Loyola University, Chicago

George Mason University

Reed College

Georgia State University

Tufts University

Illinois State University

University of Southern California

North Carolina State University


Rutgers, the State University of New Jersey, Newark


State University of New York, Albany


University of Colorado, Denver


University of Connecticut


University of Maryland, Baltimore County


University of Nevada, Reno


University of Texas, Arlington


University of Wisconsin, Milwaukee


Wayne State University


University of California Comparison Institutions

Public Institutions

Private Institutions

State University of New York, Buffalo

Harvard University

University of Illinois, Urbana

Massachusetts Institute of Technology

University of Michigan, Ann Arbor

Stanford University

University of Virginia, Charlottesville

Yale University


Comparing UC and CSU with different groups of institutions can tell a very different story than what CPEC’s recent reports have suggested. For example, as shown in Figure 2, the Chronicle of Higher Education recently reported that the average faculty salary at state public universities is higher in California than any other state in the nation.

LAO Recommendation: CPEC Should Provide Data on Faculty Compensation. We think that CPEC could perform a useful data collection role in helping the Legislature assess the adequacy of faculty compensation. We therefore recommend the Legislature direct CPEC to collect and report specified compensation information, including regular salaries, fringe benefits, vehicle use, housing and mortgage assistance, life insurance, and additional forms of compensation. We recommend that CPEC be directed to use these factors to annually measure faculty compensation at

UC and CSU (by campus and system). This information would provide a more complete measure of an important cost of the state’s public university systems. Even without comparison institution information, this data would give the Legislature and the general public a sense of the investment that is made in higher education faculty. In addition, it would facilitate comparisons between UC and CSU faculty compensation, as well as tracking of increases in compensation funding over time.

Broad Comparisons Would Provide Context and Facilitate Policy Choices. In order to provide context for the UC and CSU faculty compensation data, we also recommend that CPEC be directed to collect the same information for selected other institutions. However, we do not recommend that a new group of comparison institutions be established. Judging from past experience, we expect that such an attempt would generate considerable controversy and would be unlikely to result in a consensus. Even if possible, the outcome would not necessarily be desirable. In our opinion, CPEC’s past approach of calculating a “parity” number based on a single set of comparison institutions improperly implies a precise compensation target.

Instead, we recommend that CPEC calculate compensation for broad ranges of institutions (both public and private) that reflect the spectrum of campuses within the UC and CSU systems. The intent would not be to develop a close match of the UC and CSU systems, but rather to reflect the breadth of institutional characteristics (such as selectivity) within those systems. For example, in a variety of indices of the top 100 research institutions, UC’s eight general campuses (excluding Merced) are typically spread throughout the rankings. Therefore, a measure of faculty compensation for, say, each decile or quintile of the top 100 research universities would provide valuable contextual information for thinking about UC faculty compensation. A similar range of masters-level institutions could be used for CSU.

Such information would allow interested parties (including the Legislature, Governor, and stakeholders within the universities) to draw their own conclusions about the adequacy of faculty compensation. For example, the Legislature might adopt an expectation that UC or CSU faculty be compensated at some percentile level of the range measured by CPEC. On the other hand, it might not set a target at all, and instead simply use the information as one factor in considering what level of funding to appropriate for the systems each year. University officials might use the information as they recruit and make offers to new faculty. At the same time, this information would not preclude the systems and their campuses from using available funding to make whatever compensation decisions they felt would best serve their needs.

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