REED, YOU HAVE:
Extra pay follows top CSU brass out the door
Chancellor gives special perks to some departing executives
Monday, July 17, 2006
First of Two Parts
Millions of dollars worth of extra compensation has been handed out to California State University campus presidents and other top executives as they leave their posts -- without public disclosure by the chancellor and the university's Board of Trustees.
Of the 44,000 people employed by the CSU system, a review by The Chronicle found that a handful of past and present officials in the university's 29 highest-paid positions benefit in part from policies designed specifically for an inner circle of top administrators.
Whether it's "transition pay," a multiyear consulting contract or a coveted tenured teaching position, the executives have for a decade or more received these little-known perks to cushion their departure from -- and in some cases return to -- the nation's largest public university system.
For example, some retired campus presidents and other executives have been given "special assignments" and kept on the payroll for up to five years after leaving office. Several executives were retained on the payroll even after taking jobs elsewhere.
These opportunities -- not available to rank-and-file employees -- have been handed out as students have seen their tuition costs increase by 76 percent over the past three years.
They are in addition to CSU's generous pension and lifetime health benefits that all eligible employees receive.
Some of these extra perks and pay appear to have been awarded without prior knowledge or approval by the governing Board of Trustees, a 25-member body responsible for making the final decisions regarding executive compensation.
In some cases, the chancellor notified the then-chairman of the board through private correspondence. But The Chronicle found no public record of board discussion, review or approval in those cases. Several trustees said they were not aware of, or could not recall, the special pay and perks being doled out.
"I am just appalled that this is occurring when the reality is that the budget has been cut so many times, and we cannot afford these kinds of perks. I was certainly not aware of it," said Trustee Ricardo F. Icaza.
"This is happening against a backdrop of rising student tuition fees," he added. "We've had a depletion in the enrollment because the people who we're trying to serve are the least able to afford it. People have had to take two jobs to make their student loans."
Chancellor Charles B. Reed, who heads the 23-campus system with 405,000 students, said there has been no wrongdoing.
"These agreements have been conducted according to policy, and in most cases have been limited to a few years after an executive retires from his or her position," Reed told the trustees in a June 23 e-mail in response to inquiries from The Chronicle. "I want to emphasize that all executive transition programs approved or implemented under my leadership have conformed to trustee policy."
The trustees plan to discuss the issue of "personnel matters" on Tuesday during a closed meeting in Long Beach.
The newspaper's review of salaries and perks associated with CSU's top executive positions -- including the chancellor, four vice chancellors, the general counsel and 23 campus presidents -- found examples of administrators whose financial umbilical cord remained attached well after they left the university or retired.
Among the findings:
-- Two former executives -- Peter P. Smith and David S. Spence -- took paid transition leaves in 2005, a perk that allows them to continue to receive their six-figure salaries for an extra year after they left office and took other jobs, with no obligation to return. Smith received $157,932 during his paid leave; Spence is receiving $173,952 during his leave, which ends July 31.
-- Three executives -- General Counsel Christine Helwick, Vice Chancellor Jackie McClain and Chief Financial Officer Richard West -- have been granted future tenured positions as full professors at CSU campuses, although Helwick has never taught full courses at the university level, and the others have limited teaching experience.
-- One campus president, Marvalene Hughes, resigned her post in 2004 to take advantage of the governor's offer of extra benefits for longtime faculty members who retire early. She was then rehired the next day as interim president for another year at a salary of $204,252.
-- Another campus president, Manuel A. Esteban, left his post in 2003 and, a year later, collected early faculty retirement benefits while remaining on the payroll for two years -- with a transitional leave and a special project. He was paid a total of $301,959 for the two-year period.
-- At least five former campus presidents -- Tomas A. Arciniega, Robert C. Maxson, Alistair W. McCrone, Norma S. Rees and Bob H. Suzuki -- have remained on the payroll for a year or more at salaries exceeding $200,000 to do special projects for the chancellor, sometimes without any "end product" or written reports required. Arciniega is being paid $540,744 during a three-year period; Maxson is getting $555,792 for a two-year assignment; McCrone was paid $203,088 for a one-year assignment, plus up to $142,000 for unused vacation time; Rees is being paid $341,232 for a two-year assignment; and Suzuki has received about $423,000 for a three-year assignment.
Reed's e-mail to trustees notes that his office has spent "as much as $4 million" over the past decade on "special assignments" and paid leave for former campus presidents and vice chancellors.
In several of the cases cited above, CSU's policies and practices giving trustees authority over executive appointments and compensation appear to have been ignored or circumvented. The state's Bagley-Keane Open Meeting Act requires the university to conduct most of its primary business in public.
Details of executive compensation packages generally escape public notice because many of the perks are handed out privately by the chancellor. Some trustees said they were unaware that top executives remained on the payroll for a year after their departure, and expressed surprise that several retired university presidents remained on the payroll with special jobs given by the chancellor. Other trustees declined to comment.
The chancellor and his supporters say that such perquisites are necessary to attract the most qualified educators.
"Being a good university president is one of the most taxing, challenging things to do," said Spence, a former CSU executive vice chancellor who remained on the payroll for a full year after leaving his job in 2005. "It is difficult to find people up to this challenge. And when you find the people you want, you need to pay them to get them."
That may have been the rationale for rehiring Hughes, former president of Cal State Stanislaus. She stepped down from her post in July 2004 to take advantage of a "golden handshake" offer from Gov. Arnold Schwarzenegger for early retirement, in which she and other longtime faculty members received two extra years of service credit for retirement benefits. The following day, Reed rehired Hughes at the same salary as interim president of Cal State Stanislaus for an additional year.
Reed, emphasizing that he has the authority to make interim appointments, told The Chronicle he couldn't recall whether he discussed the rehiring of Hughes with trustees before making his decision. His office did, however, issue a press release on her rehiring. Hughes, who is now president of Dillard University in New Orleans, did not respond to repeated phone calls.
Under established policies and practices, trustees approve the compensation packages for campus presidents and executives during public meetings -- setting out the executive's salary as well as housing and auto allowances.
"Decisions regarding appointment, salary, and continuity of (campus) presidents are made by the Board of Trustees upon recommendation of the chancellor," states a board policy approved in 2001.
That point was reinforced by university officials in February when they told state lawmakers: "The chancellor recommends and the Board of Trustees approves the compensation package for all CSU executives."
But the extra compensation deals for retiring executives have been handled behind closed doors.
Under the law, a state agency must conduct its business openly so the public can be informed. Closed sessions may only be held in limited circumstances, such as to confer with the board's legal counsel or "to consider the appointment, employment, evaluation of performance, or dismissal of a public employee."
Following a closed session, the law requires the board to "report publicly at a subsequent public meeting any action taken, and any roll call vote thereon, to appoint, employ, or dismiss a public employee arising out of any closed session of the state body."
A check of records shows the trustees did not disclose the appointments of retiring executives to new duties.
In public meetings, however, trustees routinely conferred emeritus status on retiring campus presidents and executives -- stressing that such status carries an honorary title with "courtesies, but no compensation." Left unsaid was that some retiring presidents would remain on the payroll at six-figure salaries for one to five years to perform special projects.
Helwick, the CSU general counsel and secretary to the board, conceded that public notices about retiring executives may have been oblique, but insisted that the law had been followed.
Public notices were "not intended to confuse anyone. ... There was no attempt to mislead," she said. "If there is a misperception, I'm sure that it's something that we will be taking a look at."
In private correspondence, the chancellor notified the chair of the Board of Trustees of special assignments for retiring executives. But the trustees did not give public notice of any meetings in which these appointments were discussed, reviewed or approved.
Some trustees said they could not recall being told by either the chancellor or other board members of the special assignments for retiring campus presidents. Others recalled that such appointments were occasionally discussed by the chancellor in closed sessions.
"Not all the presidents got these perks," said Ralph R. Pesqueira, a San Diego businessman who served for 16 years as a trustee until 2004. "We didn't throw money around. ... The board was very frugal. Our trustees went through the budget with a fine-tooth comb."
He said that extra perks, including the appointment of retiring campus presidents to multiyear special assignments, came before the trustees for review and approval. However, other trustees, such as Icaza and George Gowgani of Cambria, could not recall any discussions about these matters.
Critics say the salaries, benefits and perks for campus presidents and top execs in the chancellor's office are inappropriate examples of excessive compensation, given that student tuition and fees are rising, academic programs have been scaled back and faculty salaries are stagnant.
"It's symptomatic of misplaced priorities," said Lillian Taiz, a history professor at Cal State Los Angeles who is vice president of the California Faculty Association, the union that represents instructors in the CSU system.
She and other critics warn that CSU may be losing sight of its original mission to provide a low-cost four-year college education to eligible students.
"We should not be emulating corporate America and its excessive greed," said Robert Atwell, president emeritus of the American Council on Education. "We should be deploring it, not emulating it in higher education.
"When you work in a taxpayer-supported environment," he said, "you should not expect the kind of awards that seem to be expected in corporate America."
David Longanecker, executive director of the Western Interstate Commission for Higher Education, said public universities must be held to a higher standard than private institutions. "All public employees' compensation and benefits should be as transparent as possible to the public," he said. "To the extent that a system obfuscates that, it's not a helpful system. So transparency is the issue."
Chancellor Reed insisted that his administration has been candid with the public and the trustees.
"We try to be as transparent as possible. We want to be as accountable as possible," Reed said. "We're all public-sector employees."
Today: Departing California State University executives have received millions of dollars in extra compensation without public disclosure.
Tuesday: A look at the special compensation policies benefiting CSU's inner circle of executives.
E-mail Jim Doyle at firstname.lastname@example.org.
This article appeared on page A - 1 of the San Francisco Chronicle