November 7, 2007

Audit targets top CSU perks
Big raises, fringe benefits for execs challenged.
By E.J. Schultz / The Bee's Capitol Bureau

SACRAMENTO -- The California State University system has awarded generous raises and perks to top executives using a method that is inherently flawed, according to a report issued Tuesday by the state auditor.

CSU officials have said the pay increases were warranted to keep pay in line with competing institutions. But the comparisons were faulty because officials did not consider the substantial benefits and perks that CSU executives already enjoyed, according to the report by State Auditor Elaine Howle.

The audit also criticized "transition programs" in which managers have received "questionable" compensation after they no longer were working for CSU. Also coming under fire were relocation reimbursements that allowed one campus president to collect $84,000 for moving and real estate closing costs.

Howle called for officials to increase oversight by creating a centralized system to track compensation.

CSU officials acknowledged most of the facts in the 108-page report but said the findings did not reveal any violations of university policies.

"We agree with all of the auditor's recommendations in concept and will be working with the board on the most feasible way to implement them," Chancellor Charles Reed said in a statement.

Democratic legislators called for the audit earlier this year as CSU and the California Faculty Association were embroiled in heated contract negotiations. The union, seizing on news reports, has criticized CSU for awarding lavish perks to top administrators.

"CSU clearly needs to establish vigorous standards and be more transparent when it comes to its hiring and retention practices," Assembly Speaker Fabian Núñez, D-Los Angeles, said in a statement reacting to the audit. "This is public money we're talking about."

CSU gets about 55% of its revenue from the state budget, with most of the rest coming from tuition and fees.

In the past five years, CSU's payroll has grown by nearly $226 million, or 9.6%, according to the audit. Average compensation for executives grew by 25%, far outsripping the 5.6% average pay increase for tenured faculty.

Base pay in the Chancellor's Office ranges from Reed's $377,000 to the $149,780 made by Assistant Vice Chancellor for Financial Services William Hordyk, according to a sample of salaries published in the report.

CSU officials have said the higher salaries are needed to attract talent. But the system's compensation studies were questioned as far back as 2004 by the California Postsecondary Education Commission. The commission said the studies did not present "a complete picture" because they omitted benefits and perks given to CSU executives.

Despite the criticisms, the CSU board of trustees went ahead with a 11.8% average pay hike for executives in September, according to the audit.

CSU, in its audit response, said the disparity between executive and faculty pay was due to high faculty turnover in 2004. As a cost-cutting move during a state budget crunch, higher-paid senior faculty were encouraged to retire, and they were replaced by lower-paid junior faculty, CSU said.

The audit did not cite any specific cases at California State University, Fresno. Auditors based findings on visits to campuses in Fullerton, Long Beach, Sacramento, San Diego and San Francisco.

In one of many examples, the report found that Alexander Gonzalez, president of CSU Sacramento, was paid $18,988 for moving expenses and $64,698 for closing costs when he relocated to the university after serving as president of CSU San Marcos.

Gonzalez, a former professor and vice president of academic affairs at Fresno State, also was paid more than $27,615 by a privately funded campus foundation to remodel his kitchen to "accommodate the foundation's future catering of presidential guests," according to the audit.

In another case cited by the report, CSU's director of governmental affairs in 1996 was granted a professional leave of absence to work for a legislative committee.

The official, identified by Howle in an interview as Scott Plotkin, continued to draw a portion of his CSU salary. The idea was that he would return to CSU enriched by the experience.

But Plotkin, now the executive director of the California School Boards Association, never came back. In total, he collected $102,000 over nearly seven years without performing any service for CSU, according to the audit.

The audit recommends that CSU implement stronger regulations governing leaves of absence. CSU also should require that the board of trustees approve relocation reimbursements over a certain level, the audit said.

CSU board member Carol Chandler of Selma said the board has to be careful not to "micromanage." But she added that "we need to make sure that these guidelines are approved and followed so that we can guarantee that the public's money is spent well."