You couldn't hope for a worse PR combination than the one the California State University system handed its foes in July, when in one meeting at CSU headquarters in Long Beach the board of trustees planned for a 5 percent tuition hike, discussed Draconian cuts if voters reject Gov. Jerry Brown's plan to increase both income taxes on upper earners and sales tax on everyone, then awarded raises to incoming presidents Tomas Morales at Cal State San Bernardino, Leslie Wong at Cal State San Francisco and Dianne Harrison at Cal State Northridge.
In the case of the largely untested Harrison, who arrived at the huge CSUN, with 36,208 students, from her presidency at tiny, 4,340-student Monterey and has never helmed a large university, they pushed her already sizable $295,000 CSUN pay to $324,000 — in addition to her free house and the generous benefits package that CSUN's chief gets.
Students who had already been hunger striking called it “appalling.” For once there was an issue that united students, conservative deficit hawks and even the public employees unions. Kim Geron, of the California Faculty Association, called the decision “ludicrous” and complained of raises at the top while faculty salaries have remained frozen for a fifth year as of Aug. 31.
“It is tone-deaf beyond belief,” she told assembled reporters in Long Beach.
But shocking as the presidential pay disparity was to many critics, it could be a harbinger of what's to come — even as the state government's fiscal struggles deepen.
The raises, as trustees attempted to note amid the howls of rage, came not from the California general fund fed by California taxpayers but from “private sources” — in this case, from charitable auxiliary foundations of the Cal State University system.
And that represents a trend that will only grow, according to John Mockler, a former California secretary of education under Gov. Gray Davis, who lectures, writes and consults on state education issues.
As California retreats in its funding of the state system, the schools will dig deeper into the private sector and forage for funds to sustain themselves. “I don't like it, but I don't see the choice,” Mockler says. “There are only three ways to fund a school: one, public funds; two, student fees; and three, private donations.”
The state is increasingly chopping away at the first, and student fees are being pushed higher and higher. As they become more dependent on the private sector, the state universities will come under intense pressure to play by the standards of the private sector, with its vast income disparities between the executives — the college presidents and their aides — and everyone else.
That will be jarring for those who believe California's state school system should remain a public entity, subject to the standards of public life.
“I'm an old-fashioned guy, but it seems to me that Cal State is moving toward a private model,” Mockler says.
One example he gives of the disparities that will result as the campuses become more dependent upon private fundraising is that vast differences will evolve in the resources available to the schools like Northridge and San Francisco, located in commercial hubs, compared with rural schools like Humboldt or Chico, “where there's not a lot of business to turn to.”
This, he warns, “is in a system where all campuses and students were meant to be equal.”
The road to this month's raises, paradoxically, began with the CSU trustees' decision last year to place a cap on presidential salaries. The move came after a general outcry over the board's decision to award a jaw-dropping $400,000 annual paycheck to the incoming president of San Diego State University, Elliot Hirshman.
In making that decision, the 25 trustees, most appointed by the governor or previous governors to eight-year terms, carved out a loophole that could bring drastic change. The loophole allows private sources, whose funds are funneled through individual universities' foundations, to contribute to presidents' salaries — up to 10 percent of the total salary annually, when the position turns over. In effect, the state is telling colleges that if they can find the money, have at it.
That's a possibly unprecedented move in the state system, Mockler says. “The foundations were created to do things the system could not do — they have now changed that,” he says. He finds it “a bizarre policy choice that they would be using their funds to cover administrative salaries instead of addressing things like class size.”
But the Cal State Chancellor's Office argues that the role of university president has fundamentally changed in higher education, justifying the dramatic shift.
Mike Uhlenkamp, a Chancellor's Office spokesman, says presidents are becoming big-time fundraisers. “We've lost a billion in state funds in the last five years. … Their ability to fundraise is critical to their being able to fulfill the mission.”
The public probably doesn't view state university presidents as hustlers of private donors, but it may have to get used to it.
“It's not the most important thing they do, but it's an important part of their job,” Uhlenkamp says.
Into this breach stepped the foundations.
CSUN, for example, is supported by the California State University Northridge Foundation, a public 501(c)(3) charity overseen by a board of directors composed largely of alumni who are now in the business community. The foundation raises private money and distributes it to campus activities.
According to Vance Peterson, the foundation's president, during the search process for a new CSUN president, “there was a conversation among the executive committee, who wanted to know what we could do to be helpful. The chair contacted the chancellor and said, 'Let us know if we can be helpful.' ”
Ultimately, the CSUN Foundation agreed to add to the future presidents' salary the 10 percent allowed by the CSU Trustees' new loophole, believing it might draw in a higher-quality leader.
Peterson emphasizes that the offer was made before Dianne Harrison, then the university president in Monterey, was chosen to lead CSUN.
Using private funds to bolster schools' critical positions, however, could blur the hazy line between public and private partnerships. Right now, the CSUN Foundation covers less than 5 percent of the school's budget, Peterson says. That portion could grow. And as the outside donors become woven into the infrastructure, the tensions could become greater between a campus scrambling to meet its basic needs and a foundation operating in its name that behaves more like a private-sector organization than an arm of the teetering state of California.
For example, with $99 million in assets, the CSUN Foundation spends what looks, from a distance, like eye-catching amounts on overhead and fundraising.
In 2011, while it spent $890,236 on student scholarships, the CSUN Foundation paid $462,000 to the Northern Trust company to administer its assets.
Another $728,098 of CSUN Foundation's expenditures were for “hospitality.”
Peterson defends the foundation's hospitality expenses, which he says were used largely for alumni events that act as “investments in future revenues from private sources.” The payment to Northern Trust, which he says provided the foundation a 21.9 percent return on its investment, was “very well spent.”
Carl Robinette, a graduating senior who was editor of the Northridge student paper, the Daily Sundial, says that at CSUN, with classes being slashed due to state budget cuts, some students must wait years to graduate because they can't get the credits they need.
“Graduations are delayed, financial aid is being lost because there's requirements of how much you have to be taking. International students have lost residency status because they can't get enough units to fulfill residency requirements,” he says.
Robinette personally supports the raise for Harrison, saying it's a “big job” and saying he recognizes the need for a “nationally competitive salary.”
Nonetheless, he says, the trustees' argument that huge presidential salaries were required to hire or retain Harrison and the other presidents is seen at CSUN as “a fallacious argument.”
Ultimately, “People see this raise as a fight against students,” Robinette adds.
But to his way of thinking, “the main thing attacking students is state funding — and the board's budget decisions.”