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FY19 Merit Increases and Compensation Planning

Dear Colleagues, 

University leadership has been engaged in ongoing conversations on our financial priorities with the leadership of the Faculty Senate, the Staff Advisory Committee, and Board of Trustees — particularly trustees who are members of the Business and Finance Committee of the Board. I would like to share what the University leadership team is planning and proposing for the FY19 budget as it relates to compensation, one of our top priorities. 

The trustees agree with the leadership team that we must continue working towards improved compensation for our faculty and staff. The board has been kept apprised of the work of the Gender Equity Task Force and the disparities between female and male faculty salaries, as well as past studies that document the variance of faculty salaries to market. 

Because of the University leadership and Board’s commitment, we anticipate the Board will agree at its May meeting to continue the 5% endowment spend rate for one additional year — totaling ~$5m. The half-percent endowment spend increase approved in 2015 was to have ended this June. Assuming extension of this endowment spend, the agreed-upon reductions from the Operational Excellence Program on which we are counting, and a projected increase in net-tuition revenue — the first truly significant increase in several years — the leadership team believes we will have enough to increase compensation as follows: 

Two pools of money are being allocated as we prepare the FY19 budgets: 

  1. Necessary funds for faculty rank and tenure adjustments. This money is independent of the other funding pools.
  2. A 2% merit pool for faculty and staff to be distributed based on performance. 

Two additional pools are pending continued progress on: 

  • planned revenue growth and cost savings in the schools and colleges,
  • actual enrollment deposits aligning with projections,
  • not exceeding discounting parameters,
  • and meeting projected net revenue growth. 

We will have a better idea of our level of confidence in these assumptions after the May 1 undergraduate deposit deadline. Shortly thereafter, we expect to present a positive FY19 budget for final approval from the trustees. If all works out as we hope, that FY19 budget will allow for two additional pools of compensation increases. 

  1. An additional $4m will be assigned to those full-time faculty populations identified in the Mercer study and the Gender Equity Task Force study as being under-compensated relative to their peers at other institutions or whose compensation is inequitable based on gender. 

      • The goals of this additional pool of funds will be: 1) to reward those most contributing to the pursuit of excellence in teaching, research, and scholarship; 2) to address those who are meritorious and whose compensation is most at variance when considering market and gender issues.
      • We will continue to annually benchmark faculty compensation and hope that additional pools of funds will be part of a continuing commitment to address the peer and gender equity gaps of our faculty compensation. 
  2. An additional $400,000 will go to rewarding staff most contributing to achieving the goals in the strategic plan and serving our students and patients.

Addressing faculty and staff compensation has been a consistent strategic priority of University leadership. We affirmed this commitment by agreeing that once we achieved a modest contingency we would devote at least 20% of the positive net results above that margin to bringing our compensation practices in line with Magis, our strategic plan. This is one of the key achievements we had planned to realize through the multi-year Operational Excellence Program. Although we have not yet reached that level of surplus, we believe that it is important to make this more significant compensation allocation this year. 

You may recall that we ran a $16.7m deficit during FY16 and $9.2m deficit in FY17. This fiscal year, we will outperform the approved budget expectations (last May, the Board approved a slightly negative FY18 budget) and generate a surplus. This is a remarkable recovery, and a direct function of your hard work, modest revenue growth, OEP reductions, and financial diligence. 

I am proud that we have worked through these difficult budgetary challenges in a way that allowed us to provide a modest merit pool for the past two years and glad that, if we meet the targets indicated above, we will do something more significant this year. 

I wish to thank each of you for all that you do — much of which goes unseen — in pursuit of our noble mission and aspirational vision. 

Best wishes, 

Fred P. Pestello, Ph.D.

President