Monday, November 19, 2007

 

Presidents on Allowances

The Chronicle has had a series over the last week or so about the salaries of college Presidents.

I won't do the predictable “how can some much make so much when others make so little” lament, on the grounds that even the highest-paid Presidents in the country don't make as much as a typical major league backup catcher. Given the bonuses that folks in the financial services and HMO sectors have been making, I won't get all worked up about some college President making $250,000. (The one at my cc makes a good deal less than that.) It's a difficult job, very few people can do it well, and it's all-consuming. And the total amount spent, if it were redistributed throughout the college, would amount to spitting in the ocean. These folks are well-paid, but – with exceptions -- not scandalously so.

That said, though, I don't understand why “allowances” are so common.

The article mentions, and I've seen this in my home state, a common practice of breaking Presidents' compensation into salary, a “housing allowance,” a “car allowance” (or just a car), and so forth. This just strikes me as asking for trouble.

Probably once a year, some big muckety-muck gets written up in the papers for using a college car for personal use. It sounds awful, but if you think about it, it makes sense. I do errands on the way to and from work all the time. It saves time and gas. It's not scandalous when I do it, since I pay for my own car from my salary. I can mix work commuting, errands, trips, and whatever else, and nobody can say boo about it. If I happen to stop for milk on the way home, which happens from time to time, I don't have to justify it to an auditor.

But get a company car, or a car allowance, and suddenly any 'mixed use' is up for scrutiny. But the only way to avoid mixed use would be to go home before running any errands. Who does that? What, exactly, does that achieve? Alternately, you could keep a gazillion receipts, and pay highly-trained professionals to sort through them, to make sure that every milk run is duly deducted. No inefficiencies there!

Housing is even worse. The theory, I think, is that Presidents are supposed to host events in their homes, so the homes are mixed-use. Therefore, the college pays for some fraction of the home – in some places, all of it – to compensate the President for the wear and tear of hosting.

Role confusion here is chronic. The worst recent case was that President in California who had a dog run installed in the backyard, at considerable expense to her university. That actually occasioned a public scandal, and gave her political critics all manner of ammunition.

Had she paid for her own house out of her own salary, the dog run wouldn't have mattered.

I guess the argument for 'allowances' is that they prevent unscrupulous Boards of Trustees from riding roughshod over a beleaguered President's home. But Presidents are pretty well paid these days, and good ones have as much leverage over a Board as they other way around. So, my modest proposal for both Presidents and Boards of Trustees:

Kill allowances. Spell out expectations for hosting and/or travel in the Presidential contract, and bump up the salaries to pay the rough equivalent of what the allowances would have covered. Then treat the Presidents' personal consumption just like everybody else's. If a given President wants to cheap out on her car to blow her money on a dog run instead, I say, who cares? I don't want my tax money going to pay accountants to figure out how many tenths of miles to deduct for stops at 7-11's on the way home. Better to give the President an ample salary, and let her figure out when and how to run errands. The money saved in verifying paperwork would be significant, we could stop fighting truly idiotic public battles over how people live their daily lives, and Presidents would have the same basic freedoms of movement and choice as everybody else. Let them focus on work, rather than on keeping receipts for every last tenth of a mile.

The same works for housing. Spell out the hosting expectations in the contract, and bargain a salary that makes it worthwhile. Then let the President find her own house. If she wants to paint the place purple and decorate it with the skulls of her enemies, whatever. (This might also have to salutary benefit of acquainting Boards with the realities of local housing prices. Faculty unions might eventually reap the benefits of that.) If she fulfills the requirements and brings home the bacon, then who cares if she has odd taste?

The housing thing, I think, dates back to a deeply patriarchal 'first family' idea. Kill it. Host functions on campus, in art galleries, wherever. Let Presidents have home lives. And don't expect spouses to fulfill the old unpaid 'First Lady' role. If you want their services, hire them and pay them. Otherwise, assume that they have their own lives, and rightly so.

I don't make a habit of defending top dogs, but we need good ones, and some of these traditional expectations don't help. As with faculty and everybody else, treat Presidents as employees. Spell out what's expected, pay well, and don't micromanage their private lives. I could give two hoots whether my President picks up dry cleaning on the way home. I'd rather have that highly-paid brainpower put to use helping the college, rather than figuring out how not to violate the ground rules of the car allowance.



Comments:
My undergraduate and graduate alma maters both seem to have bought into the "first family" idea.

The college president lives in the "President's House" (or whatever the hell they call it) on campus and is expected to host functions there regularly.

Always struck me as kind of silly. I wondered how many candidates for the job shied away because they didn't like the idea of living in an old victorian house and giving up any realistic expectations of a private life.
 
I think you missed the point on allowances (or, as has been my experience, providing the home/car.)

These are not usually "taxed" monies.

If a school were to provide a bump in the salary, equal to the amount they provide as an allowance, the school would then have to cover the increased fed/state/local income taxes (at a fairly high rate given their salaries) and perhaps create a further negative impact through the creeping (and creepy) AMT.

And of course, if the increased tax burden is, say, 40%, you can't just give them that 40% since that 40% is also subject to tax. So if a school were to want to give a 25K bump in salary, the school would have to provide 66% more income to account for the increased taxes.

Is that a better use of school money? (Taxpayer/tuition/grant/donation funded?)
 
I thought this was a parenting blog?
 
Huh, what the professor writes is sure a weird quirck in the tax system!

In the other countries where I am reasonably familiar with the tax system, this would not be an issue, because they will ALWAYS tax the 'private' part of the car and make the 'job' part deductible, regardless of who pays for it. Perhaps, you should repair the tax system, because this looks like a HUGE loophole to me: Why doesn't every employer give out car-, housing-, clothes-, and food-allowances instead of a salary if this is so much cheaper?

BTW, yes I would consider taxes a marginally better use for taxpayers' money than tedious penny counting.
 
I agree absolutely on shoving everything into salary. Schlupp is also right in the response to The Professor: everyone else has to pay the taxes on the income that they use for housing, food, transportation, etc. If I have unreimbursed business expenses, I need to itemize to deduct them on U.S. income taxes. Why should presidents be any different?

The other import of all this is the vulnerability of college presidents to criticism based on personal expenses. I'd rather have them praised or raked over the coals for the job-related decisions they make.
 
Alas, the Professor is correct. It's the tax stuff.
The problem is that for fundraising, people don't just want to be in a nice house, they want to be in someone's home. So keeping a house for entertaining doesn't usually work. The solution when they make you live in a house on campus is to have an allowance for renovations etc. when the President moves in, and hten a regular program of maintenance. (Of course, if you live on campus, you don't drive to work, but just to meetings etc. off campus.)

The car allowance *is* silly. If the pres wants to drive a 1974 Dodge Dart, or even a 1990 Honda Civic, that's her prerogative.

THe part that I don't understand is the "deferred compensation". That's the ripoff.
 
It sounds like the whole allowances thing is a way for them to literally own one's entire life, not just the time at work.
 
In addition to the tax advantages, giving those perks allows the salary to be lower while still giving the benefits presidential types would like to have. It diffuses the claimed income so that it doesn't look as high as it really is. And buying the house gives an asset to the college that appreciates significantly over time. In our local housing market, that's a big deal.
 
In addition to the tax advantages, giving those perks allows the salary to be lower while still giving the benefits presidential types would like to have. It diffuses the claimed income so that it doesn't look as high as it really is. And buying the house gives an asset to the college that appreciates significantly over time. In our local housing market, that's a big deal.
 
To the 8:04 AM post, the President's job is literally 24/7, so the Board actually does own his/her life! Sad, but true and most know that going into the presidency.

Compared to the "golden parachutes" that the corporate world gives to their CEOs, a college/university President doesn't get that many perks. I'd guess most would rather live off campus to get away from it all if they could.
 
I teach at a private K-12 prep school, and our Head lives in a house the school owns and regularly host events for faculty, staff and fundraising there. I think it's a pretty common thing for schools like ours, and I would guess for private colleges as well, those that do a lot of alumni wooing and fundraising. People do want to be in someone's house, because those kinds of events are just as much social affairs as they are anything else, and people want to be flattered and courted before they open up their checkbooks. This is true in political fundraising as well.

I totally agree with DD on the car question though!
 
Allowances may have started out as perks, but the tax laws really do make them hard (expensive) to change. Never underestimate the value of a tax-free anything.
 
Private schools can do whatever their Boards of Trustees allow. Y'all are private, after all.

We public school people should demand transparency. There should not be any hidden perks--paid for with taxpayer dollars--in compensation packages for college persidents (or any other public employees for that matter).

Five years ago, the president of my mid-sized, single-campus SoCal CC left in ignomny. His salary was $169,000/year. But his car allowance, personal expenditure allowance, $1M life insurance policy, 30 paid vacation days and on and on, cost taxpayers a total of $225,000/year.

Do the arithmetic: His perks added 33% to his salary. Taxpayers only saw 2/3 of what he was really making.

--Philip
 
One of the examples Dean Dad brings up is the former UCSC Chancellor. She was the one who had the infamous dog run (UC campuses do not have presidents, there is only one UC president).

The Chancellor lives on campus in a University owned house. One could argue that she should have paid for extras and ammenities, but the house is also used for fundraising.
Per policy, the Chancellor is required to live in the Chancellor's house, it is the contract.

Here is the announcement of the newest UCSC chancellor, the details of the salary and benefits are on the bottom.
 
The univeristy I attend in the midwest has a president that lives in a home valued at over one-million dollars. The home is owned by the university.

On the topic of the presiden't spouse - the presiden't spouse is constantly on campus. She is in the classrooms, the cafeterias, and even the dorms. It is odd, but she is such a nice older lady, so no one cares.

Actually, we prefer our vice provost over the president. It is kind of funny, actually.
 
Wait - I forgot to add the univeristy I attend is private. That makes a difference.
 
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