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Home Publications Blogs Beat the Press Should Taxpayers Subsidize the Pay of College Presidents?

Should Taxpayers Subsidize the Pay of College Presidents?

Sunday, 24 August 2014 07:43

Colman McCarthy has a piece discussing the low pay received by many adjunct professors across the country. He argues that they should make a living wage and then suggests that a way to pay for this would be to cut the high salaries for university presidents and other top administrators, which can cross $1 million a year.

It is worth noting that universities, both public and private, operate with large taxpayer subsidies. In the case of private universities, most enjoy tax-exempt status. As a result, they are exempt from many state and local taxes, but most importantly, individuals can deduct their contributions from their income tax. For wealthy contributors, this means that the taxpayers are effectively picking up 40 percent of the cost of their contributions.

If the public felt it was more important that adjuncts made $40,000 a year than university presidents made $1,000,000 a year, there could be a limit on compensation levels that would allow an institution to receive tax-exempt status. For example, if the cap for total compensation was set at $400,000, university presidents would still be able to earn twice as much as cabinet officers

Of course universities would complain about such a restriction as government interference, but this is nonsense. They are free to pay their staff absolutely as much as they like, the restriction only applies if they want a government subsidy. (It's sort of like restrictions the government imposes on people who get TANF.)

The universities will also complain that they cannot get qualified people for $400,000 a year. This one should invite a healthy dose of ridicule. If we can get qualified people to run the Defense Department and Department of Health and Human Services for half this amount, perhaps their school is not the sort of institution that deserves taxpayer support if it can't find anyone willing to make the sacrifice of running the place for twice the pay of a cabinet secretary. 

Free market economics is so much fun!

Comments (13)Add Comment
I like it, don't limit it to universities
written by Dennis, August 24, 2014 8:28
Make it apply to all charitable organizations, including churches
President as Fund-Raiser
written by Aaron, August 24, 2014 8:30
Given the fund-raising role of a typical college president, part of the salary spectacle likely relates to universities bidding up the salaries of those perceived to be the best fundraisers, something that won't be part of your job if you're a cabinet officer. I'm not defending the system --- salary bloat is a huge issue -- but it seems that part of the problem is that a college may see a $1mm salary as a "good investment" if they recruit a president with a history of raising ten or more times that amount each year, as compared to a president who earns half the salary but has a track record of raising considerably less money.

The financial reward for being a cabinet officer can be significant, even gargantuan, but often come after the cabinet officer departs for the private sector.
for profit on line colleges
written by djb, August 24, 2014 8:58
The university of phoenix is for profit and the president makes 43 million dollars per year....

Most of their income comes from government student loans and grants

Any comments on them
The educational-sports complex at work:
written by AndrewDover, August 24, 2014 9:07
Professor of English Emeritus, California University of Pennsylvania
written by Horace S Rockwood III, August 24, 2014 10:10
As one of the commentors above mentions, Cabinet Secretaries frequently move on to high-paying jobs in the public sector. In addition, Cabinet Secretary is not a career or even long-term commitment, so the salary sacrifice is easier to accept.

As many people know, the highest paid public positions in many--perhaps most--states are football or basketball coaches. If college athletes get paid, their money should come, at least in part, from the athletic budget of the institution.
written by TK421, August 24, 2014 11:00
That's not the point. The comparison shows that if someone qualified can be found to run the Defense Dept for 400K, than a qualified college president can be found too.

And since when do we pay someone based upon what they might be able to earn some day?
written by Kat, August 24, 2014 11:52
Horace S. Rockwood the third,
University presidents are free to seek employment elsewhere.
I know they are most likely to compare their job to that of a CEO of a large corporation. Because CEO's are always getting fired for the slightest hint of incompetence, there are many openings.
"Cap" the Coaches
written by Stuart Levine, August 24, 2014 11:58
Forget about capping the presidents of universities. Randy Edsall, football coach of the University of Maryland, receives compensation totaling $2,025,440 with the possibility of $950,000 in bonuses. And, of course, gets a good chunk of "other" income (commercial endorsements, etc.)

In contrast, Wallace Low, the University President, makes a "mere" $496,409.00. (The highest paid economics professor makes $308,175.65.)
written by SM, August 24, 2014 5:18

The university of phoenix, as you indicate, makes all of its money from government subsidized and guaranteed student loans. If they want to pay their president more than 400k (or whatever level we agree on) then this subsidy should end too, and they will be free to pay him whatever they want.
Excuse Me?
written by Larry Signor, August 24, 2014 8:19
We are talking about people who are paid ~ $2000.00/working day. I have never met anyone with that marginal productivity.
Should Taxpayers Subsidize the Pay of College Presidents?
written by Squeezed Turnip, August 24, 2014 10:09

Reading comments above: many cabinet members actually take a cut in pay to join the cabinet (Rubin, Goldman, Hoover, Summers, Paulsen, ....). Geithner is an exception, being a career technocrat until of late. It's public service, after all. And so is being a University President.
confusing contributions with tuition based funding
written by pete, August 25, 2014 10:29
Yes the endowment contributions are tax deductible. But for most schools endowments offer a small throw off for salaries, and much goes to scholarships. So, there is little "taxpayer subsidy" for the president's salary. Exception may be the coaches, who probably are funded from particular alumni contributions. I do agree that all non-profit/not-for-profit entities should be changed to for profit. Too much shenanigans. Simplify the tax code. I also thought the IRS did limit salaries of CEOs of non profits.
what they can earn elsewhere
written by ethan, August 25, 2014 4:26
I stopped giving to my college when I found that the managers of the endowment were earning $15-18 million a year. I was told that was what they could earn on Wall Street, and I said, "OK. Fire them and let them earn it on Wall Street." I'd be glad to take the job for $500,00 (which is 3 times what I made as a "high priced" lawyer). I could consult with the finance and business school professors who should be willing to give me their advice for free. The university didn't take me up on the offer.

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Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.