Date: December 13, 2000
To: USC Faculty Senate
From: Faculty Compensation Committee (Duncan, Druelinger, Hudock, Johnston, Mertlich and Saul)
Subject: Analysis of USC faculty salaries and recommendations.

 On December 1, 2000, members of the FCC met with President Guerrero to discuss our analysis of USC faculty salaries (see attached). We agreed to meet again in early January with the President and the Vice President of Finance and Planning to discuss the budgetary impact and changes needed to adjust faculty salaries. The FCC's recommended course of action can be found on page 4 of our report. The changes that we have recommended will likely occur over the next several years and win involve changes in the USC budget and the Handbook. However, we feel that it is very important that we move ahead so that salary adjustments can be made for the next salary cycle.

Therefore, we ask the Senate for their support and cooperation in meeting immediate and longer term goals.

MEMORANDUM

 Date: November 27, 2000
To: President Guerrero From: Faculty Compensation Committee (Duncan, Druelinger, Hudock, Johnston, Mertlich and Saul)
Subject: Topic for our meeting on December

 Your memorandum of April 26, 2000 requested that the Faculty Compensation Committee and the Office of Human Resources evaluate faculty and contract staff salaries in terms of equity and competitiveness in the market place. The attached report contains our evaluation of faculty salaries along with estimates of adjustment costs. At our meeting on December 1, we would like to review the contents of this report with you as well as discuss a strategy to alleviate the identified discrepancies in pay.
An Evaluation of USC Faculty Salaries Faculty Compensation Committee Fall 2000

Introduction
In April 2000, President Guerrero requested that the Faculty Compensation Committee evaluate faculty salaries in terms of equity and competitiveness in the market place and to devise a strategy for the redirection of resources to help alleviate major discrepancies in pay. In the following we report the results of our evaluation of faculty salaries. With respect to equity it is apparent the USC has a significant salary compression problem. For example, the average full professor at USC earns $13,700 more than the average assistant. However, at comparable institutions the difference between fulls and assistants ranges from $18,000 to $20,000 on average. In terms of competitiveness, our analysis indicates that faculty at USC earn approximately 80% of the average CUPA salary by rank. It is unlikely that USC's relatively low ranking can be explained by differences in costs of living. Therefore, we recommend that steps be taken to bring the overall USC faculty average in line with other salary trends on campus as well with the practices of comparable institutions. We also provide preliminary estimates of the costs of addressing equity and competitive salary issues as well as suggestions concerning the redirection of resources to address these needs. We will review the contents of this report with the President at our meeting on December 1, 2000. The purpose of this meeting will be to further develop and discuss a strategy concerning the redirection of resources to address the salary issues described below.

Salary Equity
Salary compression is a problem at many institutions of higher education in the U.S. However, the data presented in Table I indicates that USC, in particular, has a very narrow salary difference between its most senior and least senior faculty. For example, based on 1999-2000 salary data, the average full professor at USC earned $54,000 while the average assistant professor earned $40,300, indicating a difference of $13,700 between the most and least senior faculty. On the other hand, the College and University Personnel Association (CUPA) indicates a difference of $29,000 between professors and assistants employed at public institutions in 1999- 2000. The CUPA data provides a broad cross section of salary trends in academia and the comparison indicates the severity of the compression problem at USC.
The differences between average salaries for full and assistant professors for other selected institutions are also reported in Table 1. The WICHE and CCHE schools were provided by the USC Office of Finance and Planning and have been used for comparison purposes in the past (a detailed list of these schools and their salaries by rank are attached in Appendix A, pages 1-3 ). Comparing USC to either of these school clusters indicates, once again, the severity of our compression problem. For example, while the salary spread between the average USC full and assistant professor is $13,700, it is $18,700 for WICHE schools and $19,600 for CCHE schools. We also collected salary information for institutions similar to USC. These DEMO schools are small 2A regional institutions (plus the University of Northern Colorado) with salaries at the assistant level that are comparable to the level for this. rank at USC (see Attachment A, page 4 for a list of these schools and their average salaries by rank). However, these schools differ from USC in that they offer significantly higher salaries for faculty of higher rank. These data demonstrate that institutions that are in many ways similar to USC have successfully avoided salary compression and set an example that we should follow.

In addition to reporting the difference between full and assistant professors by selected school clusters, data presented in Table I also reports USC salaries by rank as a percent of the average salary for each cluster. These percentages show that at the assistant level, USC compares very closely to other schools, but at more senior levels USC falls further behind. This pattern in salaries is likely due to the practice at USC of hiring new faculty at close to market rates while our recent low annual increases have failed to keep more senior faculty close to market trends.
The USC salary data discussed above is based on aggregated average data. However, an examination of individual faculty salary data by rank and discipline indicates that in some cases new faculty at USC are paid more than associate professors. This type of salary inversion should be corrected to reduce faculty turnover and morale problems.
Many senior faculty earn significantly less that the USC campus-wide average of 80% of CUPA salary by rank and discipline. We estimate the cost of bringing all USC faculty up to the 80% level to be approximately $300,000. Due to the method we employed to calculate this initial figure, $300,000 can be thought of as the upper limit of the cost of bringing faculty up to 80% of CUPA.(1) However, this does not imply that $300,000 will correct our compression problems. It should be thought of as an estimate of the cost of making the initial improvement. For example, if we were to bring all faculty up to the CUPA average that USC assistant professors earn (89.2%) the cost would be significantly greater than $300,000.

Competitiveness in the Market Place
The salary data reported in Table I can also be used to evaluate how competitive USC salaries are relative to selected institutions. Used in this way, our aggregated data indicate that USC is most competitive at the assistant rank and less competitive at the more senior levels.
Many institutions use the CUPA salary data to set a percent target for their campus. For example, Weber State University (which is included in the WICBE and CCBE schools clusters in Table 1) currently pays their faculty about 85% of CUPA salaries and has established a target of approximately 94% (see WSU correspondence in Attachment A, page 5). Indeed, even USC has followed this example in the recent adjustment to the salaries of the library faculty (see Attachment A, page 6 for details). These adjustments were based on 93.4 % of the CUPA salary (adjusted for experience by CUPA percentile).
Since at least one comparable institution uses the CUPA data as a target for their faculty and USC has also employed this method recently, we recommend the following. The administration should use the recent example of the library as the standard for all USC faculty. While steps should be taken to insure that the library faculty maintain 93.4% of CUPA salaries, steps should also be taken to bring all faculty to 93.4% of CUPA (adjusted for experience).

 Estimated Cost of Initially Addressing Salary Competitiveness at USC
Since USC did not fall behind market salary trends in one year, we recognize that steps to correct our market discrepancy will require several years to correct. Therefore, as an initial movement to our recommended goal of 93.4%, we estimate an initial cost of moving from 80% to 85% of CUPA to be $420,000. This figure is based on 1999-2000 USC salary data and represents a 6.25 % increase in USC expenditures on faculty salaries.

 Redirection of Resources
Given the USC budget trend of the recent past, it is unlikely that future increases in USC's funding will be sufficient to address the costs of correcting the equity and competitive salary issues described above. Therefore, the redirection and reallocation of funds within USC will be necessary to make these adjustments. To do this, the administration will have to reverse the past funding practice of shifting funds away from salaries and toward other uses. For example, between 1995 and 1999 the percent of the budget that was dedicated to instruction (the source of faculty salaries) decreased from 50. 1% to 47.2% of the total (USC budget information is presented in Appendix A, page 7). Furthermore, the total USC budget increased by 7.5%, but the portion dedicated to instruction increased by on 1.3% over this same period. If the instructional budget was restored to 50% of the total budget, this would mean an increase of $800,000 that could be used for adjusting faculty salaries.
With increased campus construction the portion of the budget dedicated to operations and maintenance (O&M) has increased from 10.4% to 13.4% over the 1995-1999 period. This is an increase of $982,000. While construction may necessitate increased expenditures, these should not be made at the expense of the instructional budget.

 Suggested Course of Action
The Faculty Compensation Committee recommends the following:

1. That the administration take immediate steps to redirect funds away from other uses and toward instruction so that funds are available to make salary adjustments beginning in the 2001-2002 contract cycle.
2. Funds be set aside so that equity adjustments related to salary compression can be made in the 2001-2002 contact cycle. In the spring of 2001 the FCC will identify those faculty most in need of adjustments due to the effects of salary compression. A more accurate estimate of the cost of this adjustment along with a list of eligible faculty will be forwarded to the administration so that a correction can be made in the next faculty contract cycle.

 3. USC faculty on average earn 80% of the corresponding CUPA salary by rank. To increase our competitiveness in the market place, we recommend that the administration increase this percent by 3 to 5 percentage points each year until we have reached the recommended target of 93.4% of CUPA. The FCC will develop a scale to adjust the CUPA data for years of experience.
4. The administration should avoid a trade-off between equity and competitive salary adjustments. To minimize disruptive faculty complaints, equity adjustments addressing salary compression problems should not be made at the expense of salary adjustments made for competitive reasons.

5. The Faculty Senate and the administration need to be more diligent in monitoring the allocation of USC budgetary funds so that instruction is appropriately funded in the future to insure a quality education as well as sufficient funding of faculty salaries.-
Footnote (1) To estimate this cost we calculated the percent of 1999-2000 individual USC faculty salaries of the CUPA salary for rank and discipline. This analysis revealed that more senior faculty were most out of line compared to the CUPA average. To estimate the initial cost of addressing compression problems, we then calculated the cost of brining those faculty up to the campus average of 80% of CUPA. However, in this initial estimate we did not control for years at rank. So, recently promoted faculty (in the last year or two) would need significant increases to bring them to 80%. This method inflates the cost of correcting for salary compression. Therefore, $300,000 can be thought of as the upper limit if making this adjustment. We recommend that in the spring of 2001, the FCC prioritize those faculty most in need of equity adjustment due to compressed salary and that this process account for years at rank. In this way we can obtain a more accurate estimate of the cost of making equity adjustments.