The Need

Attracting and retaining the best faculty is the key to the University of North Carolina at Chapel Hill’s nationally recognized teaching, research and public service. The University’s ability to attract and retain faculty depends on several factors:

1. Salaries for faculty must be comparable to those peer institutions with which Carolina competes.
2. Compensation levels, or benefits including health insurance, must be competitive.
3. Physical resources (research labs, classrooms, and office space) must be at a level comparable to peers.

Background

In its 1999 legislative session, the N.C. General Assembly directed the University of North Carolina Board of Governors to conduct a system-wide study of faculty salaries and compensation. Legislators said that the study should evaluate the salaries and compensation in comparison with peer institutions and should recommend compensation adjustments aimed at maintaining and enhancing academic excellence on each campus. The Board of Governors was further charged with identifying revenue options for funding faculty salary and compensation adjustments and with reporting to the General Assembly’s Joint Legislative Commission on Governmental Operations and to the Joint Legislative Education Oversight Committee by December 1, 1999.

In August, Interim Chancellor William O. McCoy selected the 17-member Committee on Faculty Salaries and Benefits and named Provost Richard J. Richardson chairman (See Appendix A). The legislature’s December deadline necessitated an ambitious schedule for the committee. The group determined that it must complete its work by October so that its report could be submitted to the Board of Trustees at a special meeting on October 28. The trustees would then forward the report and their recommendations by October 30 to the Board of Governors for its November meeting.

This is not the first time the General Assembly directed a study of faculty compensation or the setting of tuition among UNC System institutions and their peers. In 1997, the General Assembly asked the Board of Governors to study and revise its process of determining tuition rates. The General Assembly required the Board of Governors to examine and amend its tuition establishment process to enable the Board to set tuition in a way that more effectively addresses the differences among the UNC campuses and the unique schools within them. The Board of Governors filed its report on tuition-setting processes with the General Assembly in 1998 and subsequently amended its process.

In charging the UNC-CH Committee on Faculty Salaries and Benefits, Chancellor McCoy said, "We want to know if we are treating our faculty well and fairly, and we want to be sure that we can be competitive with the best schools that we compare ourselves with. We know that we have been able to make some progress in some years and in other years, we’ve drifted back down." McCoy referred to the percentage of pay increases at UNC-CH, which have lagged behind those awarded to public peers in other states. State-funded faculty pay raises have averaged between 3 percent and 4 percent in North Carolina since 1996-97, while those at many peer campuses have ranged from 5 percent to more than 7 percent.

Recommendations

After careful study of faculty salary levels and review of the funding options available, the Chancellor’s Committee on Faculty Salaries and Benefits recommends a solution in which responsibility for improving faculty salaries be shared by students, the General Assembly and the campus through private fund raising.

Specifically, the committee recommends:

1. That tuition be increased and retained at the campus level as follows:

By $1,500 for in-state undergraduates, over a period of 3 years.

By $2,000 for out-of-state undergraduates, over a period of 4 years.

By $2,000 for in-state graduate students, over a period of 4 years.

By $2,000 for out-of-state graduate students, over a period of 4 years.
 

2. That the legislature adopt the principles established by the committee to ensure that competitive faculty salaries are sustained (See "Principles for Funding Competitive Faculty Salaries," Appendix B).
   
   
3. That the UNC Board of Governors accept the principles proposed by the committee for establishing appropriate levels of tuition and fees (See "Principles for Tuition and Fees Increases," Appendix C).
   
   
4. That the campus do its share by raising private funds designated for faculty salaries through endowed professorships.

The work of the committee was organized around four key issues, which coincided with the charge of the 1999 legislatively mandated study and with recommendations made by members of the 1998-99 Chancellor’s Student Advisory Committee. Thus the committee attempted to:

1. Show that the University is making effective use of its current resources. (See Appendix D for a review of expenditures directed toward the educational mission of the University.)
   
   
2. Demonstrate a clear need for increased faculty salaries, relative to the University’s peers. (See Appendix E, which provides peer comparisons relative to salary and total compensation. Also included is information about faculty age and retirement projections as well as anecdotal information provided by campus administrators regarding faculty recruitment and retention issues.)
   
   
3. Examine tuition levels relative to peers. (See Appendix F for peer comparisons of tuition and fees.)
   
   
4. Address the need to increase funds available for financial aid in response to a possible tuition hike. (See Appendix G regarding the "Student Aid Profile – Need Based Aid 1997-98".)

Historical Perspective

Table I documents salary increase percentages for several comparable peer public institutions. This table demonstrates that North Carolina has provided significantly lower salary increases compared to peer institutions in other states.

Current Issues

The consistently low salary increases for faculty at the University of North Carolina at Chapel Hill result in an accumulated gap in total salary dollars compared with peer institutions. Individuals remaining on the faculty at the University over a period of time will not remain competitively rewarded in terms of their salary compared to their peers at other institutions. As a result, faculty salaries at Carolina are not keeping pace, leaving our schools and departments vulnerable to "raiding" by many other universities nationally. A recent study by F. King Alexander of the University of Illinois, reported in the September 9, 1999, issue of The Chronicle of Higher Education, notes that "… the better public institutions are becoming the faculty-training grounds for private universities. …Premier public universities are increasingly becoming premier state universities and not national universities." He further notes, "It’s becoming extremely difficult for public universities to make fair counteroffers, or even comparable counteroffers."

The anecdotal information included in Appendix E provides further documentation of the raiding that is occurring within the departments and schools across campus at UNC-CH. If Carolina is to remain a nationally ranked public institution, it must find a way to close the salary gap and to provide competitive salary increases to continuing faculty in the years to come. The attached "Principles for Funding Competitive Faculty Salaries" (Appendix B) must be adopted in order to preserve the intellectual capital of the University.

Future Requirements

In order to determine the funding required to close the salary gap and sustain faculty salaries over time, a financial analysis was conducted to assess the level of funding required. First, it is necessary to evaluate the funding necessary within a cohort of peers to project an appropriate base budget for faculty salaries. Three universities were selected for this peer comparison, the University of Michigan, the University of Virginia, and the University of California-Berkeley. These three institutions provide three different levels of historical funding for faculty salaries, and three different models of budget flexibility, which enhance this comparative analysis.

Table II compares faculty salaries by rank. First it is necessary to assess the numbers of faculty in each rank at UNC-CH in order to assess the funding levels required to adjust the average salary of each rank. The data reported in Academe for the 1998-99 faculty salary comparison provide the best evaluative tool for comparing faculty salaries. The numbers of faculty ((*)12-month converted to 9-month, and less any School of Medicine faculty), and the corresponding salary averages by rank for UNC-CH and the three peers are as follows:

The comparable salary budget, based on the UNC-CH number of faculty, and the corresponding faculty salary average of each rank for each peer can then be calculated as follows:

The salary gap that exists between the salaries at UNC-CH and these peer institutions will grow over time in real dollars, unless annual legislative salary increases comparable to those peers are provided, and until the salary gap that currently exists is eliminated.

Table IV below illustrates a proposed method of closing the salary gap that exists at UNC-CH. This proposal includes a combination of legislative salary funds, tuition increase funds at the campus level targeted for faculty salaries, and private funding targeted toward distinguished professorships.

The notion of a commitment to faculty salaries on behalf of a legislative body is not uncommon. A model such as that introduced by Georgia’s governor provides a target salary increase of 6 percent to keep the Georgia university system competitive in the recruitment and retention of faculty. This salary increase percentage was set for four years. Stephen R. Portch, chancellor of the Board of Regents of the University System of Georgia, noted in the February 26, 1999, Chronicle of Higher Education, "It is not just about the money. It is about a state government sending a positive message about how much it values faculty." North Carolina Governor James B. Hunt, Jr., developed a similar model for salary increases for public school teachers which provides a salary increase of 7.5 percent each year. This model was not a legislative mandate or statutorily required; rather it established a target for the General Assembly to use to secure the best teachers for North Carolina and to ensure retention of public teachers.

Table IV assumes a 3 percent salary increase in 2000-01 (a lower transition amount in recognition of the demand on state resources due to Hurricane Floyd), and a Legislative Salary Increase (LSI) of 5.5 percent for the following four years, based on an average of the three peers listed in Table I.
 

Without a substantial increase to the base funding for faculty salaries at UNC-CH, the salary gap cannot be made up with annual legislative increases alone.

Table V illustrates what impact the above salary increases will have toward closing the estimated salary gap for each of these three peer institutions. This Table projects the LSI for Michigan at 5 percent, Virginia at 6.5 percent, and Berkeley at 4.9 percent. The national average for salary increases continuing faculty members was 4.8 percent for 1998-1999.
 

The first column in the table above for the base year indicates the amount of funds required for UNC-CH to reach the salary base level of the listed institution in that year (1998-99). After this base adjustment has been reached, then the salary increases must remain at a rate comparable to that peer or the gap will continue. The salary increase funds required annually to maintain a competitive salary base for each peer is shown in bold on the line titled "Annual Increase." The next line indicates the "Annual Salary Gap" between the salary increases recommended each year for UNC-CH in Table IV, and the increase projected for the peer institution. The final line entitled "Cumulative Salary Gap" shows the salary gap after the annual salary increase is included in the salary base. As this table illustrates, if the salary plan outlined in Table IV is applied, UNC-CH could reach Michigan and Berkeley by Fiscal Year 2002-2003. UNC-CH will never reach UVA, based on the fact that the projected annual legislative salary increases awarded for UVA will exceed the legislative salary increases projected in the out years for UNC-CH (6.5% for UVA, vs. 5.5% for UNC-CH). However, only a $183,388 projected salary gap exists in fiscal year 2003-2004 between UNC-CH and UVA, before the projected gap widens again in 2004-2005.

Annual legislative salary increases alone could never enable the University to close the salary gap. The tuition increase provides the funds necessary to close the salary gap. However, this approach provides a remedy only if the General Assembly were to appropriate a legislative salary increase equal to that of the peer institution selected, or an average of all peer institutions.

Summary

Carolina cannot possibly compete for the best faculty in the nation without providing for competitive faculty salaries. As stated earlier in this document, and as demonstrated within the accounts provided by Deans and Department Chairs in Appendix E, attracting and retaining the best faculty is key to maintaining the University’s nationally recognized teaching, research, and public service.

The University is the economic engine in the knowledge-based economy. Economic development within the State of North Carolina, and the early establishment of the Research Triangle Park, can be attributed directly to the excellence of the area’s research universities and the caliber of their faculty. If the State is to continue to expand and excel in areas, such as biomedical and pharmaceutical research, financial, technical and business enterprises, it must provide for the intellectual capital necessary to ensure their continued success.

Carolina’s research faculty share their experience and intellect with the bright and motivated students on this campus. This further contributes to long-term economic development by providing the future generation of leaders in the State of North Carolina and beyond. Thus, resolving this significant issue is critical to the future of this State.

Recommendation of the Committee on Faculty Salaries and Benefits:
 

TUITION INCREASE PHASE-IN:		1999-2000		2000-2001			2001-2002			2002-2003			2003-2004			2004-2005
UNDERGRADUATE:
In-State FTE		12,636		12,636			12,636			12,636			12,636			12,636
Total Tuition and Fees		$2,365		$2,865			$3,365			$3,865			$3,865			$3,865
Total Tuition		$1,528		$2,028			$2,528			$3,028			$3,028			$3,028
Total Fees		$837		$837			$837			$837			$837			$837
Tuition Increase		$0		$500			$500			$500			$0			$0
Total Tuition Revenue		$29,881,866		$36,199,866			$42,517,866			$48,835,866			$48,835,866			$48,835,866
Tuition Increase Revenue-Each Year		$0		$6,318,000			$6,318,000			$6,318,000			$0			$0
Percentage Increase Each Year				21.14%			17.45%			14.86%			0.00%			0.00%
Total tuition increase of $1,500 fully implemented by 2002-2003
Out-of-State FTE		2,655		2,655			2,655			2,655			2,655			2,655
Total Tuition and Fees		$11,531		$12,031			$12,531			$13,031			$13,531			$13,531
Total Tuition		$10,694		$11,194			$11,694			$12,194			$12,694			$12,694
Total Fees		$837		$837			$837			$837			$837			$837
Tuition Increase		$0		$500			$500			$500			$500			$0
Total Tuition Revenue		$30,614,327		$31,941,827			$33,269,327			$34,596,827			$35,924,327			$35,924,327
Tuition Increase Revenue-Each Year		$0		$1,327,500			$1,327,500			$1,327,500			$1,327,500			$0
Percentage Increase Each Year				4.34%			4.16%			3.99%			3.84%			0.00%
Total tuition increase of $2,000 fully implemented by 2003-2004
TUITION INCREASE PHASE-IN:		1999-2000		2000-2001			2001-2002			2002-2003			2003-2004			2004-2005
GRADUATE:
In-State FTE		3,813		3,813			3,813			3,813			3,813			3,813
Total Tuition and Fees		$2,405		$2,905			$3,405			$3,905			$4,405			$4,405
Total Tuition		$1,578		$2,078			$2,578			$3,078			$3,578			$3,578
Total Fees		$414		$414			$414			$414			$414			$414
Tuition Increase		$0		$500			$500			$500			$500			$0
Total Tuition Revenue		$9,171,866		$11,078,366			$12,984,866			$14,891,366			$16,797,866			$16,797,866
Tuition Increase Revenue-Each Year		$0		$1,906,500			$1,906,500			$1,906,500			$1,906,500			$0
Percentage Increase Each Year				20.79%			17.21%			14.68%			12.80%			0.00%
Total tuition increase of $2,000 fully implemented by 2003-2004
Out-of-State FTE		2,998		2,998			2,998			2,998			2,998			2,998
Total Tuition and Fees		$11,571		$12,071			$12,571			$13,071			$13,571			$13,571
Total Tuition		$10,744		$11,244			$11,744			$12,244			$12,744			$12,744
Total Fees		$827		$827			$827			$827			$827			$827
Tuition Increase		$0		$500			$500			$500			$500			$0
Total Tuition Revenue		$34,691,117		$36,190,117			$37,689,117			$39,188,117			$40,687,117			$40,687,117
Tuition Increase Revenue-Each Year		$0		$1,499,000			$1,499,000			$1,499,000			$1,499,000			$0
Percentage Increase Each Year				4.32%			4.14%			3.98%			3.83%			0.00%
Total tuition increase of $2,000 fully implemented by 2003-2004

 

 

	FY2000-20001	FY2001-20002	FY2002-20003	FY2003-20004	FY2004-20005
Total Tuition Increase Revenue	$11,051,000	$11,051,000	$11,051,000	$4,733,000	$0
Less: 30% Financial Aid	$3,315,300	$3,315,300	$3,315,300	$1,419,900	$0
Net: TUITION INCREASE REVENUE	$7,735,700	$7,735,700	$7,735,700	$3,313,100	$0
Tuition Revenue For Faculty Salaries (less benefits)	$6,459,310	$6,459,310	$6,459,310	$2,766,439	$0

 

Richard J. Richardson, Provost, chair of the committee
Richard "Pete" Andrews, faculty chair
Tim Burnette, UNC-CH trustee
Anne Cates, chair, UNC-CH Board of Trustees
Lee Connor, president, Graduate and Professional Student Federation
Nancy Davis, associate vice chancellor, University Relations (staff support, non-voting member)
Doug Dibbert, president, General Alumni Association
Linda Dykstra, interim vice provost for graduate studies and research and Graduate School dean
David Guilkey, chair, Department of Economics
Evelyn Hawthorne, associate vice chancellor, Government Relations (staff support, non-voting member)
Nic Heinke, student body president
Sue Kitchen, vice chancellor, Student Affairs
Diane Kjervik, associate dean for community outreach and practice, School of Nursing
Kate McGaughey, associate provost (staff support, non-voting member)
Shirley Ort, associate provost and director of the Office of Scholarships and Student Aid
Ed Samulski, chair, Department of Chemistry
Lynn Williford, interim director, Office of Institutional Research (staff support, non-voting member)