|
Committee Membership
Jeffrey J. Daniels**, Geological Sciences
* FCBC Chair
Executive Summary
In the Academic Plan, President Kirwan argues that “academic excellence begins with high-quality faculty” and calls for the implementation of a faculty recruitment, retention, and development plan - including a competitive, merit-based compensation structure - that is in line with our benchmark institutions.” FCBC outlines principles to guide the merit distribution of salary compensation and the provision of benefits. It recommends that the process for determining individual salaries be clear and as open as possible.
In comparing Ohio State’s compensation to benchmark institutions, FCBC concludes that Ohio State’s competitive position over the past five years has declined leaving a gap between aspirations and material resources. In terms of total compensation (the combination of salary and benefits) provided to faculty members across all ranks, Ohio State is 7th among the ten benchmark institutions. This is a decline from 3rd position which it held in 1996-97. Since 1996-97, in terms of Ohio State’s average faculty salary across all ranks, Ohio State has fallen from 3rd to 8th in the benchmark group, from 4th to 9th in the CIC, and from 32nd to 42nd in the AAU group.
Unfortunately, the substantial decline in relative salary compensation is not offset by superior benefits provided by Ohio State. Overall, the benefits Ohio State provides to faculty members are competitive with those provided elsewhere, but not better. Regarding the costs a faculty member pays for health insurance and health care Ohio State is average and, with a 30% increase in all insurance plans already announced for FY 2001-2002, this status may deteriorate.
FCBC concludes that an average salary increase of at least 6% is needed to reverse the downward trend in OSU’s competitiveness and to implement the strategies outlined in the Academic Plan. It also concludes that the health insurance review underway in FY 2001-2002 must design a new insurance system that will make Ohio State’s costs for faculty coverage competitive with the plans at the benchmark institutions. FCBC also supports the extension of University-sponsored benefits to same-sex and heterosexual domestic partners in committed relationships. Introduction:
The 2001 report of the Faculty Compensation and Benefits Committee (FCBC) to the University Senate has several purposes. First, the report identifies principles that should guide the distribution of compensation, both salary and benefits, and describes the process by which decisions about an individual faculty member’s compensation should be determined. Second, the report examines The Ohio State University’s salary and benefits situation compared to other comparable universities. The purpose of this comparative analysis is to determine the competitiveness of Ohio State in seeking to retain, motivate, and recruit high quality faculty. Finally, the report makes a number of recommendations.
President Kirwan, in the Academic Plan guiding university policy, argues that “academic excellence begins with high-quality faculty.” Faculty, the President explains, “not only enhance the University's teaching and programmatic reputation but also attract the highest quality students at all levels. “More than any other single factor,” according to the President, “attracting and keeping exceptional faculty members will help us become a great university.” Consistent with this argument, President Kirwan identifies as key the implementation of “a faculty recruitment, retention, and development plan - including a competitive, merit-based compensation structure - that is in line with our benchmark institutions” as a top strategic priority. The FCBC’s report analyzes where Ohio State stands in comparison to benchmark institutions regarding faculty compensation and identifies the challenges ahead.
This year FCBC decided to issue a single report combining the analysis of salary and benefits. FCBC has taken this approach for several reasons. First, in assessing Ohio State’s competitiveness vis-a-vis benchmark institutions, salary and benefits are part of a single package. Advantages and gains in one can be offset by disadvantages and losses in the other and vice-versa. Second, salary and benefits reflect the combined costs of total compensation that the University must budget and pay. Finally, the University community faces rapidly rising costs for health care insurance. Premiums for the year FY 2001-2002 in all the medical plans will increase by more than 30%. This is on top of large increases last year in OSUHP and traditional health insurance plans. Because these rising costs both erode take-home salary and increase the costs the University must pay for non-salary compensation, FCBC decided that it was necessary to make an overall assessment of Ohio State’s position in the market integrating into a single report the analysis of salary and benefits.
The report is divided into three major parts. The first part identifies the principles that should guide the distribution of compensation. This includes specific principles for both the distribution of salary and the provision of benefits. The second part of the report turns to the analysis of Ohio State’s compensation compared to that of comparable institutions. This empirical analysis is sub-divided into three sections (1) a comparison of total compensation, (2) a comparison of salary, and (3) a comparison of major benefits. The third part of the report presents our conclusions and a series of recommendations regarding salary and benefits.
Part 1: Principles and Process Guiding Compensation
As recognized by President Kirwan in the Academic Plan, the quality of the faculty and its determination to seek excellence is a vital prerequisite for the achievement of the university’s main mission. It is faculty, after all, who are central to making Ohio State excellent in teaching, research, and service. Consequently, the University should pursue compensation strategies which maximize the recruitment, performance, and retention of quality faculty, while adhering to the letter and spirit of applicable regulations.
The University should ensure that the incentive structure of faculty compensation connects directly to the missions the University seeks to accomplish. To do this it must articulate clear principles and methods guiding both salary compensation and the provision of benefits. These principles must identify the activities that will be compensated, the order of priority, and which units and decision-makers will decide these matters. They must also define the basis on which specific levels of compensation will be determined. We discuss first the principles guiding salary compensation, then the principles guiding the provision of benefits (which are somewhat different than the principles guiding salary compensation), and finally the process by which decisions should be made and reported.
(A) Principles Guiding the Distribution of Salary
Compensation is based on merit: FCBC supports the concept of salary increases that are based on merit. The “measures-of-merit” should be primarily determined by the expectations and mission of individual academic units, and the professional culture of each unit. However, the long-term academic health of each unit is enhanced by an evolving academic environment, and measures-of-merit should be flexible enough to recognize and reward individuals who are making a positive contribution for the future by advancing into new areas of research and developing new teaching methodologies.
FCBC encourages academic units to include quality and other non-numerical factors in their consideration of merit pay increases. Unfortunately, measures-of-merit are often defined in terms of work products that can be assigned a numerical value (e.g., number of publications, research funding, number of classes taught, etc.). Once these individual numbers are derived, then a formula must be developed to weight the individual factors and derive a single number that represents the “productivity” of the faculty member. The key to applying these formulas is the weighting factors, which are subjective. Numerical evaluations are one way to roughly measure productivity, but they should not be the sole measure of merit of a faculty member. These numbers cannot take into account the intangible contributions of faculty members, including the quality or long-range impact of their contributions. Rigid annual numerical evaluations also discourage faculty from investing their time and energy in long-term research projects, teaching development, or university service.
It is particularly important to consider merit and performance over time and not simply on a year-to-year basis. Some of the most important products of academic research, such as books, require a number of years to produce. Faculty members should not be discouraged from engaging in these high impact projects by a rigid year-to-year accounting system. Rewards for major multi-year projects should also not be determined entirely by the available raise monies for one particular year.
Moreover, faculty members should be encouraged to change and re-vitalize their research focus, to develop new teaching methodologies, and to apply their knowledge to serve the academic community, their profession, or the general public. Evolutionary professional development and service often result in a short-term hiatus in the normal numerical evaluation of productivity, with a resulting decrease in salary raises. Academic units are encouraged to develop a means to foster professional and academic growth through salary increases and other means of remuneration.
Market considerations: Beyond the principle of assessing a faculty member’s contribution to the achievement of the unit’s strategic objectives, decisions on compensation should also take into account the market value of various tasks. Teaching, research, and service may all contribute in important ways to the mission of the unit, but they may not be valued equally in the market. To retain and recruit high quality faculty the university must compensate faculty in ways that are competitive with market rates for the activities they perform.
Merit is a continuum: Salary increases should be distributed with recognition that merit is relative and runs along a continuum, from exceptional through normal to inadequate. Some faculty members will be exceptionally meritorious in some years, others who have made contributions to the achievement of the various objectives of the unit are also meritorious, albeit in a more normal range. Finally, no salary increases may be appropriate when an individual’s performance is inadequate and/or the individual fails to provide required documentation related to his or her own performance. In such instances, the performance or reporting deficiencies should be documented and communicated to the individual throughout the performance cycle.
Decentralized decision-making: Although OSU’s central administration guides the overall direction, strategy, and policies of the university, there is substantial decentralization of decision-making with regard to faculty compensation. This is required by the complex nature of the university and the diversity of activities, missions, and plans developed by specific units. Each college and department is treated as a strategic enterprise which must identify its strategic plan for enhancing excellence in teaching, research, and service. Deans, chairs, and directors of individual units should assess the impact faculty have on the achievement of the unit’s strategic goals when determining salary compensation. Faculty members can be compensated for various combinations of teaching, research, and service depending on how the performance of these tasks by the faculty member affects the unit’s achievement of its strategic objectives as determined by the unit’s dean, chair, or director and its faculty. The achievement of excellence within each unit is the primary measure of compensation strategy and administrative success.
Salary and Overall Compensation: Salary is recognized as being part of the overall compensation which also includes benefits. Some of these benefits can be assigned a monetary value, while others have an intangible value that adds to the quality of life for faculty. FCBC encourages the consideration of salary and benefits for faculty as a measure of the overall compensation of an individual faculty member. Calculate salary increases in dollars rather than percentages: The University administration necessarily communicates the amount of new funds to be made available centrally for salary increases in terms of a percentage increase of the current salary budget. Individual faculty often interpret this overall average percentage total increase as the salary compensation that should be paid to faculty who achieve an average performance rating in their local unit. This is not possible, however, if resources are to be available for above average merit increases. Consequently, individual salary increases for average performance will be lower than the overall salary increase budget that is announced by the administration.
Salary decision makers should not use the percent increase in the salary budget as a basis for distributing raises. Rather, taking into account performance and market considerations, deans, chairs, and directors should determine the actual dollar figure a faculty member should earn. Deans, chairs, and directors should then distribute raises in a way that maximizes the number of faculty members earning what they should. Calculations based on actual dollars and not percentages of pre-existing base rates allow units to address market considerations and equity in a flexible fashion. Increases in base salary may be inappropriate in situations where current salary substantially exceeds market salaries or salaries of other individuals within the employing unit with similar duties, levels of performance, experience, and qualifications.
(B) Principles Guiding the Provision of Benefits
Although benefits and salary are both essential components of a faculty member’s total compensation, the principles guiding the distribution of these two types of compensation are different. Whereas faculty salaries come from a common pool and can be seen in a competitive tradeoff relationship, meaning the more one faculty member receives the less that is available for another faculty member, the situation for benefits is different. Benefits can enhance the well-being of all faculty members and provide opportunities and protection that could not be made available to individual faculty members at similar costs. This is possible because of the economies of scale and collective advantages that derive from the market power of pooling the Ohio State faculty. The advantages available to all faculty members that derive from collective action in concert, underpin a different set of philosophical principals for the distribution of benefits.
Status determines benefits: Benefits should be provided based on an employee’s employment status or retirement status rather than performance.
Subsidize protection against universal risks taking advantage of collective action: Benefits should be seen as divided into those that all employees participate in and those that are optional. The benefits that all faculty members participate in and which the University subsidizes are those (1) that represent protection against risks that all members face, (2) for which individual methods for managing the risk are expensive, technically complicated or inadequate, and (3) in which the University has relative advantage in securing coverage. The best example of such a benefit is medical insurance.
Give priority to benefits difficult for faculty members to obtain individually: For benefits that all faculty members must participate in, the University should give higher priority to protecting against the risks that are most difficult for any individual to manage alone. Major medical, disability, and long-term care are high priorities in this regard.
The University should subsidize part of a faculty member’s cost of participating in mandatory benefit programs.
Allow faculty to take advantage of OSU’s many opportunities: The provision of benefits that faculty members can choose to participate in on an optional basis should be done to maximize the quality of life and the attractiveness of working at Ohio State taking advantage of the varied resources and facilities on campus, advantages of the pooled size of the OSU market, and tax considerations.
(C) Process and Tools for Determining Faculty Salaries
The Office of Academic Affairs promulgated requirements for annual review processes in 1993 that were approved by the Faculty Council at that time. These requirements are set forth at the web site http://oaa.ohio-state.edu/handbook/x_annreview/html. A written annual review is required for every regular and regular clinical track faculty member. It is strongly recommended that this written review be provided to the faculty member prior to the time annual raise decisions are made so that there is time for the faculty member to respond to the review if he or she wishes. It is essential that departments follow these guidelines and provide faculty members with timely feedback regarding their performance.
The primary method of compensating faculty members for their performance is increasing their base salaries. Other tools are also available including cash bonuses, profit-sharing on revenue generating activities, and summer salary. Deans, chairs, and directors may use cash payments to induce and reward exemplary performance in the areas of teaching, service, or research. This method of compensation is appropriate when the activity being performed goes beyond the normal expectations of faculty members and involves performance or completion of a specific task over a short term of time. When units are considering using compensation tools other than base salary increases, they should consult the office of Human Resources and the Office of Academic Affairs for guidelines, advice, and approval. Units should also discuss the use of alternative rewards in their Patterns of Administration.
In some units, faculty members play a significant role in the process by which performance is evaluated and raises distributed. In other units, deans, chairs, and directors make these decisions without systematic faculty input. In units in which faculty play minimal or no role in the decision-making process, consideration should be given to involving faculty members more directly, as part of an advisory committee or in some other way.
The process and outcome of decision-making regarding yearly adjustments in base salary should readily accessible for review by individual faculty members. Therefore, this information should be compiled and stored in an accessible location in the department. The location of this compiled information should be noted in faculty members' written notification of their salary increase for the coming year.
Part 2: Faculty Compensation at Ohio State Compared to Competitors
The most basic metric for comparing compensation across universities is the total amount of money the university pays for faculty salaries and benefits. This metric provides a useful overview of Ohio State’s relative position in the market but is imperfect. It does not take into account the different costs-of-living in various regions of the country and it does not evaluate the substantive quality of the benefits that are provided. Our report, therefore, begins with an analysis of total compensation but then turns to a more detailed assessment of comparative salaries. Following the detailed assessment of salaries we turn to an analysis of benefits, concentrating specifically on health insurance.
(A) Faculty Total Compensation
Table A-1 and Figure A-1 in the Appendix present total compensation figures arrayed across the professorial ranks. Over the past five years Ohio State’s competitive position in this regard compared to the benchmark institutions has declined. The benchmark institutions include Arizona, Illinois, Michigan, Minnesota, Penn State, UCLA, Texas, Washington, Wisconsin and Ohio State. In 1996-97, when considering total compensation combined across all ranks, Ohio State ranked 3rd among the benchmarks. In 2000-01, Ohio State ranked 7th in this category after a steady decline. For full professors in 2000-01 the total compensation paid by Ohio State ranked 5th among the benchmarks. For associate professors and assistant professors it ranked 7th.
The reason Ohio State has failed to improve its competitive position among the benchmark institutions is not that it has approved salary guidelines less than the increases in the cost-of-living in the Midwest. To the contrary, over the past five years, the salary guidelines increases have exceeded increases in the cost-of-living. Likewise, the reason Ohio State has lost ground is not that it has reduced the percent of the total education and general expenditures that it devotes to faculty compensation. Over the past five years, this percentage has consistently hovered between 21.1% and 21.9%. According to the U.S. Department of Education’s Integrated Post-secondary Education Data System, Ohio State ranks 4th among the benchmark institutions in terms of the percent of the total educational and general expenditures that are devoted to faculty salary and benefits and has held this 4th place rank for four of the past five years.
One reason that Ohio State’s competitive position with regard to total compensation has declined is the increasing expenditures made by other universities. The market for high quality faculty members among the benchmark universities is increasingly competitive. This is seen most clearly when comparing faculty salaries at Ohio State with salaries at other institutions.
(B) Faculty Salaries
Salary comparisons are presented in this report for three groups: (1) the benchmark institutions, (2) CIC institutions (the 11 institutions in the Big Ten conference plus the University of Chicago), and (3) the American Association of Universities (AAU) institutions. The 60 AAU institutions include major public and private research universities in North America and represent a national set of institutions with which Ohio State competes for faculty. The individual institutions included in each group are listed in the tables that are presented in the Appendix.
The figures on percentage changes in faculty salaries over time (1-year, 3-year, 5-year changes) represent simple changes in average salaries (rank adjusted for overall averages) over time. These figures are not the same percentages as the faculty salary raise guidelines at the various institutions since average salaries are affected by new-hires, separations and promotions in addition to salary increases to continuing faculty.
Average faculty salaries by rank across these institutions are obtained from the American Association of University Professors (AAUP) annual survey of faculty compensation. Overall salary averages for all ranks combined are derived by taking that institution’s average salaries at the professor, associate professor and assistant professor ranks and weighting these averages by Ohio State’s distribution of faculty across the three ranks. This provides an overall rank adjusted salary. It removes the effect on the overall average salary that would result from another institution having a different distribution of faculty, for example more at the full professor rank than Ohio State.
Tables A-2 through A-5 in the Appendix provide a recent history of faculty salaries for the benchmark, CIC and AAU institutions. During this time period, salary budgets from one year to the next have increased more than 6% at five of the benchmark institutions (Illinois, Minnesota, Texas, Wisconsin and UCLA) as seen in Table A-2 in the Appendix. Three of these universities (Minnesota, Wisconsin and UCLA) have had increases of 7.0% or more in two consecutive years. Over the five-year period, only Arizona, Penn State, Texas and Washington have had lower average faculty salary budget increases than Ohio State.
Three overall trends stand out.
· Over the past five years, while salary increase budgets at other benchmark institutions have averaged 4.4%, budgeted salary increases at Ohio State have averaged 4.0%.
· Without a substantial increase in 2001-02 , Ohio State’s five-year average for salary increase budgets will decline when the 5.0% increase of 1996-97 is no longer included in the average.
· Since 1996-97, Ohio State’s ranking of average faculty salary has fallen from 3rd to 8th in the benchmark group, from 4th to 9th in the CIC, and from 32nd to 42nd in the AAU group. The downward slide in all three groups is clear and substantial.
Salary Comparisons with the Benchmark Institutions: The salary comparisons for the benchmark institutions are given in Table A-3 and Figure A-2 in the Appendix. A plot of the salaries for the combined faculty ranks is given in Figure 1. Two points highlight the decline.
· In 1996-97 Ohio State ranked 3rd overall in faculty salaries (with the other benchmark institutions faculty rank distributions adjusted to coincide with Ohio State’s faculty rank distribution) and were 1.8% above the overall salary average.
· This year Ohio State’s average declined for a fourth straight year and fell to 8th place which was 2.9% below overall average salary of the benchmark institutions.
Assuming an average yearly salary increase level of 5.33% among the benchmark institutions based on the average of the past three years, Ohio State salaries will have to rise by at least 6.68% annually for the next three years for Ohio State to return to its ranking of 3rd among the benchmark institutions.[1] To get to a 5th place ranking, Ohio State salaries will have to rise by at least 6.10% annually for the next three years. Just to retain its 8th place ranking, Ohio State must increase salaries by 3.65% annually for the next three years, and even with this increase, Ohio State salaries would be 7.5% below the overall average salary of the benchmark institutions. [1] These figures were obtained by projecting the salary of the third ranked benchmark institution (currently Illinois whose average overall salary is $76,790) out three years, increasing that salary by 5.33% each year ($76,790 increased 5.33% each year for three years results in a projected salary of $89,735 for the 2003-04 academic year.) To match this salary in 2003-04, Ohio State would need to increase its current overall average salary of $73,930 by 6.68% annually.
Figure A-3 in the Appendix presents the current faculty salaries at Ohio State in each college compared to the average salaries for similar colleges among the benchmark institutions. This analysis by college takes in account disciplinary differences in salary levels. It illustrates that some professions are paid more than others when colleges internal to Ohio State are compared to each other. It also identifies the colleges inside Ohio State in which salaries are below the market average for similar colleges at the benchmark institutions. For example, the Law School has a higher average faculty salary than other units at Ohio State but is lower than the average faculty salaries at Law schools across the benchmark institutions.
Salary Comparison with the CIC Institutions: The salary comparisons for the CIC institutions are given in Table A-4 and Figure A-4 in the Appendix. A plot of the salaries for the combined faculty ranks is given in Figure 2. Again a downward trend is evident.
· Ohio State ranks 11th out of the 12 CIC institutions with regard to overall rank adjusted salary increases over the past 10 years.
· The ten-year average increase for Ohio State has been 3.34%. The average for the CIC has been 3.87%. Over a ten-year period, this difference in average increase has generated a 4.97% differential in salary.
· In 2000-01, Ohio State average faculty salary remains in 9th place out of the 12 CIC institutions.
Figure 2. History of ranking with CIC institutions across Assistant, Associate and Full Professor ranks combined. Assuming an average yearly increase level of 5.00% among the CIC institutions based on the average of the past three years, OSU salaries will have to rise by at least 6.34% annually for the next three years for OSU to return to its ranking of 4th among the CIC institutions. Salary Comparisons with Association of American Universities (AAU): The salary comparisons for the AAU institutions are given in Table A-5 and Figure A-5 in the Appendix. A plot of the salaries for the combined faculty ranks is given in Figure 3. As with the benchmark and CIC institutions, Ohio State is also losing ground compared to the AAU institutions, specifically:
· From 1996-97 to 2000-01 Ohio State’s ranking among the AAU institutions dropped from 32nd to 42nd.
· From 1999-2000 to 2000-01 Ohio State’s ranking among the AAU institutions dropped from 40th to 42nd out of 60.
Assuming an average yearly increase of 4.66% for the 25th ranked AAU institution based on an average of the past 3 years, OSU salaries will have to rise by at least 7.74% annually for the next 3 years for OSU to rank 25th among the AAU institutions. Assuming an average yearly increase of 6.17% for the 10th ranked public AAU institution based on an average of the past 3 years, OSU salaries will have to rise by at least 8.63% annually for the next 3 years for OSU to rank 10th among the public AAU institutions. Figure 3. History of ranking with AAU institutions across Assistant, Associate and Full Professor ranks combined. (Note: the number of US AAU institutions increased from 56 to 60 in 1996-97) (C) Faculty Benefits
Although faculty benefits are a key ingredient in total compensation, they are more complicated to evaluate and more difficult to compare across benchmark institutions than salaries. First, the cost of the benefits do not necessarily equate with the value of the benefit provided. Universities can vary in terms of how efficiently they manage their benefit systems and in the substantive quality of various benefits that are provided. Second, the value individual faculty members attach to various benefits can vary substantially. Some faculty members, for example, may value highly educational assistance while others value life and disability insurance. Finally, fees and contributions that faculty pay for benefits are increasing for many benefits including health insurance, parking and recreational activities. These rising expenses reduce the gain of salary increases but they affect individual faculty members differently depending on which benefits faculty members elect to utilize. Moreover, the rising fees and costs do not necessarily mean that Ohio State’s competitive position in the market is declining. Obviously, competitive position depends on what other benchmark universities are doing.
Members of the Association of American Universities Data Exchange (AAUDE) share information on employee compensation, including benefit programs. Despite the apparent similarity in overall benefit offerings, a benefit-by-benefit comparison between Ohio State and the benchmark institutions is a complicated exercise. Details of various benefits are often not commensurate and aggregating across complex sub-parts of a particular benefit to create an overall assessment of the relative benefit is complicated. For instance, Ohio State’s retirement benefit provides health insurance while many other programs do not. On the other hand, STRS is less portable than other retirement programs and Ohio State faculty members are not covered by social security. Likewise, Ohio State’s life insurance coverage is higher than most others but the percent of monthly income Ohio State provides under long-term disability insurance is lower than most others in the benchmark group. Weighing the pros and cons of each sub-piece of each benefit requires a host of additional assumptions and is not a process easily summarized.
As difficult as it is to compare specific benefits across the benchmark institutions, comparing the entire set of benefits is even more difficult. Acknowledging these difficulties, FCBC has looked carefully at the set of benefits Ohio State offers and concluded that in the main they are competitive with those provided by the other benchmark institutions.
In analyzing the benefits part of Ohio State’s compensation package, FCBC has concluded that the most critical benefits in terms of protection against catastrophic risks and total dollars involved are health insurance and retirement. These benefits matter to all faculty members and are very likely to figure into retention and recruitment decisions. With regard to retirement, Ohio State University’s benefit is competitive and, in any case, is guided by state law. The area of health care benefits offers more opportunity for comparisons and recommendations. In addition, Ohio State is considering possible revisions in its health insurance plans for 2001-2002 and afterward, making a comparison against programs offered by other institutions particularly important. For these reasons, FCBC focused this part of the report primarily on health insurance plans.
Data summarizing selected aspects of Ohio State University’s benefit programs and those at these other institutions appear in Tables A-6 through A-8 in the Appendix. The data are taken from the AAUDE Survey of Benefit Programs 2000-2001 and were selected because they illustrate some of the variation that still remains between institutions on specific aspects of their benefit programs. Even with this heterogeneity, summary measures of benefits offered by Ohio State University appear typical when compared to the other benchmark institutions, with one exception: Ohio State’s employee premium-sharing levels are high on its most popular medical plan (University Prime Care, which Table A-6 compares to HMO/EPO plans offered at other institutions).
Table A-6 shows total annual premiums and the employee’s share of premiums for Ohio State University and the nine benchmark institutions (the identity of institutions other than Ohio State is masked). For employee-only coverage, Ohio State University enjoys the second-lowest total premium but the second-highest employee premium share. For family coverage, Ohio State's total premium is about 5 percent below average ($6,575.00 as compared to an average $6926.80) while its employee premium share is 24 percent above average ($986.29 as compared to an average $795.71).
Table A-7 provides a summary of institutions offering selected types of benefits considered important to subgroups of faculty and staff. Of the five categories of benefits considered, Ohio State University offers three, which is the number most commonly offered among the benchmark institutions. This comparison suggests that the number of subgroup benefits offered by Ohio State University to faculty and staff is typical despite heterogeneity in the profile of specific benefit programs offered by specific institutions. FCBC notes that a majority of benchmark institutions (five of nine) report that they currently offer coverage to domestic partners, a type of benefit long advocated by FCBC.
Table A-8 offers a comparison of cost-sharing provisions in medical plans offered by Ohio State University and other institutions. The first two columns compare limits on out-of-pocket expenses under Ohio State’s Prime Care plan with those of HMO/EPO plans offered at other institutions, while the next eight columns compare cost-sharing measures of prescription drug plans. The data reported show that the mechanisms for cost-sharing vary across other institutions. Unlike Ohio State, some report no specific limit on out-of-pocket expenses under their HMO/EPO plan, although the absence of such protection to the covered person is difficult to evaluate without considering other cost-sharing provisions such as deductibles and co-payments. However, the data do not suggest that cost-sharing methods in Ohio State’s medical plans are anything other than typical among other institutions.
Part 3: Conclusions
Summary
Ohio State has declared its intent to be one of the truly great research universities, entering the ranks of the top ten public institutions in the United States. President Kirwan has laid out an ambitious plan for achieving this academic mission that begins with the retention and recruitment of high-quality faculty. In this regard, the 2001 FCBC report highlights one of the most difficult challenges that Ohio State faces in implementing the Academic Plan. Rather than gaining ground on the benchmark competition, in terms of the compensation provided to faculty Ohio State is falling behind. In the competitive market of top-flight universities, Ohio State will not be able to retain, recruit and motivate high-quality faculty if it does not compete in terms of compensation. Because as President Kirwan argues, “academic excellence begins with high-quality faculty,” it is absolutely vital that Ohio State reverse its declining position among the benchmark institutions.
This year, FCBC combined its salary and benefits analyses into a single report to allow comparisons of total compensation. If Ohio State provides better benefits than available at benchmark institutions, then perhaps this would offset the relative decline in salaries. The data, however, do not show this to be the case. Although there are advantages and disadvantages in specific benefit details comparing one institution to another, FCBC has found Ohio State’s overall package to be competitive but not substantially better than the average package offered by benchmark institutions. In the case of health insurance, arguably the most important benefit, Ohio State’s program is substantively competitive but relatively expensive to employees choosing individual or family coverage under the most popular plan. With a 30% increase in premiums in all plans already announced for 2001-2002, Ohio State’s position relative to other comparable institutions is unlikely to improve in this regard. As the University considers restructuring of its health insurance benefits during 2001-2002, the competitive position of Ohio State vis-a-vis the benchmark and CIC institutions is a critical factor that will require close attention. Changes in this competitive position are likely to affect the University’s ability to attract and retain the best faculty.
If benefits are roughly comparable across the benchmark institutions, salary compensation plays a critical role in the competition for retaining and recruiting high-quality faculty. In this regard, Ohio State has seen a continuous downward slide in its competitive position over the past five years. In this regard, among the benchmark institutions Ohio State has dropped from 3rd place to 8th and among the CIC institutions it has dropped from 4th to 9th. To reverse this decline Ohio State needs to spend substantially more on faculty salaries. This can be accomplished by increasing the total budget. It can also be accomplished by increasing the percent of the budget spent on faculty salaries. Ohio State spends less than 25% of its overall educational and general expenditures on faculty salaries and benefits combined.
Recommendations:
1. OSU salaries will have to rise by at least 6.68% annually for the next three years for OSU to return to its ranking of 3rd among the benchmark institutions, assuming an average yearly salary increase level of 5.33% among the benchmark institutions based on the average of the past three years. To get to a 5th place ranking, OSU salaries will have to rise by at least 6.10% annually for the next three years. A salary increase of 3.65% annually for the next three years will be necessary just to keep Ohio State in 8th place.
Therefore, it is the opinion of the FCBC that an average salary increase of less than 5% in 2001-02 will insure that salaries for faculty at Ohio State will continue to decline compared to other institutions. An average salary increase of 6% is more in line with achieving a long-term improvement in our competitive standing with other major institutions.
2. The University already has announced a 30 percent increase in premiums across all health insurance plans for 2001-2002. While FCBC recognizes that the University’s share of the total cost also will rise by at least 30 percent, it also recognizes that the increasing burden on faculty is likely to affect the University’s standing relative to other comparable institutions. As Ohio State redesigns its health insurance plans in 2001-2002, it should seek to improve OSU’s competitive standing in terms of costs faculty members are required to pay for individual and family coverage. FCBC believes that choice among doctors and coverage options in health insurance is a highly valued benefit and should be preserved. It also believes that the focus of the committee redesigning the health care plans should be on the quality of health care. It is not clear that focusing on quality of care will drive up costs. Financial incentives to make healthy choices might also be built into the health insurance equation.
3. FCBC again recommends that University-sponsored benefits now available to spouses be extended to same-sex and heterosexual domestic partners in committed relationships. Increasingly, other institutions with which Ohio State competes in recruitment and retention of quality faculty are extending their benefit programs to encompass this category of household, which increases the importance of this aspect of Ohio State’s benefit programs in the recruitment and retention of faculty. Appendices
Table A-1 2000-01 Benchmark Ten year Faculty History Total Compensation (Salary + Benefits) Figure A-1 History of Total Compensation Ranking in Benchmark 1990-91 - 2000-01 Table A-2 Faculty Salary Increase Budgets (without Promotions) - Public Benchmark Institutions 1996-97 through 2000-01 Figure A-2 History of Ranking in Benchmark Institutions: 1996-97 - 2000-01 Table A-3: 2000-01 Benchmark Comparison Five-Year Faculty Salary History Figure A-3 - Academic Year 2000-01 Faculty Salary by College; Comparison of Internal vs Market Salary Equity Table A-4 - 2000-01 CIC Ten-Year Faculty Salary History Figure A-4 - History of Ranking in CIC: 1990-91 - 2000-01 Table A-5 - 2000-01 Average Faculty Salaries (in thousands) AAU Institutions Figure A-5 - History of Ranking in AAU: 1985-86 - 2000-01 Table A-6 - Total Annual Premium per Employee for HMO/EPO Medical Plans Single and Family Coverage at Public Benchmark Institutions 2000-01 Table A-7 - Selected Benefit Programs Offered, Public Benchmark Institutions 2000-01 Table A-8 - Limits on Out-of-Pocket Expenses and Prescription Drug Plans for HMO/EPO Medical Plans, Single and Family Coverage at Public Benchmark Institutions 2000-01
For a copy of the report, or the appendices and graphs please contact the University Senate Office.
|
|
|
|
|
