University Times

Should the highest percentage pay raises at Pitt next year go to the University’s lowest-paid employees (as they did in 1996)?

Would employees be better off if Pitt paid a larger share of their health insurance costs, in lieu of salary increases?

Questions such as those are expected to come up at meetings of the University Planning and Budgeting Committee (UPBC), a group of faculty, staff and administrators that advises Pitt’s senior administration as it plans each year’s budget.

With Pitt bracing for another lean budget year beginning July 1 — exacerbated by anticipated, hefty hikes in the University’s health insurance premiums — some professors and staff are suggesting that Pitt get more creative in allocating what’s expected to be a shallow pool of dollars for compensation increases.

University Senate President James Cassing said, “I’m sure that the issue of differential raises will come up at UPBC as we get closer to deciding how we’re going to divvy up what meager amount of salary raise money Pitt will have to work with. There’s no reason we can’t look at more creative ways of spreading the money around.”

Rich Colwell, the Staff Association Council’s vice president for steering, said SAC members have been polling staff in their units about compensation preferences for next year. “I told them to look at everything as a whole: salaries, health care benefits, to see if staff want higher raises or lower health care premiums,” Colwell said.

Last fall, Colwell charged two SAC committees with exploring ideas for a “cafeteria-style” benefits plan that would give staff more choice in selecting among Pitt’s fringe benefits.

Chancellor Mark A. Nordenberg said it would be premature for him to comment on such notions until UPBC has vetted them. But he noted: “Clearly, there is going to be tension between the dollars that we invest for health care and the dollars that are made available for the salary increase pool. I think everybody understands that. It’s going to be an issue that we’ll have to discuss.

“In terms of other unconventional approaches [to compensation], nothing has bubbled up to me yet,” Nordenberg added. “To my knowledge, there has not yet been any serious consideration of any different kinds of approaches.”

At the Feb. 4 Faculty Assembly meeting, the University Senate’s immediate past president argued for using a portion of next year’s salary funds to offset, if necessary, increases in employees’ share of health insurance costs.

Nathan Hershey said such a move would help lower-income employees in particular. “If our health premiums were to rise substantially, there would quite likely be a number of lower-paid Pitt employees who would find themselves forced to give up health insurance benefits — single mothers with children, for example,” Hershey said. “I think this social concern ought to enter into the faculty’s assessment of policy with regard to this particular allocation.”

Both Pitt and its employees get “more bang for their bucks” when the University allocates compensation dollars to benefits rather than salary, Hershey maintained.

About 24 cents of every dollar in salary earned by a city resident in the lowest federal income tax bracket goes to pay city, state and federal taxes, Hershey calculated. The University itself pays Social Security taxes on cash wages, in addition to contributing to workers comp and unemployment insurance.

No such deductions are taken out of dollars allocated for health benefits, Hershey noted.

Hershey serves on the planning and budget policies committee of the Graduate School of Public Health (GSPH) Council, which recently endorsed the concept of health benefits-in-lieu-of-salary, at least for next year.

But Hershey’s fellow Faculty Assembly members weren’t sold on the idea.

“As you hold down salaries, there’s a compounding effect,” said Lewis Jacobson of biological sciences. With health insurance costs increasing faster each year than the Consumer Price Index rate of inflation, Pitt salary increases would fall increasingly behind the CPI if Pitt adopted a policy of absorbing health care premiums at the expense of salaries, said Jacobson.

(Hershey replied that he wasn’t recommending more than a one-year change in Pitt’s salary policy.)

“This University competes in a national and, in some senses, an international market for faculty,” Jacobson added. “I strongly suspect that most candidates for faculty positions at this University do not, in fact, investigate in detail the allocations of University money between fringe benefits and salaries. What are always published are salary rankings.”

Clark Muenzer, who chairs the Germanic languages and literatures department, noted that employees’ tax-sheltered contributions to TIAA-CREF and Vanguard retirement annuities come out of their salaries, not their total compensation.

Thus, a health benefits-in-lieu-of-salary plan would not appeal to higher-paid employees who choose to have the maximum of 8 percent withheld from their salaries for TIAA-CREF and/or Vanguard — especially with Pitt kicking in a matching, tax-sheltered contribution of 12 percent.

Nor would such a plan be advantageous for employees who get health insurance through their spouses’ policies, Assembly members noted, although it would be financially beneficial for many single parents and/or lower-paid employees (who are less likely to participate in TIAA-CREF/Vanguard or to have the maximum contribution withheld from their paychecks).

“Making a one-size-fits-all recommendation [for employee compensation] will not be easy,” said English professor Phil Wion, an Assembly member who chairs the University Senate’s budget policies committee and serves on UPBC.

“Nonetheless, I think it’s very important that this year, unlike some years in the past, the UPBC and Senate committees get involved in the decision about the relative allocation between salary and fringe benefits, well in advance of the decision being made,” Wion said.

In recent years, Pitt’s administration has invested more heavily in campus construction, lab and classroom renovations, and projects aimed at improving quality of life for undergraduates, among other areas, said Wion. “All of this has helped to improve the University, yes. But the tradeoffs may need to go more toward compensation this year.”

Foreseeing big hikes in Pitt’s health insurance premiums in July 2003, the University administration allocated $6 million of the current year’s operating budget for one-time expenses rather than continuing expenses, Wion noted.

“This was done precisely so that that $6 million would be available in the future for continuing expenses,” he said. “It’s money that is already in our base budget and which could be devoted to continuing expenses next year such as health insurance premiums.”

Wion pointed out that Pitt’s salary budget increased by 3.5 percent last year; 1 percent was centrally allocated to high-priority units, primarily to fund raises for higher-paid faculty and staff who are most in demand.

“Having taken care of the better paid and the more fortunate,” Wion said, “this would be a particularly good year to really focus our attention on those among us, especially staff, who are poorly paid, relatively, and who will be most severely impacted by huge increases in our health insurance premiums.”

There’s a precedent for awarding higher raises to lower-paid employees under Pitt’s current administration: In January 1996, then-Interim Chancellor Nordenberg (who had inherited a University-wide salary freeze) approved a plan that awarded raises to continuing staff and faculty who were earning $35,000 or less and whose supervisors gave them satisfactory job evaluations.

Increases, retroactive to the previous July, ranged from 0.99 percent ($348) for employees earning between $34,001 and $35,000, to 2.35 percent ($540) for those making $23,000 or less. The previous year’s inflation rate had been 2.7 percent.

—Bruce Steele