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October 29, 1998


The subject of the fall plenary session of the University Senate, held on Oct. 14, was "The University's Salary Increase Policy: Is It Time for a Change"? A spirited discussion followed several presentations regarding University compensation generally, with a specific emphasis on salary increases and the bases for them. I was favorably impressed by one proposal — that outstanding performance be rewarded by one-time, lump-sum payment to the faculty member. One feature of a lump-sum payment is that it does not increase the salary upon which all future salary increases, ordinarily on a percentage basis, are based.

Given my positive reaction to the lump-sum concept, I was particularly interested in the decision only a week later by the compensation committee of the Board of Trustees, to award a $30,000, lump-sum bonus to Chancellor Mark A. Nordenberg for a second consecutive year, in addition to a substantial percentage increase in his base salary. With the compensation committee and J.W. Connolly, chairman of the board, so enamored of the lump-sum concept for meritorious performance, providing such payments to faculty whose performances are outstanding would seem to be consistent with the thinking of those most responsible for establishing University policy. Note that I am taking no position with regard to how particularly meritorious or outstanding performance should be determined but, rather, focusing entirely on the idea that financial recognition of such performance should include a special payment, paid in a lump sum to the faculty member in the subsequent year. I believe there is also a psychological component to the use of the lump-sum approach. A faculty member who receives an extra $1,500 as a merit increase to his or her base salary, paid monthly over the course of the year, probably does not find the pay increase in his or her check very noticeable, given the formidable number of deductions for taxes, payments into retirement accounts, etc. On the other hand, receiving $1,500, less the appropriate deductions, in a single month is likely to be a more appreciated payment at the time it is received.

Two other thoughts on the subject. First, I presuppose that satisfactory performance would continue to bring some increase in base salary for faculty, and that equity and market adjustments also would be added to the base salary. Second, I think there has been a tendency for modest increases to be given for meritorious performance, because of concern about the effect long term. By making some or all of the merit award as a lump-sum, the amount awarded could be increased substantially over what the award would be if it were fully added to the base salary, because no long- term financial commitment is created by it.

The autumn 1998 issue of Research Review contains a piece entitled "Pitt and UPMC Health System Working Together" which is, in large part, a restatement of a September press release concerning the "agreement" entered into between UPMC Health System and the University. The press release, and the article in Research Review, both mentioned the estimate that the University would receive revenues in excess of $1 billion from the UPMCHS during the 10-year life of the agreement. In the past some faculty, including me, have taken prior statements of that sort with a grain of salt, because the statements appeared to indicate that UPMCHS was making "contributions" to the University from its profits. Careful reading of the language now makes clear that Pitt is to receive "revenues," which would include payment for services rendered by University faculty. When I asked about the sources of payments from UPMCHS at the Senate Council meeting on Sept. 14, the chancellor responded that the sources of revenue for the University would include "direct clinical payments to the departments that are delivering services." Thus, the revenue to Pitt, or at least a part of it, consists of payments for services sought and purchased by UPMCHS, and is no different in kind than the revenue paid by any purchaser of services or goods from a supplier. I assume that, if the services rendered by University personnel to UPMCHS were not provided by them, UPMCHS would purchase the services from other sources. The market would determine whether the services could be acquired from others at a lower, or higher, cost by UPMCHS. Only to the extent UPMCHS provides funds to the University, other than payments for services, use of space etc., is it making "contributions" to the University.

Coincidentally, on the same day I read the piece in Research Review I spoke with a faculty member who claimed that School of Medicine faculty using space in the Biomedical Science Tower are charged rent higher than the cost of similar space in Oakland. If true, and Pitt restricts faculty using University funds from leasing less expensive space, it would appear that Pitt is subsidizing UPMCHS. I look forward to attending a closed session of the Senate budget policies committee Nov. 6, at which the agreement between UPMCHS and Pitt will be discussed. I intend to raise the rental of space issue at that meeting, particularly since UPMCHS is reported to be expecting to build a major research facility to provide space for use by Pitt researchers.

Nathan Hershey, a professor of health services administration in the Graduate School of Public Health, is president of the University Senate.

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