At the September 27th, 2017 town hall for Penn State University faculty & staff, Executive VIce President and Provost Nick Jones said "the days of [using air quotes gesture] "cost-of-living increases" (see video below), those days are pretty much behind us". In lieu of cost-of-living raises, a general salary increase pool is to be divvied out in a merit-based fashion.
Jones goes onto explain that the general salary increase pool was based on 2% in 2017, explaining that receiving a raise above or below that 2% average would be meritocratic. Just over a month later, Nick Jones and other Penn State executives receive 'modest' merit-based raises with approval from the Committee on Compensation. In Jones' case, he received a $12,000 raise to a total salary of $542,532---representing a 2.26% increase. In the zero sum game of a 'general salary increase pool', that $1,389.36 was collectively not awarded to Penn State employees who performed worse than Nick Jones.
So, let's consider Nick Jones' merit.
Jones goes onto explain that the general salary increase pool was based on 2% in 2017, explaining that receiving a raise above or below that 2% average would be meritocratic. Just over a month later, Nick Jones and other Penn State executives receive 'modest' merit-based raises with approval from the Committee on Compensation. In Jones' case, he received a $12,000 raise to a total salary of $542,532---representing a 2.26% increase. In the zero sum game of a 'general salary increase pool', that $1,389.36 was collectively not awarded to Penn State employees who performed worse than Nick Jones.
So, let's consider Nick Jones' merit.
In 2017, Penn State had record-breaking research expenditures of $863M, of which $534M were federal research dollars. In tandem, Penn State also increased the magnitude of its "reduction to cap" from 6.6% to 8.1%. If you're thinking, I have no idea what "reduction to cap" means, you would not be alone. "Reduction to cap" refers to the percentage of research overhead (otherwise known as facilities and administration [F&A Rate]) that exceeds the 26% cap that is set by federal grant guidelines (CFR200). The significance of "reduction to cap" is that it's the portion of research administration that is NOT subsidized by federal research dollars. In conversation with Richard Killian from the Office of the University Comptroller on April 24th, 2017, Richard Killian volunteered that the "reduction to cap" is, therefore, functionally subsidized by out-of-state undergraduate tuition.
It's worthy to note that in the typical fashion of trying to make finances and economics indiscernible or maybe just the #shenanigan of accounting, these "percentages" are actually ratios. What is a real percentage though is 23.75%--the percentage of administrative research overhead that is subsidized by out-of-state undergraduate tuition. For clarity, 23.75% equates to 8.1 'percent' of 34.1 'percent' uncapped administrative (i.e. non-facilities) portion of research overhead (see picture left). |
So let's talk about what that means in actual dollars and cents.
$534M is the amount of federal funds awarded to Penn State. Not all of these funds would incur the cost of research administration. Things like equipment and participant costs (e.g. compensation / rewards provided to participants in food testing, medical studies) don't incur the cost of research administration. Additionally, subcontracts to other entities only incur research overhead fees on the first $25K of a subcontract. I have no way to discern what portion of that $534M were not subject to research administration, however, so to be conservative, let's just cut the amount by 25% and say $400M. If $400M of federal funds had research overhead applied when in the 2017 Fiscal Year (when 'reduction to cap' was 8.1%), that would mean that out-of-state undergraduate tuition would have had to subsidize $20,467,467 of research administration costs.
For ease, I have also made this spreadsheet available so that anyone can input 1) current F&A, 2) current reduction to cap, and 3) total federal funds [under the same premise as above e.g. no equipment, subcontracts] to return the amount of undergraduate tuition 'subsidy' required.
$534M is the amount of federal funds awarded to Penn State. Not all of these funds would incur the cost of research administration. Things like equipment and participant costs (e.g. compensation / rewards provided to participants in food testing, medical studies) don't incur the cost of research administration. Additionally, subcontracts to other entities only incur research overhead fees on the first $25K of a subcontract. I have no way to discern what portion of that $534M were not subject to research administration, however, so to be conservative, let's just cut the amount by 25% and say $400M. If $400M of federal funds had research overhead applied when in the 2017 Fiscal Year (when 'reduction to cap' was 8.1%), that would mean that out-of-state undergraduate tuition would have had to subsidize $20,467,467 of research administration costs.
For ease, I have also made this spreadsheet available so that anyone can input 1) current F&A, 2) current reduction to cap, and 3) total federal funds [under the same premise as above e.g. no equipment, subcontracts] to return the amount of undergraduate tuition 'subsidy' required.
Granted, Penn State is not the only university that must find a way to pay for research administrative costs on federal grants when they exceed the 26% cap, however, there are big ten universities that keep their research administrative costs at 26% like Northwestern, Michigan State, and Ohio State. This cost competitiveness in research administration to me seems like relevant criteria to the Executive Vice President of Penn State in consideration for a merit-based raise, particularly in a year when the Board of Trustees also authorized a 2.74% tuition hike---even if it was for the in-state undergraduates.
Hey, maybe, it's just me. Maybe others love the sound of his Australian accent as he sells the idea of a meritocracy in order to advance his own salary faster... but ummm, I'm thinking not the kind of university leadership I had in mind.
Hey, maybe, it's just me. Maybe others love the sound of his Australian accent as he sells the idea of a meritocracy in order to advance his own salary faster... but ummm, I'm thinking not the kind of university leadership I had in mind.
Note that all of these research accounting #shenanigans are explained in the video below. This video is also included in a playlist of videos that also explains cost-share and research incentive funds, I feel, much better than Penn State's brochure.