Reforming Compensation at State Universities is Tricky Due to State Constitution

Joe Schwarz, a GOP congressman from 2005-2006 in Michigan’s 7^th Congressional District, recently told the Michigan Information & Research Service that the Legislature should “back off” its attempts to use constitutional amendments to force cuts upon state universities.

Because universities have broad powers to self-govern under the state constitution, lawmakers and the governor cannot order them to make specific spending reforms. The issue is very timely because – while staring at a $1.8 billion budget hole – lawmakers and the governor are wrestling with reforming public sector pay and benefits in other aspects of state and local government.

But getting at the issue with state universities is vastly more complicated, due to their constitutional autonomy. Lansing’s constitutional role is currently limited mostly to sending the tax dollars; the universities mostly have the authority to spend as they see fit. The only cost-cutting tool available to state politicians is to reduce the appropriations spent on higher education, but that does not necessarily mean that the schools will adopt cost reforms. Their constitutional autonomy allows them to make up the difference by increasing tuition, an option that has been used in the past and one that Lansing policymakers fear may be used again.

Thus, the option of changing the constitution has been suggested, prompting Schwarz’s rebuttal.

Schwarz was the chairman of the Michigan Senate’s appropriations subcommittee on higher education while a member of the state senate. He now works as a lecturer for the Gerald R. Ford School for Public Policy at the University of Michigan.

“The perils are great,” he said to MIRS. “I believe the Legislature should back off . . . If you punch one hole in constitutional autonomy, other assaults on constitutional autonomy won't be far behind. Leave it alone. It gives the universities stability, both in the present and the anticipation of stability in the future so they know no governor or Legislature, however well-intentioned, will have the power to micromanage the administration or how universities govern themselves from a financial aspect. It's worked well for many years and is, frankly, the envy of every state university system in the country."

But James Hohman, the fiscal policy analyst at the Mackinac Center for Public Policy, said universities should be held more accountable for their spending than they have been.

“As long as state universities receive tax money for their operations, they should ultimately be accountable to the people that pay their bills,” Hohman said. “Taxpayers don't want to pay for benefits that they've lost themselves.”

In an email, Schwarz replied that he doesn’t believe that private sector comparisons work for public universities:

“Comparing university salaries and benefits to those in the private sector is, in many ways, an ‘apples to oranges’ proposition. The universities employ many people who are not part of the "academy". Some are union members, some not. I expect, if the topic was researched, salary and benefits for the non-academics would be much the same as hourly workers at GM and Ford. On the academic side, a meaningful comparison is not possible. How do you compare what is appropriate for a Professor of History to that which is appropriate for a senior analyst at Goldmam-Sachs?? Junior faculty are not particularly well-paid in any event.”

“The principle of "Constitutional Autonomy" was memorialized in the Michigan Constitution of 1850, and remained in the 1910 and 1963 documents. You many ask, ‘are universities different’? The answer is ‘yes’, in virtually every way. The academy, has historically, been allowed to work, to teach, to do research, unhindered by intrusions from those who would impinge upon academic freedom. Much like libertarianism, don't you think?? In any event, any thought of disassembling constitutional autonomy in this state would be a grievous error. It is because of that selfsame autonomy that public universities in Michigan, especially U of M, MSU, and WSU outshine the publics in almost every other state.”

But Hohman reported last summer that Lansing policymakers have spent more than $15 billion in taxpayer dollars on state universities in the past decade and that a lot of this went to overhead rather than instruction. He reported a growing number of administrators and service staff, and that those non-instructional employees saw a 13-percent increase in average compensation from 2005-2009.

“Having Lansing make sure the students and taxpayers are getting the best deal on their money is a good thing,” Hohman said. He also notes that universities may need “some nudging” from Lansing to accomplish this.

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