UW System president’s remarks to Regents on employee pay

UW System President Kevin Reilly addressed the Board of Regents on the topic of employee compensation during the full board meeting on Dec. 7, 2012, in Madison. His prepared remarks are as follows:

This morning, a few thoughts about our employees, the faculty and staff who are the heart and soul of this university system…

Here in Wisconsin, and around the world, we have spent the last several years trying to manage one of the deepest recessions in decades. I don’t need to tell you it’s been a serious challenge.

In the UW, our employees have had a 0% pay plan for both 2009-11 and 2011-13, under two different state administrations, struggling with a faltering economy. Prior to that, our unclassified staff – that’s all faculty and academic staff – received a 1% pay plan increase in July 2008. The 2% pay plan increase scheduled for June 2009, however, was rescinded for all employees except represented classified staff.

Then, there were furloughs. The vast majority of our UW employees were required to take 16 mandatory unpaid furlough days over two years, ending in 2011, which resulted in a cut in compensation of just over 3% in each of the two years.

When the furloughs expired, all UW employees were then required to make larger contributions towards the cost of benefits, again resulting in a reduction in take-home pay.

This has not been easy. Nonetheless, our UW employees did what they were asked to do – sometimes with considerable personal sacrifice – while at the same time, they have continued to perform and achieve at levels that make the UW System the envy of our peers across the country.  We should all be incredibly proud of their dedication.

These sacrifices have played a real part in the State’s improved financial position.

The current landscape is starting to look a whole lot more promising than before. There is a growing sense that things are now moving in the right direction.

Last month, the State Budget Director sent a memo to state agencies indicating that the state’s fiscal condition is significantly improved. The State of Wisconsin ended the 2011-12 fiscal year with a positive fund balance of $342 million, and the gross balance for 2012-13 is projected to be $348 million. Revenues are anticipated to grow 3.8% in 2013-14 and 3.5% in 2014-15, according to DOA.

Meanwhile, unemployment numbers for the state are also improving, according to the Bureau of Labor Statistics, dropping from 7.3% in September to 6.9% in October. That’s an encouraging change from the peak of 9.2% in June 2009.

So, this might be an appropriate time for a reality check.

The 2008 market downturn continues to affect the Wisconsin Retirement System, requiring still another increase on January 1, 2013 in the benefit costs paid by our faculty and staff, further reducing their take-home pay.

As we have discussed here before, we know that the gap between our UW employees’ compensation and that of their peers has widened in recent years, and that gap continues to grow. Indeed, faculty salaries at UW System institutions have now fallen more than 18% below the national average.

We recognize that such a sizeable gap cannot be closed in one budget cycle – it was not created in one – but certainly, we must at least begin to mitigate the size of that gap … or we will all pay the price in lost talent and sliding reputation.

I’d like to point out that we are not the only ones to recognize the implications of the current situation for our employees, or to voice concerns over it. An editorial in the Nov. 18th edition of the Wisconsin State Journal said, (QUOTE) “They have sacrificed more and are going on four years without a raise. The state’s improving budget and economy bode well for a bump … No operation – public or private – can keep its talent if compensation languishes for too long.” (UNQUOTE)

As you know, we have been seeking approval for the Board of Regents to be given greater authority to consider compensation matters for our employees. This proposed change is supported, I’d like to point out, by the Legislative Task Force on the UW, which included legislators in both houses and from both sides of the political aisle. There is clear recognition that the University operates differently from other state agencies, in different markets, and that should be reflected in how we deal with our own employees.

If we are successful in achieving this change, this Board will have authority over the University’s pay plan going forward. That’s as it should be. But we will not know until the end of this fiscal year whether that authority is to be so delegated.

Therefore, given the uncertainty about these pending changes – and the uncertain but brightening economy – it would be premature, and possibly counter-productive, to put out specific pay plan numbers at this juncture.

Nonetheless, I want to reiterate emphatically that improved compensation for our UW employees has been, and will continue to be, a very high priority for 2013-15 and beyond. It’s an issue that impacts not only our 45,000 employees statewide, but also the ability of the UW System to fuel a stronger workforce and stronger businesses in Wisconsin, and the quality of the education our 181,000 students receive.

We have said before, and it bears repeating, that we are only as good as our people. We know that resources are needed to attract and retain high quality faculty and staff members. Pay is almost never the whole story about why highly qualified people come and stay, and how they perform, but we all know it is a significant factor – one we as responsible stewards of the university cannot ignore.

So it’s important that this Board takes a hard look at all this when we know whether it has full pay plan authority, we hope no later than July 1. We need to look at where the economy is then, what the state pay plan turns out to be, what resources we may need to draw on internally to adequately compensate our people.

Meanwhile, we will advocate vigorously for a just and fair state pay plan.

We need to restore morale and confidence among faculty and staff that when they work hard on behalf of their students, and the people of Wisconsin and the world, their work will be recognized and rewarded. We want them to understand that we are committed to doing everything in our power to make that happen in the coming biennium.

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