After the early resignation of President Trani, under fire for his coziness with tobacco money (see post here and links backwards), Virginia Commonwealth University (VCU) just announced its new President, Michael Rao. The official announcement of his appointment included:
The VCU Board approved Rao’s salary of $488,500, $176,113 of which is paid by state funds and $312,387 from VCU Health System and private funds, for the positions of VCU president and president of the VCU Health System. His total compensation package, approved by the board, also includes $66,500 in deferred compensation, a $60,000 housing allowance, and use of a car, all paid by private funds. Separate from the compensation package, Rao will receive a signing bonus of $275,000, paid by private funds. He will be required to repay $200,000 if he leaves the university within five years.
This announcement is unusual, perhaps unique, in that it breaks down the sources of a university president's salary. Very few universities publish any details about their budgets, and hardly ever explain money flows among their different sub-divisions.
What is striking is that 63% of President Rao's salary will come from the health center. However, the health center only accounts for about one-eighth of the university's students. (Total university enrollment is more than 32,000, and 2008 Health Sciences enrollment was 4278.) So, the president of a university will derive approximately five times more of his funding from the health sciences division of the university than would be expected by the size of that division.
I suspect that this situation is not unique, or even uncommon. What is unique is that VCU has made it public.
(Note also that President Rao's total compensation, while far more than that of the average faculty member, is nowhere near as outrageous as that of some other university presidents. Finally, in the interests of disclosure, I should note that I was a full-time faculty member at VCU from 1987-1994, and still serve as an adjunct faculty member there.)
In my experience and humble opinion, it seems that the pressure academic leaders put on their faculty to bring in ever increasing amounts of money is out of proportion to the needs of academic medical centers or medical schools, or even the greed of their leaders. Instead, it may be that academic medical centers and medical schools, in turn, are under pressure to be the cash cows of their universities.
Many universities have expanded their administrative staffs and budgets, and raised the salaries of their top leaders far more than inflation or increases in enrollment would justify. They have also erected palatial buildings, funded extravagant sports programs, and provided students luxuries unheard of when the baby boomers went off to college.
University leaders may well have taken advantage of the abundant money flowing through health care, especially that supplied by pharmaceutical, biotechnology and device companies to generate research and "education" to market their products, and that supplied by a physician and hospital reimbursement system rigged to pay handsomely for an ever increasing number of procedures (see post here). But having become accustomed to this money to fund expansive administrative budgets, it is no wonder that university leaders have pushed for more and more financial production from medical school faculty, no matter what. And funded by their cash cow academic medical sub-divisions, it is no wonder that university leaders have turned a blind eye towards, if not actively encouraged financial entanglements by faculty and administrators that would dull their scruples about the sources and reasons for their outside financial support.
If we want universities and their academic medical components to go back to putting their mission before their margins, we need to wean university leaders off the narcotic of surplus funds provided by their academic medical sub-divisions' external financial support.
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