2006/07 Support Budget

Compensation

2006/07 Compensation Increase, $77,403,000

It is essential that the CSU fund compensation that supports recruitment and retention of highly qualified and motivated faculty, staff, and management. The CSU 2006/07 Support Budget plan includes a 3 percent ($77.4 million) compensation increase for faculty and staff (non-faculty). The actual distribution of the compensation increase would be determined by individual collective bargaining agreements negotiated with represented employees and chancellor approval for non-represented employees. The following table shows the faculty and staff compensation components from which the CSU 2006/07 cost of a 1 percent salary increase and total 3 percent increase in compensation funding are derived:

Faculty and Staff Compensation

The 2005/06 compensation base is comprised of salaries, retirement, and social security (OASDI and Medicare) budgeted by campuses. The 2005/06 compensation base has been adjusted for changes in employer-paid retirement rates (-$22.5 million) that the California State Department of Finance processes after the start of the fiscal year.

2006/07 Salary Lag Funding, $16,551,000

The CSU funded a total 3.5 percent compensation increase for 2005/06 that included a 0.5 percent increase to reduce faculty and staff salary lags. Beginning with 2006/07, the CSU is developing a fiveyear strategic budget plan to address faculty and staff salary lags. The 2006/07 budget plan includes a .64 percent supplemental compensation increase ($16.5 million) to reduce faculty and staff salary lags. The five-year salary lag funding plan is described in the Budgetary Challenges section.

CPEC Faculty Salaray Lag And CSU Compensation Funding

The California Postsecondary Education Commission (CPEC) annually issues a report on faculty salaries at California public universities to the Department of Finance and the Office of the Legislative Analyst. In fiscal year 2005/06, the CPEC-projected faculty salary lag is 16.8 percent. After adjusting for 2005/06 compensation increases, the unfunded faculty salary lag is 13.3 percent. The table below provides information on the CSU’s faculty salary lag history from 1996/97 through 2005/06:

CPEC Faculty Salary Lag and CSU Compensation Funding

Following are historical compensation settlements for non-faculty employees over the past 10 years:

Compensation Increases For Non-Faculty

As a result of this funding history, salary lags for the various CSU employee groups range from 3 percent to 49 percent.

2005/06 Employer-Paid Retirement Adjustment

The California Public Employees’ Retirement System (CalPERS) defined benefit pension plan is funded by employer-paid contributions, employee contributions, and the plan’s investment earnings. Employer-paid contribution rates adjust each year in order to meet defined pension benefit obligations. After several years of rising employer retirement rates, the 2005/06 employer-paid retirement rates declined slightly. The reductions resulted largely due to the CalPERS Board efforts to reduce volatility in employer contribution rates by adopting an Employer Rate Stabilization Policy effective for the 2005/06 fiscal year.

The CSU 2005/06 employer-paid retirement adjustment is equivalent to -$22.5 million. The state Department of Finance processes state agency retirement adjustments during the fiscal year. The table on the next page provides CalPERS employerpaid retirement contribution rates and adjustments from 1997/98 through 2005/06:

California Government Code Section 20814 requires the state to include in the annual budget the employer-paid retirement rates established by the actuary, and requires the legislature to adopt the rates and authorize the appropriation in the Budget Act.

Also for reference regarding 2005/06 employer-paid retirement rates, see CSU Human Resources Administration coded memorandum HR/Benefits 2005-09.

Employee Retirement Contributions

The miscellaneous tier 1 employee contribution rate has remained constant since July 1, 1976. Government Code Section 20677 (b)(1) provides that employee retirement contribution rates for state miscellaneous tier 1 members employed by the CSU who are in the federal system (Social Security) shall be 5 percent of compensation in excess of $513 per month. Most CSU employees (approximately 99.1 percent) with CalPERS retirement benefits fall within the CalPERS miscellaneous tier 1 category. Retirement benefit formulas were enhanced for employees in the state miscellaneous tier 1 category to 2 percent of final compensation at age 55 for those who retire on or after January 1, 2000.

The remaining CSU employees with CalPERS retirement benefits have designated CalPERS Peace Officer/Firefighter category benefit levels. The employee contribution rate for this group is subject to Government Code Section 20687, which provides that employee retirement contribution rates shall be 8 percent of compensation in excess of $238 per month. Pursuant to a collective bargaining agreement for the represented employees, the CSU pays the full employee contribution. Retirement benefit formulas were enhanced for employees in the Peace Officer/ Firefighter category to 3 percent of final compensation at age 50 for those who retire on or after January 1, 2002.


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Last Updated: November 10, 2005