Letter to the Editor: For extra cash, NU should turn from endowment to high salaries

Regarding your Jan. 17 article, “NU on track to balance budget in 2021 fiscal year:”

Northwestern’s president, provost and senior vice president of business and finance said they “deeply appreciate the spirit of shared sacrifice across this extraordinary university community which helps put us on a path to operational stability” in an email. But do they and other high-paid executives share this sacrifice? A recently enacted tax law makes that question relevant to NU. The law requires private, non-profit institutions — including universities — to pay a 21 percent tax on the compensation of employees earning more than $1 million a year. Public non-profit schools are currently exempt, but the Joint Committee on Taxation is trying to correct this imbalance. Under the current law, private universities must pay this tax, not the individual employees.

The new law targets a university’s five highest paid staffers. At NU, that includes football coach Pat Fitzgerald, President Morton Schapiro and athletic director Jim Phillips. “A majority of (college) presidents, coaches & chancellors don’t make anywhere near $1 million,” Steven Bloom, director of government relations at the American Council on Education, told Politico this January. Only 180 employees at private U.S. universities made more than $1 million in 2017, notes the Chronicle of Higher Education, but NU clearly exceeds the national norm.

The tax will have little impact on well-endowed universities like Harvard, said attorney Raymond Cotton, who specializes in college executives’ compensation. But he predicts it will lower salaries and benefits at less wealthy schools. While NU’s endowment is smaller than Harvard’s, it still ranks among the top of all U.S. universities. Should NU dip into this pot to pay the taxes of its top earners during a deficit that’s expected to last through 2021? Or should those staffers take a voluntary pay cut below the $1 million mark until the deficit situation is resolved?

Tapping the endowment may affect NU’s top credit rating from Standard & Poor’s, if the total amount withdrawn exceeds the 5 percent limit cited by Senior Vice President Craig Johnson to achieve fiscal discipline. But shared sacrifice must also be considered. NU laid off dozens of staffers, curtailed construction projects and reduced funds for custodial services and student activities groups. Why can’t those at the top of NU’s power structure share the pain that others suffer? If they refuse, their moral compass points directly to the bottom line.

— Dick Reif
MSJ ’64