University of Montana President George Dennison’s surprise announcement last week that he plans to retire in August had a lot of people questioning whether a possible $75,000 raise – to bring his salary in line with that of the new Montana State University president – might affect his retirement benefits.
The answer? Not as much as you might think.
But there are other questions, too.
More than likely, the next UM president will be hired at a rate more in line with MSU President Waded Cruzado’s $280,000 salary than with Dennison’s $205,050 base pay.
Members of the Board of Regents frequently talk of the need to offer competitive wages to recruit qualified applicants. So a wage increase of some sort for UM’s top post is likely, whether the beneficiary is Dennison or someone else.
Talk of a pay increase is difficult to swallow, of course, at a time when campuses are busy cutting budgets and freezing the pay of faculty and staff.
Yet, if the regents choose not to act, then the leaders of Montana’s two flagship universities will receive very different salaries for two very similar jobs – the first time that’s happened in at least three decades. The presidential salaries at MSU and UM have been the same since the adoption of the 1972 Montana Constitution.
“It’s a very good question for which I do not have an answer,” replied Sheila Stearns, commissioner of higher education, when asked last week about the pay discrepancy. “It wouldn’t surprise me if the regents asked themselves that question, but it has not yet been addressed by the board.”
The conversation is inevitable and one that Stearns says she will encourage at a Feb. 17 workshop on the UM campus – if the subject doesn’t surface sooner.
The regents determine salaries for the university’s top leaders.
Dennison said last week that his decision to retire had nothing to do with any raise he may or may not receive.
“That issue has nothing to do with the decision to retire,” he said. “I’m following through on what I said I was going to do. I was going to make the announcement in September.”
Instead, Dennison, the longest-serving president in UM history, waited until last week to announce plans to retire in August after 20 years.
When Dennison was hired in 1990, he chose the state Teacher’s Retirement System.
Until 1987, it was the only plan available to university employees. Then in 1987, contract faculty and administrators were given the option of using either TRS or the Montana University System Optional Retirement Plan, in which employees assume all the investment risk in exchange for the plan’s enhanced mobility. University employees could choose between the two retirement plans until 1993. After that, new hires were only offered the optional retirement plan.
The state Teacher’s Retirement System calculates annual retirement benefits by averaging the three highest consecutive years’ earnings. An employee’s years of service are also factored into the equation.
Hypothetically, if Dennison were to receive a 36 percent raise (to match Cruzado’s salary) in March, that would increase his pay for fiscal year 2010 by $15,700 – less than 10 percent.
The Legislature in 1989 passed a law preventing so-called golden parachutes. It limits salary raises for people about to retire to 10 percent above the previous year’s pay.
In Dennison’s case, at the end of fiscal year 2010, he won’t have reached that 10 percent threshold. So, in the end, his yearly retirement benefits would increase only $1,800 to $2,000 if he were to receive the boost in pay in the next several months, for a total of around $70,000 in annual retirement benefits. But that, of course, is only if the regents decide to grant him the raise.
Reporter Chelsi Moy can be reached at 523-5260 or at firstname.lastname@example.org.