From the Dean: Inflation, budgets, and benefits
As this academic and fiscal year winds down and the new one begins on July 1, we are finalizing our budget for the upcoming second year of the biennium. Per North Dakota University System (NDUS) requirements, we need to electronically submit our final budget package to the NDUS and embed it in their system soon. Part of the budget process is to determine the appropriate amount of merit increase to the salaries that faculty and staff will receive in the upcoming academic/fiscal year of 2023. It turns out that the North Dakota Legislative Assembly authorized a merit increase for each year of the subsequent biennium; for this biennium it was an average of 1.5% for the first (current) year and an average of 2.0% for the upcoming one.
There are both advantages and disadvantages as to the method that the legislature uses for these annual increases. Basing any salary increases on employee performance certainly is a positive aspect; rather than simply approving an across-the-board percentage that applies to all, performance and reward are linked. That is a good thing. But the legislature only provides additional funding to the merit pool for a given year based on amount of appropriated dollars supporting those salaries. For the UND SMHS, roughly two-thirds of salary dollars come from non-appropriated funding sources such as grants and contracts and clinical income. Thus, in any one year, we need to identify internal resources to defray the additional expenses associated with merit salary increases on the non-appropriated portions of our employees’ salaries.
An additional problematic issue is that the size of the merit pool authorized by the legislature is not tied specifically to the current level of inflation. Unlike cost-of-living adjustments (COLA) that typically are proportional to the level of inflation, merit increases often are linked more to the status of the state budget (surplus or deficit) rather than inflation per se. This arrangement has worked well in the recent past since up until last year inflation has been quite modest (in the range of 2%). Thus, merit increases of around 2 to 3 percent were of the same order of magnitude as inflation.
Not so anymore, though! As you know well, for the past year or more inflation has been running around 8%. And while I don’t want to get too wonky, economists often distinguish overall inflation (typically called “headline” inflation) from “core” inflation, which is headline inflation minus highly volatile components such as food and energy prices. Although new data will be released by the government today, core inflation has been running at around 6.2% and headline inflation at 8.3%. Regardless of which figure you use, inflation clearly is running several fold higher than the recently awarded merit increases at the School.
This obviously is a problem for all UND employees, but it is an even more pronounced problem for those individuals at the low end of the pay scale since they have the least disposable income and are most at the mercy of high inflation. Concern about the impact of inflation on our employees isn’t limited to the SMHS; UND President Andy Armacost discussed this challenge recently with Dave Thompson of Prairie Public Broadcasting.
For the first time in quite a while, I suspect that the issue of inflation (and how to deal with it fairly and equitably) will be a topic of discussion during the time that the legislature meets next year. I am hopeful those discussions will yield tangible results for our faculty and staff, especially those who are most impacted by the ravages of continued inflation.
While we are on the topic of employee compensation, let me repeat something I’ve mentioned before: namely that we do an annual review of the salaries paid to all faculty members at the SMHS and we correct any obvious inequities. Where available, we use national databases as references (such as the excellent information available for medical program faculty and staff from the Association of American Medical Colleges, or AAMC). We also look at salary levels by gender. Fortunately, we don’t have any major discrepancies noted recently based on gender, although our salaries in general tend to lag national comparison data, especially as one goes higher in academic rank (professor vs. assistant professor, for example).
But one of the compounding problems of the national data is that those data often are limited to salary information and do not include other components of total compensation. At UND, for example, faculty and staff receive additional compensation (in addition to salary) in the form of additional institutional contributions to the North Dakota Public Employees Retirement System (NDPERS) for staff and the Teachers Insurance and Annuity Association (TIAA) for faculty and professional staff. This additional compensation can add up; for example, senior faculty members receive an additional 13% of salary (up to the Internal Revenue Service limit) in the form of an institutional contribution to their TIAA retirement account.
In view of this additional compensation (and the lower cost of living in North Dakota than many other locales), I think it is fair to say that we are on par with many other institutions when we compete for faculty and staff, at least from the standpoint of total compensation.
Joshua Wynne, MD, MBA, MPH
Vice President for Health Affairs, UND
Dean, UND School of Medicine & Health Sciences