The board is expected to amend the executive compensation policy at its meeting Tuesday after months of outrage from faculty, students and lawmakers over giving salary boosts to the 23-campus system's highest-paid employees at the same time that it's hiking tuition, freezing professor pay and halting enrollment to cope with state funding cuts.
Under the proposed amendment, new presidents could still receive higher pay than their predecessors, but the amount of the raise would be paid for by campus nonprofit groups known as "auxiliaries," which include everything from campus bookstores to student newspapers to privately-funded foundations. There are about 90 such groups scattered through the CSU system.
The raises would not take away money destined for campus use, said CSU spokesman Mike Uhlenkamp.
For instance, foundations, which are campus fundraising arms, would gather private donations specifically to pay for the presidential salary so funding for scholarships, a primary mission of foundations, would not be affected.
Auxiliaries would not be limited in the amount they could give to new presidents in either salary or other perks. "Practically speaking, we would try to stay within that 10 percent," Uhlenkamp said.
The policy would be in effect until 2014 to give the university flexibility in case the economy improves.
Critics said the board is simply playing a shell game. No matter who pays for the raises, it's money that could be used to build academic programs, said Lillian Taiz, president of the California Faculty Association, which represents 24,000 professors and other staff that have not had a raise since 2008.
"They're clearly not backing away from the model of unlimited raises for campus presidents," she said.
Taiz also raised questions about possible conflicts with donors paying for presidents' salaries and who might seek contracts with the university. "Where are these private resources coming from?" she said. "It's a slippery slope."
Although the nonprofits are governed by independent boards, they are unlikely to turn down a funding request when the money is being used for university purposes, said Debbie Adishian-Astone, president of the CSU Auxiliary Organization Association.
"It's just something the auxiliaries may need to plan for," she said of the raises.
The spotlight on presidents' pay comes as the CSU system faces a wave of presidential retirements. Two presidents were appointed at the last meeting in March, receiving 10 percent raises over the outgoing campus chiefs, and six other vacancies are coming up.
CSU Chancellor Charles Reed has said he needs to offer competitive salary packages to attract top talent to fill the posts.
"We're trying to be mindful of the economy in California," Uhlenkamp said. "But we do have to be able to compete in a national market."
Campus presidents also annually receive a $12,000 car allowance and a $50,000 to $60,000 housing allowance, depending on regional housing costs, or a residence. If the campus has a president's residence, the candidate is required to live there.
It's not unusual for presidents to receive such perks and universities have different ways to fund presidential expenses, but CSU's new policy smacks of a maneuver around unfavorable public opinion, said William Tierney, director of the Pullias Center for Higher Education at the University of Southern California.
"It sends the wrong message," he said. "There needs to be some public symbol that CSU administrators are serious. We need leadership by example."
Several campus foundations, which are run by a separate board of directors, are already tapped to pay some salary supplements and other items for presidents and upper-echelon administrators, including car allowances and moving expenses, according to a 2007 state auditor's report.
The report stated that a couple foundations used specific grants, such as funds from the California Postsecondary Education Commission, to boost some salaries.
Auditor Elaine Howell did not criticize the practice, but underscored one unusual deal that signaled greater board oversight was needed over the financial relationships between presidents and foundations.
In 2003, the Sacramento campus foundation loaned the incoming president $164,000 for escrow costs and $69,000 for mortgage payments at a below-market interest rate of 1.697 percent.
The purpose of the loan was to enable the president to pay the mortgage on his former home until it was financially viable for him to sell it and not incur a loss. The foundation also paid $27,000 to remodel the president's kitchen to accommodate foundation fundraising events.
A more recent case has also raised eyebrows. The CSU-Fullerton Auxiliary Services Corp., which operates the campus restaurants and stores, is paying $300,000 to remodel and repair the campus' eight-bedroom historical home for incoming president Mildred Garcia, who will earn $324,000 annually, a 10 percent hike from her predecessor's salary.
The home, built in 1919, is in dire need of updates after the previous president lived there for 22 years. "This is nothing more than a classic case of deferred maintenance," said Christopher Bugbee, spokesman for CSU Fullerton.
Uhlenkamp noted that the presidents' residences need to be able to be used for fundraising and entertaining. "That's a critical part of the job," he said.
The issue of presidents' pay rose last July when the trustees appointed a new president at San Diego State University at a $400,000 salary, $50,000 of which is paid by the campus foundation, at the same meeting they approved a 12 percent tuition hike.
Since then, the topic has dominated public comment at trustee meetings.