1. 1 Report of the Financial Affairs Committee of the Faculty Senate Paul Bolster, CBA - Finance and Insurance Jackie Isaacs, COE - Mechanical and Industrial Engineering John Kwoka, CSSH - Economics Robert Young, CBA - Marketing

2. 2 Fall Semester: 1.Based on current information and any other analyses that it may wish to undertake, the Committee is asked to make recommendations on University resource allocation and budget priorities as well as appropriate merit and market adjustment raises for FY 2013. The Committee should present its recommendations on these matters to the Faculty Senate Agenda Committee by November 22, 2011 for Senate consideration no later than November 30, 2011. Spring Semester: 2.The Committee shall collaborate with the Provost’s Office for the purpose of reviewing the implementation of the hybrid budget management system. This review should address the 2010-11 Faculty Senate’s Financial Affairs Committee’s recommendations, including those pertaining to achieving maximum transparency in the administration of the hybrid budget model. 3.The Committee shall present a report on the university budget process and the implementation of the hybrid management system, including recommendations and possible draft resolutions, to the Senate Agenda Committee by February 27 th. Charge to the FAC

3. 3  Baseline Northeastern University  Salary Comparison with Aspirants and Peers  University matchmate data  AAUP data  Overall Recommendation Merit and Market Raise Pool Consideration

4. 4 Financial Status Indicators

5. 5  Positives:  Continued financial strength of NU  Continued strength in applicant and matriculant pool  Continued rise in US News rankings  Continuing challenges:  No strong consensus for economic recovery Unemployment is still 9% nationally GDP growth is 1.6% for 2011 and is forecast at 2% for 2012  This can impact future enrollment and retention Northeastern University Trends

6. 6 Over the past 5 years  Average faculty salary raise pool2.90%  Average inflation rate2.28%  Real salary increase 0.61%  Average tuition increase4.82% Trends in Faculty Salary, Inflation and Tuition

7. 7 Average Salary Increase vs. Aspirants and Peers *All raises via AAUP

8. 8 Average NU Faculty Salary - Nominal and Real (2007 $) Growth in real wages over past 3 yrs Assistant professors salary: modest growth Associate and full salary: no growth Nominal salaries Real salaries in 2007 dollars

9. 9 Salary Comparison with Aspirants and Peers Assistants and Associates are at the bottom of the top third. Fulls are just above the median.

10. 10  Salary increases have been essential to significant new hiring  Numbers of new hires  High profile hires  Salary increases play important role in US News rankings  US News and World Report Rankings  Faculty Resources count for 20% of ranking Faculty salary Percent of classes under 20 students Percent of classes over 50 students Percent of full-time faculty Percent of faculty with terminal degree Student / Faculty ratio Faculty Salaries: A Benefit as Well as a Cost : NU is 62 in 2012 (40%)

11. 11  We are in the upper third in terms of average faculty salary with respect to our matchmates.  Using AAUP data, our average salary increases are in the middle of this matchmate group  4.0% for NU faculty vs. 4.2% for matchmates; Top quartile for matchmates is 4.6%  Salary increase data is only available for 16 of 17 matchmates  NU’s AAUP average of 4.0% is higher than the 2.9% raise pool average over the same period, a difference of 1.1% per year. Why?  One possibility: AAUP reports the average raise per faculty. If NU has provided larger percentage raises to faculty with lower salaries. This means the average raise increase is greater than the overall increase implied in the raise pool.  We reduce the matchmate average by 1.1% and arrive at an average of 3.1% for comparison purposes, or 3.5% for the top quartile The Recommended Raise Pool

12. 12 Over past 5 years, NU salary pool has risen at average compounded rate of 2.9%; matchmates have risen at 3.1%. In order to catch up, a faster rate of growth is necessary in the near term to close this gap. NU Salaries at Risk of Falling Behind Matchmates 4.5% annual increase 4.0% annual increase 3.5% annual increase How long to get us to a 3.1% average increase if subsequent annual increases are: 4.5%: >1 years 4.0%: <2 years 3.5%: ~3 years

13. 13 Summary  Strong financial position of the University  Need to remain competitive with peers  Need to continue enhancement of academic quality as evidenced by  Improved quality of students  Increased ranking by U.S. News and other national surveys  A raise pool of 4.0% enhances our competitive position within our current group of matchmates.  Merit and equity distinctions should be determined at the appropriate level. For example, if units are organized by department, merit awards should be made at that level.