Your child just began classes at San Diego State. You read in the paper the board of trustees just increased the school president’s salary by $100,000 (to $400,000). And, during the same meeting they increased student tuition by 12 percent. As you write your congressman you grumble, “There oughta be a law!”
You can save your breath because there already is a law limiting unreasonable compensation in tax-exempt organizations, including colleges and universities. The problem is that the law doesn’t matter. The Internal Revenue Service (IRS) can’t seem to conclude that even million-dollar compensation packages for school executives are unlawfully unreasonable. The agency put on a good show back in 2008 when it embarked on a college/university compliance initiative, during which it sent detailed questionnaires to 400 public and private schools. The IRS then sent examiners to 35 schools for on-site audits looking at things such as unrelated business income and executive compensation. A ton of money was spent by the schools in answering the questionnaires, and more was spent by the schools and the government during the audits.