UM System president ends incentive payments and talks tuition hikes, job cuts

University of Missouri System President Mun Choi on Friday announced the immediate termination of the university’s executive performance incentive program, which came under harsh criticism from the state auditor earlier this week.

The performance incentive payment program was a target of an audit report released by Missouri State Auditor Nicole Galloway’s office, which said the $1.2 million in payments to top system executives appeared to have violated the state constitution.

Choi’s decision applies not only to current senior officers of the university system, but also to future system senior executives.

Hours after his morning announcement, Choi discussed his decision and answered reporters’ questions about tuition hikes, academic program cuts and possible layoffs. He also talked about shrinking enrollment and about building trust between the administration and faculty, staff and students and between the university and citizens of the state.

“As the state’s premier public university, we owe it to the state’s taxpayers and our stakeholders to be transparent with respect to what we are trying to accomplish as we move the university forward,” Choi said during his first media availability event since officially assuming his job March 1.

In a statement earlier, he said that going forward, the university system “will explore options for making our executive performance practices more effective, with any changes fully vetted with the board of curators.”

But Choi admitted that system campuses will have to find revenue to offer competitive salaries to keep and bring in quality executives.

“We are a flagship institution that competes with other top universities for talent,” Choi said. “We are going to have to pay market value ... so that we are competitive.”

He said the university will review what competing universities pay their executives and set market competitive benchmarks that would be made public. He promised a review of all existing compensation packages for top UM System executives and promised future transparency about what’s being paid to university leaders.

“There is nothing to hide at this University of Missouri System,” Choi said.

Galloway said she is “pleased” that university leaders “accepted responsibility and committed to ending bonus payments uncovered in my audit.”

She also promised to watch the system’s progress and said her team will return later in the year to determine whether it has followed through on the commitment Choi made.

The questioned payments were made in 2015, 2016 and 2017 and approved by either the curators or Missouri’s system president.

Galloway’s audit report said the “incentive payments were made without a formalized and clearly defined process of how the additional compensation was to be earned, giving the appearance of year-end bonuses, which are a violation of the Missouri Constitution.”

At the University of Missouri-Kansas City, Chancellor Leo Morton from 2015 to 2017 received a total of $79,377 in incentive payments. He also received another $28,118, from 2015 through 2016 in vehicle allowance payments, according to the audit.

Hank Foley, the current interim chancellor on the Columbia campus, received incentive payments over the three years totaling $106,258.

Tim Wolfe, who resigned as UM System president in November 2015, received $118,750 in incentive payments from 2015 through 2016, the audit said.

Most of the payments, plus roughly $60,000 in retention bonuses, were paid to administrators “without formal Board of Curators’ approval of the individual amounts,” the audit report said.

When asked about raising tuition, Choi said the university would be seeking a state waiver to a tuition-cap law that prohibits Missouri public institutions from raising tuition above inflation.

He said that with the system expecting a $57 million state funding cut to its budget, it would take a 15 to 17 percent increase in tuition to fill the revenue hole.

“But we are not going to do that,” Choi said, adding that he is having discussions with campus leaders about what a workable tuition increase might look like.

MU, UMKC and Missouri University of Science and Technology have averaged tuition and fee increases of 1.1 percent annually for the past five years. The increase at the University of Missouri-St. Louis averages 2.2 percent, with a student-approved Health and Wellness Center fee during this period.

Choi said he already has talked with department heads on the system’s campuses about needing to eliminate some programs that no longer meet the university mission goals.

On top of that, Choi said that with 80 percent of the university budget going to pay salaries, to reduce spending will likely mean a loss of jobs in the future.

“It’s time for us to make tough decisions,” Choi said. “The primary goal for all of us is to support the faculty, students staff and citizens of Missouri. ... Not to kick the can down the road, as they say.”

This story was originally published March 10, 2017 at 10:36 AM with the headline "UM System president ends incentive payments and talks tuition hikes, job cuts."