Corporation Gives Faculty Benefits Mixed Review

Corporation Maintains Reduction in Faculty Pension Plans

The University's highest governing board yesterday upheld a controversial decision to reduce Harvard's contribution to faculty pension plans, alter the structure of post-retirement health care and establish a University wide benefits committee.

The Harvard Corporation completed its review of a Faculty of Arts and Sciences (FAS) committee report recommending changes to last June's benefits cuts that have outraged FAS and rocked the University over the past year.

In a statement issued yesterday to some faculty members, the Corporation announced that it will maintain the one percent reduction made last June in the University's contribution to faculty pensions, overlooking the objections of a faculty committee.

But the Corporation agreed to impose a "soft cap" which will link the University's contribution to post-retirement health-care coverage with rises in health care costs, in compliance with the faculty committee's recommendations.

The report was still being printed last yesterday afternoon, according to Provost Albert Carnesale, so only a few faculty members had seen a copy of it last night. But many who read the memo expressed outrage at the Corporation's decision.

"I'm sorry to see the Corporation take this attitude," said Professor of the History of Science Everett I. Mendelsohn. "I think this will indeed further strain administrative-faculty relations."

The Corporation's report attributes the decision to the fiscal constraints faced by Harvard.

"[T]he dilemma that has confronted each Faculty or School, as well as the Corporation, has been how to provide strong and competitive benefits while also containing expenditures that have been growing at an unsustainable rate, and have the capacity to impinge on the strength of other essential programs which are also dependent upon unrestricted funds," the report reads.

The FAS Standing Committee on Benefits, convened in the fall following an uproar over benefits cuts, recommended this spring that pension contributions be restored and paid for by a one percent reduction in the growth of FAS faculty salary increases.

But members of the Corporation argued that those adjustments could not have been made without upsetting the University's graduate schools.

"Everyone recognized that no single `package' could be accommodated equally well by all units, but the effort to strike a balance was extremely important," the report reads.

For many other faculties, "stability and even ameasure of growth in the rate of salary increases,rather than a reduction, is a high priority,"according to the report.

The Corporation cited the School of PublicHealth as an example of why it could not approvethe faculty committee's recommendations; thatschool has currently enacted a salary freeze whichwould prevent the implementation of a salaryreduction.

The report also questioned whether a salaryreduction could even be sustained in the long run.

"We are inclined to think that a Faculty orSchool that made such a decision...would probablysoon have to reassess, and would find it necessaryto make up the salary differential in order toremain competitive," according to the report."

The Upside for FAS

The Corporation upheld the FAS committee'srecommendation that a "soft cap" be imposed withrespect to post-retirement health-care coverage.

Last June, the University adopted a "hard cap,"which would have held constant the dollar amountof the University's retirement health plan forpost-1995 retirees.

The "soft cap" allows the contribution to growafter 1999--but no faster than one percent belowthe inflation rate for health-care costs. A softcap thus removes the threat of inflation fromfaculty benefits, despite the lack of a guaranteedrate of increase in benefits.

Carnesale, who sits in on, but is not a votingmember of, the Corporation, said that the boardconcluded that its benefits package is bothcompetitive and fair.

"Within the Harvard community, the Corporationfeels a responsibility to be sure that people aretreated fairly," the provost said. "[TheCorporation] feels that [the changes] result in abenefits package that seemed to be fair."

Another Corporation member agreed.

"We decided for broad institutional reasons wehad to reject the report," University Treasurer D.Ronald Daniel said in an interview yesterday. "Wegot a very good report [and] we tried to respondwith equal effort."

Professor of Sociology Peter V. Marsden, chairof the FAS Committee on Benefits, refused tocomment to the press, but issued a statement withthe qualification that any further remarks wouldbe delayed until after the May 2 faculty meeting.

"The Committee appreciates the seriousattention that the Harvard Corporation has giventhe recommendation....It is pleased that themembers of the Corporation share its concern abouthow the benefits changes announced last Juneaffect plans and retirement decisions," thestatement said.

"Likewise we are glad that the Corporation hasdecided to replace the `hard cap' onpost-retirement health benefits after 1999 with a`soft-cap.'"

"Of course, the Committee felt that the groundsit set forward for rescinding the announcedreductions...were persuasive, and we are sorrythat the Corporation decided to leave thosereductions in place," the statement said.

Several other members of the committee referredall comments to Marsden.

The Corporation's report also reaches a thirdand much less controversial conclusion, astatement regarding "process, and future steps."The statement points to the recently-establishedUniversity Committee on Benefits as an appropriateforum for evaluation of the benefits process.

Carnesale, who will chair the committee, saidin a telephone interview late yesterday afternoonthat it will work largely through subcommittees.Among the issues to be covered by separatesubcommittees are those of faculty retirement,health care, administrative matters and issues ofparticular importance to the staff.

The provost said yesterday that he has alreadysolicited nominations from the deans, and thatinvitations will be issued to individuals"shortly." He said he hoped the committee couldconvene once before Commencement.

History

The benefits issue has been among the mostpressing in the FAS since the University TaskForce on Benefits' original announcement lastJune, which called for the one percent reductionand the "hard cap" on medical benefits.

The announcement itself was somewhat rocky. Thetask force had originally been chaired by formerprovost Jerry R. Green. Green, an economist andthe task force's only academic, left the committeeupon his resignation as provost last April, andsubsequently refused to sign the committee'sreport.

Faculty members revolted upon the release ofthe report. At full faculty meetings last Octoberand November, professors expressed outrage at boththe decision itself and the process by which itwas made.

President Neil L. Rudenstine's November reporton the issue further enraged members of thefaculty. In that month's faculty meeting, therewas open opposition and a level of animosity thatclearly surprised Rudenstine.

McKay Professor of Computer Science Barbara J.Grosz summed up the general feeling.

"It seemed as though we were being treated moreas employees of a business than members ofcommunity," she said.

The ordeal took an obvious toll on thepresident. At one point during the Novembermeeting, Rudenstine looked down at the table andshook his head in dejection. Just days after themeeting, the University announced that thepresident would take a medical leave of absence torecuperate from severe fatigue and exhaustion.

Comparative Assessment

Although the Faculty has objected strongly tothe reductions, many impartial observers havedescribed Harvard's package as extremely generous.

The benefit cuts announced last June wereenacted to try to curb the yearly deficit theUniversity runs despite its almost $6 billionendowment.

Presently, the University contributes 11percent of salary up to $61,200 to the pensions offaculty above age 40 and 16 percent, an amounttermed "sumptuous" by Fortune magazine, ofany salary above $61,200.

The plan costs Harvard more for older facultywho generally earn higher salaries and, thus, reaplarger contributions. And with the averageretirement age increasing, the Universityestimates benefits costs will rise significantlyin years to come