ERI Blog

After a report that presidents of New Jersey state community colleges were receiving much more than the US average salary of $165,000, New Jersey Governor Chris Christie ordered a follow-up investigation of their compensation in early June.  These salaries are set by the trustees of the individual colleges, as the state of New Jersey ceded control of community colleges in 1994.  Although supported by taxpayer dollars, there are no guidelines for compensation for the top executives and there were huge salary disparities among pay in the state’s nineteen two-year colleges.  With community college tuition rates in New Jersey among the highest in the nation, such high salaries for presidents have warranted a closer look.

The average salary of $165,000 used as the benchmark for the report to the Governor came from a 2009-2010 study of 208 colleges by Yaffe & Co. However, some more information is necessary to determine whether or not the presidential pay ranges are in line – hopefully, that is what the current in-depth study will add.

The IRS says nonprofits must pay employees reasonable compensation, but there are few specific guidelines. In general, total compensation must be compared with what would be paid for like services by like enterprises under like circumstances[1].  Typically, “like” means similar size and industry – in the nonprofit world, this equates to annual revenues and the type of organization.  What is missing in the reported salary levels for New Jersey is the size of the colleges in question, as size is an influential factor for determining appropriate compensation.

ERI Economic Research Institute compiles a database of compensation data reported on the Form 990 for our Nonprofit Comparables Assessor. A quick analysis of the data shows that New Jersey community colleges do seem to pay higher than the national average.  However, whether that New Jersey pay should be a concern for local taxpayers is related to the size of the college in question.

The missing information about the size of the community colleges in question will indicate whether or not these presidents are paid more than their counterparts across the US, and if they are paid in line with their New Jersey colleagues.

Setting the “right” nonprofit compensation requires data from relevant comparables – those from a similar industry, size, and geography. ERI’s easy-to-use software allows for such comparisons.  Download a free demonstration version of the Nonprofit Comparables Assessor or schedule a Guided Tour for more information on nonprofit compensation data.