Public Colleges Might Escape a Tax on Million-Dollar Employees. Here’s Who They Are.

A proposal from Republican lawmakers to amend their signature tax law has public colleges seeing red. But until Congress finds a way to make such changes in the law, state universities are unlikely to be taxed like their counterparts in the private, nonprofit sector.

It goes like this: Take the two highest-paid head coaches now employed in the public and private higher-ed arenas. Nick Saban, the University of Alabama’s football coach, earned $8.3 million in 2018, according to USA Today. Mike Krzyzewski, head basketball coach at Duke University, earned just over $7 million in 2016, the most recent year available via the university’s tax returns.

Under the auspices of the 2017 Tax Cuts and Jobs Act, were those two individuals to be paid similarly in 2019 to what each respectively earned when the law was passed, Duke would be required to pay a 21-percent tax on the compensation earned by Krzyzewski after his first $1 million. The tax would be paid exclusively by Duke, not by Coach K. But because of imprecise language in the tax-cuts law, the University of Alabama will avoid a similar fate as it relates to Saban’s paychecks. The glitch was first reported by Politico.

But rather than change the law and levy additional taxes on public colleges, Steven M. Bloom, director of government relations at the American Council on Education, said his organization and its members hope Congress will instead repeal those facets of the law aimed at institutions of higher education.

“It seems like misguided tax policy. It’s not going to affect that many schools, but the schools that are affected, it’s just going to add to their cost structure,” said Bloom.

For private colleges, the tax on millionaire employees will apply to a maximum of five people, according to the National Association of College and University Business Officers. Critics contend that the imbalanced application of the tax gives public universities a competitive edge in terms of hiring labor and managing finances.

The Chronicle identified at least 205 employees at 73 public institutions of higher education who earned more than a million dollars in the 2017 fiscal year. The group includes 163 nonmedical employees, most of whom are athletics-staff members. Collectively, the cohort earned almost $390 million in compensation that year, according to disclosures to The Chronicle by those universities and their parent systems.

Executive Compensation at Private and Public Colleges

Browse The Chronicle‘s executive-compensation package, which includes the latest data on more than 1,400 chief executives at more than 800 private and public colleges.

Additionally, 42 medical-faculty members and professionals in the public higher-ed sector earned more than a million dollars that same year. Under the Tax Cuts and Jobs Act, pay to health-care employees at private institutions in excess of a million dollars for work related to medical services is exempt from the tax. But if the pay is related to medical-school or hospital management, it would be subject to the tax.

Were the expansion of the tax to public colleges ever to be codified into law, it would very likely have a disproportionate impact on public flagships, considering their exclusivity in each state. Of the 205 employees referenced above, 115 were employed at public flagship institutions in the 2016-17 fiscal year.

Below is a list of the employees earning more than $1 million at state institutions of higher education. Because The Chronicle can’t be certain of the exact roles of medical-staff members and professionals in their health-care and education apparatuses, it is unclear how their compensation would affect their institution’s tax liability.

Late last year, in an effort to rectify the flub, Rep. Kevin Brady, Republican of Texas, introduced a bill expanding the tax to all universities, regardless of sector. It didn’t go anywhere.

Dan Bauman is a reporter who investigates and writes about all things data in higher education. Tweet him at @danbauman77 or email him at dan.bauman@chronicle.com.