Amid pay furor, Suffolk plans to boost its debt

The Beacon Hill university’s fiscal difficulties, outlined in a report recently issued by a credit rating agency, are casting a harsh light on president David J. Sargent’s $1.5 million pay package, reported yesterday in an annual survey by The Chronicle of Higher Education.

University officials said Sargent deserves the pay package, contending it is appropriate for someone of his experience who has helped transform the institution. But many, including advocates for college students, roundly panned the lucrative sum, which for the second consecutive year placed Sargent among the country’s highest compensated university presidents. Last year, the survey reported Sargent received $2.8 million.

“It strikes me as really bad form that you have all these presidents making six-figure salaries as families are struggling more than ever to afford to attend these schools,’’ said Bob Giannino-Racine, who directs a Boston nonprofit that helps students find ways to afford college.

“It’s time that every higher education leader takes a step back and look at what is driving the annually increasing costs that put college out of reach for many folks.’’

Nationally, one in four presidents of private colleges earned more than $500,000 in the fiscal year that ended in 2008, the latest figures available from federal tax filings. At major private research universities, median pay rose about 15 percent to $627,000.

Meanwhile, the number of colleges charging more than $50,000 in annual tuition this year rose from five to 58, the survey found.

About one-third of Sargent’s reported compensation consisted of bonuses that, because of federal disclosure requirements, were also reported last year, meaning that his total salary and benefits for fiscal 2008 was about $1 million. Even so, that figure surpassed his counterparts’ wages at many larger, wealthier institutions, often by a comfortable margin.

“I find it bordering on scandalous,’’ said Richard Vedder, who studies higher education financing and directs the Center for College Affordability and Productivity, a Washington, D.C., think tank. “Suffolk’s trustees are just wasting valuable assets for the institution.’’

Vedder and other critics of Sargent’s salary said paying presidents such handsome sums run counter to colleges’ nonprofit mission and exploits their many tax advantages. This week, for instance, the university will turn to the state’s Health and Educational Facilities Authority, to issue $110 million in tax-exempt bonds so it can restructure its debt and solidify its finances, a move that could yield substantial savings.

“What’s troubling to me is that we give up a tremendous amount of tax revenue to nonprofits, and then they pay their leader more than some CEOs,’’ said state Senator Mark C. Montigny, chairman of the committee on Bonding, Capital Expenditures & State Assets, who described Sargent as “grossly overpaid.’’

“The trustees should cut his salary immediately,’’ he said.

Suffolk officials staunchly defended Sargent’s salary, part of a five-year contract signed in 2006, as commensurate with a two-decade tenure that saw the former commuter college gain prominence and stake out an expanding presence in downtown Boston.

“He’s taken the school to a whole new place,’’ said Jim Morris, a Suffolk Law School graduate and member of the board of trustees. “All he did was dedicate his entire life and career to the university, and all we did is say ‘Thank you and don’t leave.’ ’’

Morris said he recognized the public might see the salary as disproportionate, but said Sargent’s contributions over the years have been invaluable, and that a top compensation expert helped the board craft the terms of the contract.

Through a spokesman, Sargent declined to comment.

Terry Hartle, a senior vice president for the American Council on Education, said Sargent’s salary was deserved “in light of his accomplishments.’’

“What you’ve got at Suffolk is largely the result of vision and energy of one guy,’’ he said. “Good leadership is hard to find and when you find it you want to keep it.’’

But Senator Chuck Grassley, an Iowa Republican, said rising presidential salaries undermine colleges’ charitable mission and tax-exempt status.

“The pressure on students and families gets greater all the time,’’ he said. “The fact that these salaries are growing right now is out of synch with the reality for most parents and students who are trying to pay for college in the midst of high unemployment and after savings for education were either wiped out or greatly diminished last year due to the stock market falling.’’

This week’s bond sale will increase Suffolk’s debt by 13 percent to $303.5 million, according to Moody’s Investors Service, but will leave the college with only fixed-interest payments.

Based on the move, Moody upgraded the college’s long-term rating to stable from negative.

Provost Barry Brown, who is overseeing Suffolk’s refinancing, said the increased debt is a prudent move that will “provide long-term interest rate stability.’’

Moody’s said the college has a healthy market position, strong cash reserves, and an enviable urban location and real estate portfolio. But it also found that the school was highly reliant on tuition and in heavy debt.

“Any impact on the university’s ability to continue to raise tuition and keep enrollment stable could disproportionately impact operations,’’ the report stated.