In January 1987, just days before C. Warren Neel returned to full-time employment as dean of the College of Business, State Attorney General W. J. Michael Cody issued an opinion stating that UT’s payment of an annual salary supplement of $23,562 to him, representing the difference between his salary as dean and his salary as employment commissioner, was illegal. A subsequent state audit confirmed the illegality of the payments, showing that UT also spent $2,784 to reimburse Neel for travel expenses and $10,500 for apartment rent.
Under an agreement entered into by Neel and UT on January 2, 1986, Neel gave up his position to serve in Governor Lamar Alexander’s cabinet but agreed to provide “planning, budget assistance, and other support for a flat fee of $23,562 payable in four quarterly installments.” Neel was not required to pay back the funds. UT’s agreement not to enter any additional such employment arrangements effectively stopped consideration of UT’s paying a salary supplement to UT System Vice President Charles Smith, who took a leave of absence to become commissioner of education in Governor Ned McWherter’s cabinet. The State position taken by Smith represented an approximate $15,000 salary cut, and UT had been discussing the possibility of paying him $20,000 to $25,000 a year to supplement his salary as commissioner. (Smith’s appointment was announced on December 23, 1986. McWherter had first offered the position to Memphis City Schools Superintendent Willie Herenton, who declined.)
The state legislature then passed legislation allowing the governor to set, raise, and lower cabinet officers’ pay—prior to that ruling, the governor could not reduce pay. The legislature removed from the bill, however, a provision that would have opened the way for Smith to receive a salary supplement from UT. McWherter raised Smith’s salary from $64,500—the figure at which he was hired—to $75,000 one month after Smith took the position.