No public money will be used in the $500,000 deferred compensation plan for Montana State University's new president, the state University System's budget chief confirms.

The Montana Board of Regents is scheduled to vote today during a meeting in Dillon to approve the deferred compensation plan. It has sparked skeptical comments from some taxpayers, despite Regents Chairman Stephen Barrett's assurances that no public money will be used to pay for it.

Mick Robinson, deputy commissioner of higher education for fiscal affairs and a former Revenue Department director under former Gov. Marc Racicot, this week backed up Barrett's stand.

"There will not be any use of state funds or tuition dollars," Robinson said.

"It's the first time this has ever been used in the Montana University System, (but) it's used in many other states."

Under the plan, the nonprofit MSU Foundation will pay for a life insurance policy covering Cruzado.

The Foundation, listed as the beneficiary, will receive the death benefit when she dies. As a result, Barrett said, the Foundation could receive back almost as much or possibly even more than it invests in the policy.

The policy would pay Cruzado $50,000 a year for 10 years, starting when she reaches age 65.

The MSU Foundation will pay $35,000 a year for 10 years to purchase the life insurance policy, said Tracy Ellig, an MSU spokesman. The policy begins as a term life policy and converts over time into a whole-life policy, blending the two as a way to keep costs down, he said.

If current investment rates hold, Ellig said, even if Cruzado lives to age 75 and receives the full 10 years of payments, the Foundation would still receive a net gain on its investment.

"It seems to me that is an answer to critics - the Foundation would still end up being ahead," Ellig said.

A whole-life insurance policy does two things, Robinson said. It pays a death benefit and it accumulates cash value over time. One key element that makes the plan work is that Cruzado is only 50 years old, he said. That allows 15 years for cash value to accumulate in the policy.

Connie Carmack, MSU Foundation president and chief executive officer, was on leave Wednesday and could not be reached for comment.

Under the terms of the deferred compensation plan, Cruzado would have to work for MSU at least five years and meet "other specified conditions," which aren't spelled out in the regent's agenda.

Defending the deferred compensation plan, Barrett said it wouldn't cost any taxpayer or student tuition dollars, and it would help MSU compete with other states' universities that can offer larger salaries to hire talented leaders like Cruzado.

The regents negotiated with Cruzado a salary of $280,000, which is more than $50,000 below the average pay for university presidents in Montana's neighboring states.

Yet the $280,000 makes her Montana's highest-paid state employee, prompting some criticism.

The regents said when they hired Cruzado last fall they planned to provide her additional, deferred compensation, but it wasn't until last week that the dollar amount was disclosed.

This arrangement makes it possible, Ellig said, for the University System to bring in a "top quality" president to run a four-campus system with more than 20,000 students, 3,000 employees, Extension offices in all 56 counties and seven Agricultural Experiment Station centers.

Gail Schontzler can be reached at gails@dailychronicle.com or 582-2633.

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