In bringing Saban on board, Alabama has hired a proven winner that maximizes their chance of returning to the summit of college football. Is that worth $2m more than the next best guy? It is hard for me to say. Surely, the money people at Alabama have the best feel for how much more boosters, sponsors, and ticket purchasers are willing to pay for an enhanced product.
A salary cap for coaches, given legal precedent, would violate anti-trust law. So the NCAA is powerless to stop the spiral in coaching salaries, short of stopping the flow of revenue into the game -- fat chance -- or shifting it to the players and away from the coaches (i.e. the player proxies). Also not likely.
As the money flows into the game, coaches' salaries will flow with it. Roll Tide!
As Skip notes, surely there will be much hand-wringing and tut-tutting about the size of the contract - messed up university priorities and whatnot. The priorities may be messed up at Alabama (I'm in no position to judge this), but it's rather doubtful that the next-best alternative to the boosters, ticket buyers, and sponsors of 'Bama football is the 'Bama student education.
Coyote notes in the comments to Skip's post:
Is there any state where a college men's football or basketball coach is not the highest paid state official?
I don't know the answer to this question, but I recall there being much fretting in Iowa when Tim Floyd (former Iowa State head basketball coach) was the highest-paid public employee in that state. That was, as is Saban's contract, a direct result of the relative scarcity of basketball coaching talent and the fact that, as Skip notes, the average player is not paid anything close to what he is worth.
Update: surely the diamond-water paradox applies in assessing the social value of Saban's contract.