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Comments on the final 2015-16 state budget

By Joe Kiskis

This note makes a few comments on the final UC budget for 2015-2016 and then focuses on points related to the UC Pension Plan (UCRP). To some extent, it updates previous comments here by including changes since then and information that was not available then.

The 2015-16 UC Budget and UCRP

To get good information on the budget, one must read both AB 93 and SB 97. The process this year was a little convoluted. On June 15, the legislature passed AB 93, the Budget Act of 2015. This was the Legislature’s version of the budget and was passed on that day so as to meet the constitutional deadline. It was done before the Legislature and Governor had come to agreement. Their agreement was announced the next day. To account for that and other small items in the following days, SB 97 was passed on June 19. It makes many significant amendments to AB 93, including a number relevant to UC. Both AB 93 and SB 97 were signed by the Governor. However the Governor exercised his line item veto authority in a few minor ways that are not relevant to UC. To get complete information, there are, as usual, trailer bills to read. One of those, SB 81, has a few parts relevant to UC—most significantly concerning the Middle Class Scholarship Program.

The main features of the UC budget concerning tuition and the base budget came out as expected and as have been widely reported. However, it’s worth noting that the final language on these points is less proscriptive than in the original version and that what is expected to happen in the out years is just that—an expectation that is not mandated in this budget. Briefly, per the Regents decision of May 2015, tuition for California resident students is to remain constant for two more years. Following that, modest increases comparable to the rate of inflation are possible. On the other hand, for non-resident students, tuition will likely increase by 8% in each of the next two years. System-wide Student Services fees (as opposed to tuition) are allowed to go up 5% ($48).  The increase in the 2015-16 UC base budget is the same as the Governor originally proposed, i.e. 4% or $119.5M. The expectation is that 4% increases will continue through 2018-2019.

There was an expectation that the Legislature would augment the Governor’s budget with funding for enrollment growth and that the Governor would not line-item veto it. This did not turn out as well as was hoped. The amount is only $25M, and it is contingent on UC adding 5,000 resident undergrads by 2016-17. This is a short timeline, and the amount is far below that needed to educate 5,000 students for one year. On a per student basis, it is also substantially below the average State contribution to the cost of education.

Earlier versions of the budget had limits on nonresident enrollment. Those did not make it into the final budget.

In the trailer bill, the eligibility requirements for the Middle Class Scholarships have been raised and the funding for the program has been decreased.

UC Retirement Plan (UCRP)

As it turned out, there is a large discrepancy between the language related to UCRP in the publicized agreement from the Committee of Two (or equivalently in the Governor’s May Revise statement) and that which actually appeared in the final budget product.

The original claim was that there would be a one-time payment of $436M spread over three years ($96M in the first year) to pay off a small fraction of the UCRP unfunded liability. In return the University agreed to make a permanent change to UCRP by adding another tier that would apply to new employees. In this new tier, UCRP eligible salaries were to be capped at the inflation indexed PEPRA/Social Security limit ($117k for the current year) rather than at the IRS limit of $265k currently used by UCRP. Employees in the new tier would have the option of either a defined benefit plan with the new cap in combination with a supplemental defined contribution part or a defined contribution plan with no defined benefit portion. The second option of a straight defined contribution (DC) plan is most troublesome. Fortunately, no language describing such options was incorporated into the budget bills signed by the Governor.

The Governor’s May Revise letter to the Legislature suggested budget bill language. This suggested language said only that UC would get a one year addition of $96M in exchange for making UCRP consistent with the PEPRA cap. It said nothing about how that should be done. It made no mention of $436M, no mention of a DC supplement, and certainly no mention of a DC only option. This recommendation was followed, and the language that the Governor suggested is essentially that of the budget bills. However, to drive home the point that there is no larger deal, the amended version of the budget adds:

“This appropriation does not constitute an obligation on behalf of the state to appropriate any additional funds in subsequent years for any costs of the University of California Retirement Plan.” (SB 97, p. 96)

Thus neither the Governor nor the Legislature are pressuring the University to introduce a straight DC option. The DC option is something introduced (most likely by UCOP) during discussions in the Committee of Two but done without appropriate consultation within the University. Nevertheless, the Office of the President intends to pursue the possibility of a DC only option. In the discussions that will take place in the coming months, it is worth keeping in mind that a DC option appears to be primarily a priority of UCOP and not of the Legislature or the Governor. Note also that the relative merits of defined contribution verses defined benefit plans were thoroughly, carefully, and widely discussed in the University about six years ago. The conclusion was that the excellence of the University was best served by continuing with UCRP as a defined benefit plan. Thus in 2010, when the President recommended and the Regents endorsed pension reforms, UCRP was preserved as a defined benefit plan.

The May Revise

As the Legislature and Governor enter the end game for the 2015-2016 budget, here is a review of provisions related to UC in the Governor’s latest budget proposal—the May revise, which is now being considered by the Legislature.

It appears likely that the final UC budget will have provisions that address access and affordability. What is missing are resources to ensure that the university can maintain quality. It is the hardest to quantify, the weakest politically, and is now the most seriously threatened.

This budget is another demonstration of the truism that the only way to restore access, affordability, and quality is through adequate State investment in public higher education. In spite of strong revenues to the State, the Governor’s budget falls well short of what is needed to reverse the negative trends in recent years. As it happens, it is well within the means of the citizens of the State to restore all of California public higher education to the levels of access, affordability, and quality enjoyed in 2000-2001. http://keepcaliforniaspromise.org/473424/reset-2015-16

The May revise budget summary is available at

http://www.ebudget.ca.gov/2015-16/pdf/Revised/BudgetSummary/FullBudgetSummary.pdf

The UC part begins on page 28. Professor Chris Newfield (UCSB) has previously commented on the May revise at

http://utotherescue.blogspot.co.uk/2015/05/the-may-budget-revision-uc-budget-goes.html.

Many aspects of the May revise as they relate to UC are contained in the agreement of the “Committee of Two”

http://budget.universityofcalifornia.edu/

now endorsed by the Regents

http://regents.universityofcalifornia.edu/regmeet/may15/j2.pdf.

1) Systemwide tuition and fees for California resident students are to remain constant for two more years. Following that, modest increases comparable to the rate of inflation are allowed. On the other hand for non-resident students, tuition will increase by 8% in each of the next two years.

2) Increases in the UC base budget are to be the same as the Governor originally proposed, i.e. 4% per year ($119.5M for 2015-16) but are now continued through 2018-2019. This is much less than what the State should contribute to replace cuts since 2007 and is also substantially less than the needs identified in the UC proposed budget for 2015-2016. http://regents.universityofcalifornia.edu/regmeet/nov14/f1.pdf http://regents.universityofcalifornia.edu/regmeet/nov14/f1attach1.pdf

The May revise also proposes one time funds of $25M for deferred maintenance and $25M for energy efficiency projects.

3) The May revise contains a tepid and ambiguous recognition of a State obligation to UC pensions. One-time funds of $436M spread over three years (with $96M for 2015-16) are proposed. However, this is Proposition 2 money, which can be used only to reduce the UCRP unfunded liability (about $7.6B in the last annual report). The one-time payment is only modestly significant in the long run and has negligible impact on the University’s operating budget in the near term. This is because the University has not planned to increase the UCRP contribution rate above 8% for most employees and 14% for the employer. Contributions at this rate cover only the current year additional liability and some of the interest on the unfunded liability. I.e. at this point, the regular employer and employee payments are making no contribution to retiring the unfunded liability. Thus in near term years, the Proposition 2 money does not reduce the large negative impact on the UC operating budget from regular UCRP contributions. The Proposition 2 money could be framed as a replacement for or enhancement to UC’s own occasional ad hoc payments to reduce the unfunded liability, but these have been very controversial, and UC has not revealed any plans to make another such payment.

Unfortunately this modest one time contribution comes with permanent strings. In return UC is required to introduce yet another tier to UCRP that would apply to new employees. The new tier will mirror state law for other state employees. In this tier, UCRP eligible salaries are to be capped at the inflation indexed PEPRA/Social Security limit ($117k for the current year) rather than with the IRS limit of $265k currently used by UC. Employees in the new tier will have the option of either a defined benefit plan with the new cap and an add-on defined contribution plan to supplement the defined benefits or a fully defined contribution plan. It is this second option that is particularly troubling.

The relative merits of defined contribution and defined benefit plans were thoroughly evaluated and debated during the extended review that led to the 2010 reforms of the UCRP. The conclusion was that a defined benefit plan is the more advantageous option for both the University as an employer and for its employees.

The main concern is not so much that UC has cut a deal on this issue but rather that it has made such a poor deal. For very modest one-time money, it has agreed to make permanent changes to UCRP including offering a completely defined contribution option that will put at risk the whole of the defined benefit plan. (Chris Newfield has previously made similar comments as mentioned above.) In addition the closed process by which this agreement between the Governor and the President was reached has undermined shared governance and collective bargaining.

4) UCOP has stated that the Governor has agreed not to veto additional appropriations for UC that come out of the legislative process. The University is asking legislators for additional funds to increase California resident enrollment.

5) There are several areas in which the President has committed UC to the implementation of additional efficiencies. These include transfers, time-to-degree, advising, and use of technology. Some of these Presidential promises relate to topics that are squarely within the authority of the Academic Senate, and all of them would normally be addressed through shared governance.

First round is on us, June 10th at Sudwerk

The Board of the Davis Faculty Association invites all UCD faculty to join us over a beer – or other drink – at Davis’s Sudwerk restaurant at 5:00 pm on Wednesday, June 10th. The first drink will be courtesy of the DFA.

Come discuss the issues confronting UC. We want to hear about your concerns, your suggestions, and any other input you may have for the Board of the DFA. To be effective in representing you, we need your help.

Please forward this message to your colleagues! As the University of California continues to face challenges, we need concerted action as much as ever.

Please join us on the 10th.

More evidence of the decline in state support

As UCD faculty we are all unhappily aware of the erosion in state support for our institution and its students.  Perhaps, however, we view this with an element of resignation as a part of a national trend.  However, according to a study by the Chronicle of Higher Education, of 70 large research institutions in the country, UCD has the dubious honor of ranking second in terms of erosion in state support, trailing only UI, Chicago.  (Three others of the ‘top seven’ on the list are other of our sister UC campuses.)

http://chronicle.com/article/25-Years-of-Declining-State/144973/

California’s Research University: The UC System, Yesterday, Today and Tomorrow

Spring 2015, Mondays 6:10 to 8:00 pm, Bainer 1062.

Instructors: Jim Chalfant, Department of Agricultural and Resource Economics, and Bob Powell, Department of Chemical Engineering and Materials Science and Department of Food Science and Technology.

This series will examine the nexus of the excellence of the University of California and its budget. Our focus will be on the disinvestment by the State in UC and the measures that UC has taken to maintain its place among the greatest research universities in the world. We will explore such topics as UC’s research mission, the roles of graduate and undergraduate education at UC, the current realization of the Master Plan for Higher Education, tuition, and the UC budget. The main focus will be on the ten campuses, with additional consideration of the University’s other roles: its role as a large provider of health care, in management of three national labs, and in the delivery of agricultural research and extension, along with other prominent examples. Outside speakers from both the UC Office of the President and the campus will help frame these and other issues.

Guest Speakers:

March 30: Patrick Lenz, former Vice President Budget and Capital Resources

April 6: Bob Powell. CHMS and Food Sci. Tech, UC Davis

April 13: Ralph Hexter, Provost UC Davis

April 20: John Aubrey Douglass, Senior Research Fellow, Center for Studies in Higher Education UC Berkeley

April 27: MRC Greenwood, Chancellor Emeritus UC Santa Cruz and Linda Katehi, Chancellor UC Davis

May 4: Nathan Brostrom, Executive Vice President & Chief Financial Officer

What has the DFA been up to lately?

The DFA belongs to the Council of UC Faculty Associations (CUCFA). By far the largest independent dues-supported organization representing the faculty at the campuses of the University of California, CUCFA coordinates activities of the Faculty Associations on a statewide level, acts as collective bargaining agent for faculty at UC Santa Cruz, and maintains a lobbyist in Sacramento. The DFA Executive Director, Eric Hays, can be reached by email at info@cucfa.org and the 2013-2015 DFA chair can be reached at scalettar@physics.ucdavis.edu.

Here is a brief reminder of some of the things the DFA has been up to in the past year:

• The DFA and CUCFA continue to produce material that highlights the disinvestment in higher education by California’s governor. An example of such work includes the annually updated “How Much Would It Cost to Restore California’s Public Higher Education?” This document became the centerpiece of our response to UC’s proposal to raise tuition up to 5% per year for the next five years for undergraduate and graduate students.

• CUCFA formed a partnership with the American Association of University Professors in defense and promotion of academic freedom, shared university governance, and the economic security of all those engaged in teaching and research in higher education. Founded in 1915, the AAUP has helped to shape American higher education by developing the standards and procedures that maintain quality in education and academic freedom in this country’s colleges and universities.
• Concerns by the DFA resulted in a change in the practice of distributing materials from outside interest groups by the Chancellor’s office.  These materials are henceforth accompanied by a statement “that distributing material does not imply endorsement”.
• CUCFA produced a statement on academic freedom in response to a statement made by UCB Chancellor Dirks that evoked civility, echoing language recently used by the Chancellor of the University of Illinois, Urbana and the Board of Trustees of the University of Illinois (especially its Chair Christopher Kennedy) concerning the refused appointment of Steven Salaita. It also mirrored language in the effort by the University of Kansas Board of Regents to regulate social media speech and the Penn State administration’s new statement on civility. “Although each of these administrative statements have responded to specific local events, the repetitive invocation of “civil” and “civility” to set limits to acceptable speech bespeaks a broader and deeper challenge to intellectual freedom on college and university campuses.”

• CUCFA objected that Governor Brown proposed Regental nominees prior to notification, much less consultation, with the advisory committee specified in Article 9 Sec. 9e of the Constitution and therefore requested that the California Senate’s Rules Committee reject the nominees proposed by the Governor.
• CUCFA lobbied for passage of AB 1476 which would have provided UC with $50 million in additional state funding in the current year. Governor Brown vetoed AB 1476.

• CUCFA objected when UC President Janet Napolitano rescinded the 1989 Guidelines on University-Industry Relations without consulting with the Academic Senate.

• The DFA opposed the demolition of Solano and Orchard Park Student-Family Housing without a plan to replace them with similar subsidized graduate student housing: “This change will seriously undermine the efforts that faculty and the university generally are making to bring a diverse set of graduate students to our campus.”
• The DFA, and FA chapters across the state, supported graduate student workers in their negotiations with UC. At the time of the negotiations according to UCOP’s own survey, student stipends lagged behind comparative institutions at least $2,697 making recruiting graduate students into UC programs difficult. A new contract was ultimately ratified in June of 2014.

• The DFA is one of the sponsors of the annual Charles P. Nash Prize, named for a former Chair of the DFA and longtime Vice President of CUCFA. The Nash Prize is awarded annually to acknowledge achievement in and commitment to promoting shared governance in keeping with Charlie Nash’s exceptional efforts in promoting and advocating for faculty interests and welfare. The 2014 Nash Prize was awarded to Linda Bisson, The Maynard E. Amerine Chair in Viticulture and Enology.
• CUCFA continues to produce material that details the persistent compensation gap between UC faculty and faculty at comparison institutions. This year’s report was titled “The Degradation of Faculty Welfare and Compensation.

• CUCFA, through its unionized Santa Cruz chapter, continues to work with UC to create online contracts that provide UC with the necessary clearance to distribute online coursework without requiring faculty to give up their intellectual property, their ownership of lectures and all accompanying materials.

• The restructuring of the university has led to a massive and costly expansion of senior administrative positions on campus. System wide, there are now more management positions than regular teaching faculty. Increasingly, significant policy decisions are made by administrators with inadequate direct experience and insufficient faculty input. We seek to reverse this process and make Davis again a faculty-led campus. We support the merit and promotion system and equitable salaries.
For more information on our activities, browse our website http://ucdfa.org. If you have colleagues who are not current members of the DFA who you think support the ideals of the organization, please encourage them to join at http://ucdfa.org/join.

 
With best wishes,

The DFA Executive Board

CUCFA response to UC’s plans to raise tuition

Below, please find a letter that The Council of UC Faculty Associations (CUCFA), the systemwide organization of which the Davis Faculty Association is a member, sent today to President Napolitano and the UC Regents regarding their recent proposal to raise tuition up to 5% per year for the next five years:


The Council of UC Faculty Associations holds Governor Jerry Brown’s slashing of public higher education responsible for UC President Napolitano’s recent proposal to budget for 5% tuition increases every year for the next 5 years.

Raising tuition is not the solution. There is a better way: provide California students and their families high quality, affordable higher education, as defined by the California Master Plan for Higher Education.

The reality is that Governor Brown has not been willing to spend the necessary money to do so even though the cost to do so is surprisingly low.

Here are the financial facts:

• In 2001-02, Gov. Gray Davis provided $3.2 billion ($4.4 billion in 2014 dollars) to the University of California. Tuition was $3,964.

• On taking office in 2003, Gov. Arnold Schwarzenegger cut UC’s budget by 15% to $2.7 billion and pressed for rapid tuition hikes to shift costs on to students and their families. By the time Gov. Schwarzenegger left office in 2011, he was providing just $2.9 billion to UC. Tuition had tripled to $11,279.

• Brown cut UC’s provision to $2.4 billion in his first budget (2011-12).

• While Brown has provided small increases to UC in the last 3 years, his 2014-15 budget only includes $2.8 billion for UC, more than one-third less (in real dollars) than Gov. Davis provided more than a decade before.

• At the same time that governors have cut support for UC by one-third, the university’s student body has grown by nearly one-third: from 183,000 to 238,000 students as UC continued to meet its Master Plan obligations.

• While Governor Brown appealed to UC students to help pass Proposition 30 in 2012, he has only allocated 4.5% of the money it raised to UC.

UC’s leaders have responded to these unprecedented cuts by reducing budgets for teaching and research, boosting class sizes, shifting administrative tasks to faculty (leaving less time for students and research), admitting more out-of-state students, and massive tuition hikes that tripled tuition in 15 years.

Along with his legacy of high-speed trains and long-distance water tunnels, Governor Brown needs to restore the promise of the California Master Plan for Higher Education:

• He should budget for all public higher education, including the State University and Community College systems, at levels that will return them to where they were in 2001-2002, adjusted for inflation and student population growth.

• Tuition should not merely be capped but rolled back to 2001-2002 levels, inflation adjusted ($4,717 for the University of California, compared to the $13,860 planned for UC next year).

Unlike many dreams, offering affordable, high quality public higher education to all is a bargain. It would cost the median California household just $50 a year.  (Details of calculation at http://keepcaliforniaspromise.org/3553/restore-2013-14.)

The UC Regents and President Napolitano must represent not only the institutional interests of UC students, staff and faculty but also the fundamental public interest of all Californians to restore one of the few fair-minded systems of advancement still open to anyone, from any background, who works hard and demonstrates talent.

BFA sponsored talk on September 30, 5pm, at UC Berkeley

The DFA’s sister chapter at Berkeley, the BFA, would like to extend a warm welcome to DFA folk to come to an event they are organizing this coming Tuesday. Please invite your colleagues as well.

*    *    *

The New Normal: What Does It Mean to Work at the UC Today

This event will address the rise of the new managerialism at UC and its implications for faculty research, teaching, welfare, academic freedom, and the tradition of shared governance.

Speakers: Christopher Newfield and Michael Meranze

When and where: September 30, 5pm, Wheeler Hall 300

The_New_Normal

(click on the image for a larger version)

Money behind CA pension proposition also secret money behind PBS pension news series

John Arnold — the billionaire former Enron trader who has been the financial backing for a proposed California ballot proposition that would eliminate constitutional protections for vested pension and retiree healthcare benefits for current public employees, including UC employees, if it gathers enough signatures to make it to the November ballot — turns out to be the hidden money behind a new a new two-year PBS news series titled “Pension Peril.”

Full story is at:
http://pando.com/2014/02/12/the-wolf-of-sesame-street-revealing-the-secret-corruption-inside-pbss-news-division/

Here is an excerpt:

In recent years, Arnold has been using massive contributions to politicians, Super PACs, ballot initiative efforts, think tanks and local front groups to finance a nationwide political campaign aimed at slashing public employees’ retirement benefits. His foundation which backs his efforts employs top Republican political operatives, including the former chief of staff to GOP House Majority Leader Dick Armey (TX). According to its own promotional materials, the Arnold Foundation is pushing lawmakers in states across the country “to stop promising a (retirement) benefit” to public employees.

Despite Arnold’s pension-slashing activism and his foundation’s ties to partisan politics, Leila Walsh, a spokesperson for the Laura and John Arnold Foundation (LJAF), told Pando that PBS officials were not hesitant to work with them, even though PBS’s own very clear rules prohibit such blatant conflicts…

The stealth Arnold-PBS connection, however, represents a major escalation in the larger trend. In this particular case, PBS seems to be defying its own rules and regulations about conflicts of interest. At the same time, the fact that PBS is obscuring the financial arrangement suggests the network may be deliberately attempting to hide those conflicts from its own viewers…
But most troubling of all, the report on Vallejo promoted the city councilor’s “campaigning to change (state) law to give cities the right to negotiate for pension cuts.” PBS’s “Pension Peril” correspondent noted that the legislator’s coalition is “hoping to get the initiative onto the ballot” so that cities can unilaterally cut public employee pensions. What the PBS “Pension Peril” series omitted is the fact that the “Pension Peril” series’ own benefactor, John Arnold, is the major financier of the very California ballot initiative PBS was promoting. Arnold’s involvement in that ballot measure follows his earlier funding of pension-cutting advocacy in California, which PBS also did not mention.

How Much Would It Cost to Restore California’s Public Higher Ed? (December, 2013 update)

Raising revenue has become such a taboo subject in California politics, but restoring quality public higher education in California can be done. For the median California tax payer, restoring the entire system while rolling back student fees to what they were a decade ago would cost $50 next April 15. Read “Financial Options for Restoring Quality and Access to Public Higher Education in California: 2013-14” at the Keep California’s Promise website.

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