Several UC Faculty Associations sent the following letter to UC Regent’s Chair Russell Gould.
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Dec. 1, 2009
Russell Gould, Chair
UC Regents
Office of the Secretary and Chief of Staff
1111 Franklin Street, 12th floor
Oakland, CA 94607
Dear Chair Gould and University of California Regents:
As Chair of the Faculty Association at UCLA, an independent, dues-supported, voluntary organization of Academic Senate members on this campus since 1973, I am writing to you about resuming contributions to UCRP at the level called for by the new UCRP Funding Policy, approved by the Regents in September 2008 to become effective in Plan Year 2009-10. Joining us in this request are the Davis Faculty Association and the Santa Barbara Faculty Association.
We are attaching two documents, one longer, one shorter: the UCLA FA newsletter uses market numbers instead of averaged or smoothed numbers to illustrate more clearly the current status of UCRP and the need to increase the level of contributions quickly to the level called for by the UCRP Funding Policy; and a 3 point summary.
Using the market numbers as of September 30, 2009,
· The market funding ratio of UCRP is 78%.
· The unfunded liability of $10.19 billion dollars requires a contribution of $1.15 billion annually to amortize it over 15 years.
· With the annual cost of benefits (the Normal Cost) approximately $1.34 billion, annual contributions of about $2.49 billion are required to restore UCRP to full funding in 15 years.
The Regents have approved contributions of 4% for the University and 2% for employees as of April 15, 2010 and to continue through academic year 2010-11 with slight increases over the next years. That is not enough. The better course of action is to begin contributions on April 15, 2010 at 4% for the University and 2% for the employee; raise the level of contributions on July 1, 2010 to the Normal Cost, 17%; and increase the contributions to the full cost required by the UCRP Funding Policy, on July 1, 2011.
Delay in contributing what the Plan needs is costly because of the reimbursement policy: the Regents make the employer contribution for all covered employees with the expectation that the State, the federal govt., UC Medical Centers, and all other independent enterprises will reimburse them for UCRP contributions in proportion to their portion of the total covered compensation. That means that if the Regents do not put enough into UCRP to cover the state-supported employees, neither do the non-state agencies, who cover roughly twice the number of employees.
The LAO is saying that the State has no responsibility for the UC pension, which shifts the burden, at least temporarily, to the Regents to take a big chunk of the operating budget or issue an IOU or a pension bond of some sort to fund UCRP. In any case, the amount owed, borrowed or raised will draw from non-state agencies more than double that amount. Therefore, when contributions resume, much of the money would not come from the state. And every state dollar foregone as an input costs another $2 in foregone non-state contributions, but UCRP is still liable for all three dollars. Furthermore, a not insignificant number of faculty members have growing doubts that UCRP will pay the entirety of the promised benefits, in spite of the legal obligations. Eventually, these doubts will induce some separations of highly mobile faculty members, those whom we most want to retain.
Thank you for your attention to this matter. Please visit the UCLA FA website at http://www.uclafaculty.org/ and the Davis Faculty Association website at http://ucdfa.org/
Dwight Read
Chair, Faculty Association at UCLA
Ian Kennedy
Chair, Davis Faculty Association
Sarah Cline
Chair, Santa Barbara Faculty Association