Regent Gould Talks About Pensions, Tuition, Concerns About Creating New Programs, and Anderson Self-Sufficiency

UC Regents Chair Gould Talks Funds, Pension Plan

Jordan Bach-Lombardo, November 30, 2010, Daily Californian

http://www.dailycal.org/article/111368/uc_regents_chair_gould_talks_funds_pension_plan

The Daily Californian interviewed UC Board of Regents Chair Russell Gould – who previously served as director of the California Department of Finance from 1993 to 1996 – on Nov. 23 about the University of California’s pension fund, which is facing significant changes due to its multibillion dollar funding deficit.

Since the state halted contributions to the pension fund in 1990, the fund’s liabilities grew as its assets shrank, resulting in a $14 billion deficit as of August 2010. The regents voted in September to increase employer and employee contributions to the fund and will vote in December on a new model for the pension program, intended to return it to fully funded status.

The Daily Californian: The main focus of what I want to ask you about is the pensions. First, you came onto the board in 2005, so I’m wondering in terms of the history of it, in talking to administration members, they said they had started identifying this as a big issue in ’06 -’07, and I spoke to Regent Blum at the most recent meeting and he said he had brought it up in ’07, could you talk about the process of getting the ball rolling in terms of putting contributions back in and why didn’t it start back in ’07 when it was brought up initially?

Russell Gould: Well I think there have been a lot of us who have been pushing for getting the contributions back into the system. When we first raised this issue we were more than 100 percent funded, so with the other pressing needs of the system and with some concerns expressed by some of the staff and some of the participants we just didn’t have the movement or the ability to move forward right then. I think over time we had to educate everyone as to the importance of making contributions to the system in order to sustain it. And so I think that it took a while to get everyone up to speed, and we’re satisfied now that people understand the importance of contributing to the system and making it viable. And so we’ve made real progress, but there was a lot of work needed to be done to get there.

DC: In terms of it happening now, do you think it has happened fast enough? Because the situation seems bleak from where I view it.

RG: Yeah, well we’re making, I think, good progress. Everyone wishes we were moving faster because we’re not funding the entire unfunded liability and the normal cost. But we also have limited dollars and we’re getting no support from the state, unlike Cal State University or retirements for community colleges, we get zero support from the state. Now, we’re fighting for that and believe we should get support from the state, which would improve our ability to accelerate our contributions, a much more achievable goal. But right now we’re basically cutting into programs and cutting into other priorities at the university in order to fund the retirement system.

DC: And this state issue was one reason I was particularly interested in speaking to you because you have worked on both sides of this coin. So how do you see that with that perspective, because right now you’re on the university side asking for money from the state where the state is saying they don’t have money.

RG: I clearly understand the challenge that Governor-Elect Brown has coming in, a $25 billion budget shortfall is huge. At the same time, I think every governor has to make his priorities and decide where his focus is going to be and we certainly believe that he is going to understand the importance of the University of California for the future of California, because I can’t envision a healthy California economy without a healthy UC system. We just drive so much innovation and new jobs, just an absolute essential ingredient. So he has to make it a priority and he has to make a commitment that can be relied upon for UC to achieve what it can for California.

DC: And in terms of that commitment being relied upon, in talking to a lot of administration officials I’ve heard them reference the “state’s obligation,” but in terms of actual hard and fast legal compact, that doesn’t really exist the same way it does with CalSTRS and CalPERS, so do you still view the state as having an obligation to fund the UC pension system?

RG: I do. It’s unfortunate that there was a holiday where no one paid in for 19 years, but I think that in the history of the UC the state did contribute for what the retirement costs were going to be, and I think to be treated fairly and comparably to the other systems, that payments need to be made. So, I think, putting the uncertainties of legal issues aside, there’s no question about the validity of state support for UC’s pension system, and I believe that the legislature and the governor will agree with that.

DC: Have you spoken with Governor-elect Brown at all about this?

RG: I have not. It’s awfully early and I’m sure we’ll get the opportunity to discuss these things, he’s very experienced and I’m sure will understand the issues very quickly. I’m certain that he will understand the role that UC can play in California’s future and I’m looking forward to working with him.

DC: In terms of going forward and money, President Yudof at the last Regents’ meeting said that the pension woes contributed greatly to the need for the fee increases, so I’m wondering, especially with the absence next year of the one-time federal funds and the continued bleak state budget outlook, is the problem of the pension system going to contribute to more fee increases?

RG: Well, I think everyone hopes that we don’t have fee increases. I just don’t know though, this is unprecedented waters with a $25 billion budget gap on about an $80 billion base of revenues, so this is really tough sledding, and how gov-elect brown is going to deal with this and the legislature, there’s no clear path, so all of us are going to have to work together on a solution. I certainly hope we don’t have to ask for any more fees, we’ll just have to see how the legislature and the governor, what plans they present relative to our funding, and then make a determination.
DC: I was wondering about a long-term fee schedule. It seems from hearing you talk about it that you support it, but it wasn’t in the Commission on the Future final recs. I’m wondering why that happened and whether you think it’s going to come up again? RG: I think when the commission looked at that question while everyone liked the idea of a long-term fee policy you can’t negotiate with yourself. So for us to say we want a long-term fee policy it doesn’t do anything unless we have a long-term funding commitment from the state. And with a long-term funding commitment from the state, we could fashion a fee structure that was predictable and modest and one that I think people would like. This kind of bouncing around from year to year based on what state funding we receive or the kind of economic crisis and state budget crisis we face is a terrible way to set student fees and to set funding for UC.

DC: My last question is if you think expansion – like the UCR med school and the law schools that other campuses have asked for – if they’re really a feasible or responsible way to spend funds right now?

RG: Well I think you have to look at whether they can be supported within the revenue stream, either through the fees, through donations, through state support where they make a specific appropriation to support a medical school, so all these things will come into play but you raise a very good question. As we move forward we’re going to have to assess every one of our commitments and we’re even going to have to reassess existing programs to determine what’s sustainable and certainly building out new programs raises serious questions without state support.

DC: And following off of that, if you’re looking for alternative sources of revenue, what do you think of the Anderson School of Business’s possible move away from state funding?

RG: You know I haven’t seen a final plan on that, I know it has been talked about, I haven’t seen a final plan, we’ll examine it once they submit it. I think it has to come to the campus first, and we haven’t seen it. We’ll just have to see what the game plan is.