Outlawing Holidays

There is a bill pending in the legislature (passed the Assembly; now in the Senate) – applying to CalPERS, not UC – that would effectively ban pension “contribution holidays.” As is well known, UC had the mother of all contribution holidays to its pension fund, one lasting two decades. Had that holiday not occurred, we would not have the underfunding problem we have today.

Of course, given the circumstances under which the UC pension holiday developed – overfunding in the face of a state budget crisis at the time – it could be argued that the holiday was unavoidable. But as this blog and numerous other sources have since pointed out, contribution holidays are particularly risky for UC because contributions foregone come largely from non-state sources that are difficult to recoup retroactively.

The bill – as noted above – has no direct effect on UC but its passage could nonetheless be helpful to the university. Passage would highlight the point that the state is still on holiday when it comes to the UC pension. The ramping up of UC pension funding that should be coming from the state is instead coming out of Regents general money. The state refuses to pay or even to deposit an IOU into the pension fund. And non-state sources are having to make up for contributions they didn’t make in the past.

The bill can be found at:

http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_1301-1350/ab_1320_cfa_20110825_155431_sen_comm.html