Academic Senate Rejects New Pension Tier

Representatives of UC faculty on all campuses delivered a strongly worded rejection of the proposed 2016 pension tier. Reports from the campuses were extensive and overwhelmingly negative (link to PDF).

Berkeley faculty called the proposal “imprudent and potentially fiscally irresponsible.” Davis faculty said, “It is a myth that UCRP is too generous,” and went on to detail a long list of likely negative outcomes from the new tier. Irvine faculty noted “the level of disappointment and depth of passion expressed from all quarters about the negative impact that the imposition of the PEPRA cap has on the future of the UC.” And UCLA Senate leaders, among other comments, noted that the proposal will likely harm efforts to diversify the faculty:

Once in place, this proposal will create a two-tier caste system with different compensation structures among faculty in the same departments and schools. The proposed plan will be unfair to diverse faculty as women and underrepresented groups are more likely to be hired in the future. Overall, the proposed plan will undermine the continuing efforts of the university to diversify the faculty.

Based on these responses, the Assembly of the Academic Senate unanimously (with one abstention) passed a motion rejecting the new tier. Read the text of the motion on Dan Mitchtell’s FA blog.

Faculty Voice Opposition to Pension Proposal

On Friday, the UCLA Academic Senate hosted an informational meeting that explained in clear terms that this is a bad, bad plan for faculty. What to do about it was less clear cut.

Shane White gave a deeply detailed account of financial aspects of the plan (Slides here: Pension Presentation by Shane White). Among the things we learned:

Last year’s budget deal introduced the “PEPRA cap” to UC retirement benefits. This is not a limit on retirement pay-outs, but a cap on the earnings that are used to calculate retirement pay-outs. So any new hire after July 1, 2016 who might expect to earn more than $117,000 annually (indexed to inflation) can plan on a reduced retirement income compared to those of us currently working at the UC.
The new tier will include a supplemental Defined Contribution (DC) plan which is not likely to earn as much as the current Defined Benefit plan.
The Gov. and UC Pres. Napolitano probably assumed adding a DC option would generate financial savings for the university. It doesn’t…
But it will substantially cut overall compensation for future faculty. How much less? See the charts starting at page 17 of White’s presentation.
The plan does nothing for the health of the current pension tiers, which are on a path to financial stability following an unwise, and lengthy pension “holiday.”

Following White’s sobering wall-of-data presentation, Megan Sweeney (Chair, Faculty Welfare) suggested the various ways “shared governance” is not in effect with this proposal. The Senate is expected to reply within a month to a proposal so complex it came with its own “how to read me” guide. Even so, key details of the plan were not available to the Senate as of Friday (1/29), meaning the Senate has less than 2 weeks to evaluate the full details of the proposal.

A strategic glimmer of hope lies in the fact that the proposed new tier does not seem to meet President Napolitano’s original charge to the pension Task Force. In particular the charge to devise a plan that would keep total compensation competitive with peer institutions. In Sweeney’s words, “The math does not add up.” As a result, we are likely to introduce inequities between new hires and currently-employed faculty, Sweeney worried. The complexity of comparing total compensation across pension tiers will be a nightmare for departmental academic personnel committees. The potential is real that faculty interests will splinter across benefit tiers, undermining the overall health of the university.

If you want to get an opinion in to the Senate, do it now. For those of you who don’t want to wait for the Senate response, consider signing the UC employee petition against the new pension tier (http://www.protectmypension.org/).

Pension Changes Proposed: lower benefits, little savings, weaker UCRS

The University of California will soon have a third pension tier if the Regents approve a plan put forth by the Retirement Options Task Force on Friday. UC President Janet Napolitano charged the Task Force, which included management and Academic Senate representatives, with finding a way to implement her agreement with Gov. Brown to set a cap on pension benefits in exchange for state funds to support the pension system.

Over the weekend, as faculty activists read the task force report and a second report produced by Senate leaders (Guide to reviewing the recommendations of the Retirement Options Task Force) it has become clear that the proposed options will significantly decrease pension benefits for new hires, will not save very much money, and may weaken the viability of existing pension tiers in the UC Retirement System (UCRS).

To get up to speed on this issue, read the following posts:

Dan Mitchell, The Default Option is Not in Our Stars but in the Plan
Michael Meranze, Pensions, Politics, and the Failures of Leadership

The proposed new pension tier would offer new hires after July 1, 2016 two options, so currently faculty are not directly impacted. Plan A is a defined benefit (DB) plan like the existing tiers but with contributions based on income under $117,000. Income over the cap will count toward a supplemental defined contribution (DC) plan. Plan B does away with the traditional pension arrangement and offers a DC plan only. Employees choosing Plan B could be convert into the Plan A system after 5 years.

According to independent faculty analysis, both plans represent a significant cut in benefits for new hires, save relatively little money for the UC budget, and do little to address the underfunded pension liability. Despite the sacrifice by UC employees, the State of California will not commit to paying its share of pension costs. There are many more financial details, wherein resides the devil as they say. The upshot for current faculty is that the financial arrangements of the new plans pose a significant risk to the financial health of the retirement benefits of currently employed faculty, according to those who have carefully read the proposal.

The UC Office of the President (UCOP) has generously given faculty leaders until February 15 to respond to the complex recommendations, and the Senate in turn has asked for faculty comment by February 5. Under these circumstances, the Academic Senate should reject the plan or at least demand more time for review.

UC employee representatives, including the Faculty Associations, have an online petition calling on the Regents to reject the proposals. Please consider adding your name!

Sign the Petition: http://www.protectmypension.org/

PBS’ Hot Potato May Not Be on California Stations

As far as yours truly can tell, the major PBS affiliates in California have so far taken a pass on the hot potato program described below. That decision could have been because the threatened pension initiative that would have swept in UC was originally aimed at the November 2014 ballot. With it apparently off the ballot for now (see earlier posts), some stations might air the program. On verra.

The Wolf of Sesame Street: Revealing the secret corruption inside PBS’s news division

On December 18th, the Public Broadcasting Service’s flagship station WNET issued a press release announcing the launch of a new two-year news series entitled “The Pension Peril.” The series, promoting cuts to public employee pensions, is airing on hundreds of PBS outlets all over the nation. It has been presented as objective news on major PBS programs including the PBS News Hour.

However, neither the WNET press release nor the broadcasted segments explicitly disclosed who is financing the series. Pando has exclusively confirmed that “The Pension Peril” is secretly funded by former Enron trader John Arnold, a billionaire political powerbroker who is actively trying to shape the very pension policy that the series claims to be dispassionately covering…

According to newly posted disclosures about its 2013 grantmaking, the Laura and John Arnold Foundation responded to PBS’s tailored proposal by donating a whopping $3.5 million to WNET, the PBS flagship station that is coordinating the “Pension Peril” series for distribution across the country. The $3.5 million, which is earmarked for “educat(ing) the public about public employees’ retirement benefits,” is one of the foundation’s largest single disclosed expenditures. WNET spokesperson Kellie Specter confirmed to Pando that the huge sum makes Arnold the “anchor/lead funder of the initiative.” A single note buried on PBS’s website – but not repeated in such explicit terms on PBS airwaves – confirms that the money is directly financing the “Pension Peril” series.

With PBS’s “Pension Peril” series echoing many of the same pension-cutting themes that the Arnold Foundation is promoting in the legislative arena, and with the series not explicitly disclosing the Arnold financing to PBS viewers, the foundation’s spokesperson says her organization is happy with the segments airing on stations throughout the country. However, she says the foundation reserves “the ability to stop funding” the series at any time “in the event of extraordinary circumstances.” …

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

Well, maybe not exactly like you!

Tradition!

The Legislative Analyst’s Office (LAO) has issued a report on UC and CSU funding. LAO is usually viewed as a neutral agency. But it is a component of the legislature. So it tends to favor approaches that add to legislative control as opposed to, say, gubernatorial control. This report is no exception.

LAO seems to want to return to what it terms the “traditional” approach to funding, but with bells and whistles added to monitor legislative goals. The traditional approach seems to be one focused on undergraduate enrollment. But in fact the tradition – such as it is – has been to forget about tradition and cut the budget during state budget crises, in the knowledge that UC and CSU can raise tuition. Indeed, as the chart above indicates, these traditional deviations from tradition dominate tuition decisions.

The LAO is uncomfortable with the habit of the governor of just proposing dollar increases not linked to enrollment and then extracting some promises from the university to do this or that, e.g., to spend $10 million on online education.

It might be noted that since LAO chose to lump UC and CSU together, it might have discussed a sore point namely the fact that CSU, as a part of CalPERS, gets its pension costs taken care of by the state whereas the state likes to stand aloof from the UC pension and its costs.

You can read the report at http://lao.ca.gov/reports/2014/education/higher-ed-budgetary-practices/budgetary-practices-021114.pdf

In any case, there is much nostalgia for tradition, albeit with some uncertainty as to what that is. Sounds familiar!
[youtube http://www.youtube.com/watch?v=gRdfX7ut8gw?feature=player_detailpage]

Anti-Pension Group Opens the Door to ID Fraud

That’s a harsh headline. But it applies to any group that publishes info on the web – because it is technically legal to obtain and publish it – that identifies incomes of individuals. And the same harsh headline applies to govt. salary data, not just pensions. It applies whether there is a political objective, as in the pension case, or just a way to get eyeballs to a commercial website. While there may be a case for such disclosures for top executives and elected officials, wholesale publication deserves harsh headlines. For details on the latest such development, see:

http://www.sacbee.com/2014/02/04/6125543/government-reform-group-launches.htm l

And, yes, UC is part of the database at http://transparentcalifornia.com/. The only good thing to say is that the database search engine doesn’t work well.

Pension Initiative Seems to Be Out of Gas (for Now)

Earlier posts noted a pension initiative drive – fronted by San Jose Mayor Chris Reed – that would have swept in UC. For now, the effort seems to have stalled. The proponents have decided to litigate the title and summary by the attorney general of the initiative. Effectively, that will take enough time so that they will not be able to gather the signatures needed to get the initiative on the November 2014 ballot. The decision to litigate may just be a polite way to bow out for now. See:
http://www.sacbee.com/2014/01/30/6116016/public-pension-measure-likely.html

Of course, if your car stalls for whatever reason, you are in trouble:
[youtube http://www.youtube.com/watch?v=T8yKa-c-1nI?feature=player_detailpage]

Issue Heating Up

We noted in yesterday’s posting (in the update portion) on the Regents public comment session that there were spokespeople complaining about anti-Israel activities on UC campuses including course credit on one campus, pushes for divestment, etc. Earlier postings noted statements by the UC prez and several chancellors (including Block) opposing an academic boycott of Israel by several academic societies. Today, the LA Times reports:

A group of lawmakers has formed the California Legislative Jewish Caucus to weigh in on issues of priority to members, including immigration, civil rights and Israel, according to its chairman, state Sen. Marty Block (D-San Diego)… So far, the new caucus has nine full members, including Senate President Pro Tem Darrell Steinberg (D-Sacramento)…

Among the issues the group will address: In the last two years, some University of California student organizations and governments have approved resolutions urging the U.C. Board of Regents to divest from companies linked to the Israeli military. Block said there was also concern about incidents of anti-Semitism on California university campuses and cases in which professors have taught anti-Israel lessons…

Full story at http://www.latimes.com/local/political/la-me-pc-lawmakers-form-new-california-legislative-jewish-caucus-20140122,0,7883863.story

We have also noted on this blog the progress being made in getting the state to assume responsibility for the UC pension. [Indeed, the UCLA Faculty Assn. made the first break-through with the Legislative Analyst’s Office on that issue.] The Regents also noted the progress so far and also the need for UC to be treated the same as CSU regarding pension funding. (CSU is part of CalPERS for which the state assumes liability.) Thus, calls for political use of pension and other UC funds (including continued calls on the Regents to divest from fossil fuels) could end up being costly for UC by undermining that progress. At present, UC gets about the same funding as CSU, but UC has to make pension contributions out of its state funding while CSU does not. As time goes on, and pension contributions have to be ramped up, this difference – if it persists – will be a source of an ongoing budgetary squeeze of UC and upward pressure on tuition.

Thus far, no one seems to have noted the interconnection between these various issues. So you read it here first.

Is there a Changing State Attitude Regarding the UC Pension? Reading Between the Lines

As blog readers will know, UC has had difficulties in getting the state to recognize that its pension liabilities were ultimately those of the state, just as CalPERS and CalSTRS liabilities are liabilities of the state. Thanks to the two-decade hiatus of contributions, the state seemed to forget about UC’s pension. However, there is beginning to be recognition that although you can say the pension is a liability of the Regents, in the end the Regents have no sources other than the state and tuition to deal with it.

We noted recently that in his budget document describing his proposal for 2014-15, the governor listed the UC pension and retiree health obligations along with those of other state plans. The Legislative Analyst’s Office (LAO), which at one time was adamant about the liability not belonging to the state, has not been repeating that position of late. Indeed, the LAO has just released its summary of the governor’s budget plan. It notes that the governor is trying to move to what can be seen as a block grant approach to UC (and CSU) funding, rather than one based on enrollments or particular programs. LAO complains that such an approach reduces control by the legislature. In citing examples of an alternative approach, the LAO says [page 30]:

For example, the state could allocate new funding for specific purposes such as a COLA, maintenance projects, or pension obligations.

You have to read between the lines to take this as a shift in attitude towards the UC pension. But LAO could have picked other examples.

The LAO document is at: http://lao.ca.gov/reports/2014/budget/overview/budget-overview-2014.pdf

Neutral

Proponents of the proposed pension/retiree health care initiative (that would cover UC) were afraid the attorney general would come up with a nasty title and summary. It doesn’t seem to have happened, however. Other than the references to teachers, nurses, and peace officers (the public’s favorite public employees), it is pretty neutral. To the extent there is mention of costs, the references come from the earlier Legislative Analyst’s Office (LAO) report. Below is the title and summary:

January 6, 2014

Initiative 13-0043

The Attorney General of California has prepared the following title and summary of the chief purpose and points of the proposed measure:

PUBLIC EMPLOYEES. PENSION AND RETIREE HEALTHCARE BENEFITS. INITIATIVE CONSTITUTIONAL AMENDMENT.

Eliminates constitutional protections for vested pension and retiree healthcare benefits for current public employees, including teachers, nurses, and peace officers, for future work performed. Permits government employers to reduce employee benefits and increase employee contributions for future work if retirement plans are substantially underfunded or government employer declares fiscal emergency. Requires government employers whose pension or retiree healthcare plans are less than 80 percent funded to prepare a stabilization report specifying non-binding actions designed to achieve 100 percent funding within 15 years.

Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local government: Potential net reduction of hundreds of millions to billions of dollars per year in state and local government costs. Net savings—emerging over time—would depend on how much governments reduce retirement benefits and increase salary and other benefits. Increased annual costs—potentially in the hundreds of millions to billions of dollars—over the next two decades for those state and local governments choosing to increase contributions for unfunded liabilities, more than offset by retirement cost savings in future decades. Increased annual costs to state and local governments to develop retirement system funding reports and to modify procedures and information technology. Costs could exceed tens of millions of dollars initially, but would decline in future years.

Source: https://oag.ca.gov/system/files/initiatives/pdfs/Title%20and%20Summary%20%2813-0043%29.pdf

Does this official summary mean that the governor is going to be neutral? Who knows? One member of the anti-pension crowd managed to slam the governor’s high-speed train today in the NY Times – which might not endear him to Brown:

High-Speed Train in California Is Caught in a Political Storm

By Adam Nagourney

…Joe Nation, a professor of public policy at Stanford University and a critic of the plan, said Mr. Brown would have to grapple with this decline in support, which he argued reflected voters’ growing doubts about the basic competence of government. “Obamacare has leached over into this,” Mr. Nation said. “You have people saying, ‘The federal government that can’t build a website — how can we expect them to build a multibillion-dollar train?’ ”…

Full article at http://www.nytimes.com/2014/01/07/us/high-speed-train-in-california-is-caught-in-a-political-storm.html

As we continue to note, UC’s interest is basically not to be included. So far, as per above, that hasn’t happened.

UPDATE: Mayor Reed of San Jose – the front man for the initiative – isn’t happy with the wording. The union group opposing the initiative isn’t completely happy, either. See http://www.sacbee.com/2014/01/06/6051649/california-attorney-general-clears.html