The Degradation of Faculty Welfare and Compensation

Colleen Lye and James Vernon (UC Berkeley Faculty Association)

UC faculty need to wake up to the systematic degradation of their pay and benefits. In 2009, when the salary furlough temporarily cut faculty salaries between 6 and 10%, faculty were outraged. Yet since then our compensation has been hit by a more serious, and seemingly permanent, double blow.

First, despite modest salary rises of 3% and 2% in October 2011 and July 2013, faculty take-home pay has been effectively cut as employee contributions to pension and healthcare have escalated. Faculty now pay more for retirement and healthcare programs that offer less. Secondly, faculty are no longer treated equally. Different groups of faculty are increasingly pitted against each other as – depending on our age or where we live or when we were hired – we receive different levels of retirement, health and other benefits.

Faculty salaries were already uncompetitive. Even with the recently-announced 3% raise, they remain 10-15% below UC’s own comparator institutions (http://accountability.universityofcalifornia.edu/documents/accountabilityreport13.pdf) and a further 10% behind those of the private 4 — Stanford, Yale, Harvard and MIT –(http://accountability.universityofcalifornia.edu/documents/accountabilityreport13.pdf).

Back in 2009 strong benefits, in the form of pension and health care provisions, once allowed UC to excuse its uncompetitive salaries by reminding us of what it called our ‘total compensation package’ (http://compensation.universityofcalifornia.edu/total_rem_report_nov2009.pdf).

This is no longer true. Now, as continued austerity management grips University administrators, and campaigns are launched to divest public sector workers of their pensions and retiree healthcare, faculty are being stripped of these deferred (and other) benefits.

One reason faculty are largely unaware of the degradation of their benefits is that changes have been made incrementally and target different constituencies. Gone are the days when all faculty and retirees were treated equally and received the same benefits. And yet for all faculty these changes mean we are paying more and getting less.

Firstly, faculty are divided by a new two-tier pension system. The old pension, the so-called 1976 tier, has seen a steady escalation of employee contributions from 0% in 2009 to 8% in 2014. These raises alone mean that faculty take-home pay has deteriorated by as much as 3%.

The new pension introduced for those hired since 2013 has begun with a 7% employee contribution. Despite paying more new faculty get less. The minimum retirement age has been raised from 50 to 55, the retirement age for maximum pension has been raised from 60 to 65, and the lump sum cash-out and subsidized survivor benefits have been eliminated.

Secondly, although there is as yet no legal evidence that retiree health benefits are less ‘vested’ (and thus unalterable except by legislation) than pensions, they have been progressively stripped. And here again different groups of faculty are treated differently.

Since 2010 UC’s contribution to retiree health benefits has fallen from 100% to 70%, but this pales in comparison to the changes introduced in 2013 which have affected 50% of faculty and staff. All new hires, together with those with fewer than 5 years of service, or those whose age plus service is fewer than 50 years, will now receive nothing from UC towards their healthcare if they retire before 55. Meanwhile contributions for those retiring after 56 will be on a sliding scale (depending on length of service) beginning at just 5%!

Worse still, in what is being considered a pilot program by the Regents, retirees no longer living in California have been removed from UC’s insurance plans. Instead they will be given a lump sum of $3,000 per annum to help defray costs not covered by Medicare. This represents a significant shift of the risk and the responsibility for healthcare from UC on to retirees. If it generates the projected $700 million savings of total liability as reported by UCOP’s CFO to the regents this year, it is likely soon to be coming to a group of retirees near you.

Thirdly, in the fall, the majority of faculty and staff were forced to change their healthcare plan in little over two months. We were promised that these had been negotiated to secure great savings for UC and lower insurance rates for all UC employees. It quickly became clear that those lower monthly rates masked a huge turnover in eligible providers, geographically uneven coverage of service (across as well as between campuses), and considerably higher deductibles. It is too soon to calculate how much more faculty are paying for their healthcare, but once again we are certainly paying more for less.

It is time for faculty to wise up to this systematic and universal downgrading of our salaries and benefits that also sets different groups of us on different tracks. The contrast with the new contracts recently signed by CNA, UPTE and ACSFME is worth noting. In addition to significantly improved salaries, these unions have been able to maintain a single-tier pension (for an additional 1% contribution) and retain retiree health benefits.

So how will faculty respond? With a sigh of resignation? A determination to get an outside offer that would increase one’s personal compensation package? Or will we seek better mechanisms that would permit faculty to negotiate all elements of our compensation rather than have it decreed, and diminished, from on high?

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

Follow Me, Says Crane

We have previously reported on a proposed ballot initiative on public pensions in California that, as written, would cover UC. There appears to be money behind the campaign for this initiative. Another indication of such money comes in the form of a letter by former UC Regent David Crane on CalSTRS. Crane was appointed by Gov. Schwarzenegger but the appointment was not endorsed by the state senate and thus ended.

In any event, the letter from Crane addressed to Gov. Brown – which his website says in today’s Sacramento Bee – seems to be part of the larger campaign for the initiative. It was circulated on the website of (and by emails from) a group associated with Crane – Govern for California: [excerpt]

…Governor, it’s long past time to act. By not addressing CalSTRS, California has already become the largest “deadbeat” state government, a term coined by The New Yorker to characterize governments not even paying minimally required pension contributions. Every day of additional delay adds millions of dollars to the next generation’s burden. If you don’t act, you are effectively defunding their classrooms, cutting their public services, and raising their taxes…

You can find the full letter at:
http://hosted.verticalresponse.com/990407/ff4a77211d/1660549029/358ab184e1/
or
http://www.governforcalifornia.org/an-open-letter-to-governor-jerry-brown/

Oddly, a search in today’s Bee (under Crane, CalSTRS, opinion, viewpoint, letters to the editor, etc.) did not find the letter. It did find other earlier Crane-related items. Among them was a recent article indicating Crane was involving himself in state legislative contests related to his pension interests. See:

http://www.sacbee.com/2014/01/03/6045328/pension-activists-back-democrat.html

As we have noted in past postings, the chief UC interest in this matter is to be excluded from the proposed initiative and to leave funding of the UC pension to the university and (current) Regents.

UPDATE: Crane in a later post on Fox and Hounds no longer claims the letter appeared in the Bee. See http://www.foxandhoundsdaily.com/2014/01/political-leaders-must-focus-calstrs-funding-crisis/

The Rewards of Good Behavior (and the penalties for the reverse)

With a possible pension initiative coming to the ballot, it would be nice if public pension plans stayed on Good Behavior. Alas:

Federal investigators are looking into allegations that CalPERS violated insider trading laws this year when it purchased $26.6 million in restricted stock and then decided it didn’t need to reverse the trades when they were discovered. Two sources with knowledge of the Securities and Exchange Commission’s inquiry say on condition of anonymity that it involves stock purchases that the nation’s largest public pension fund made in March, including nearly $24 million in global financial firm JPMorgan Chase & Co. and almost $2.7 million in Access Midstream Partners LP, an Oklahoma-based energy company.

According to an internal memo and a fired employee’s challenge of her termination by CalPERS, some staff at the fund contend that the purchases – and a subsequent decision not to rescind them – calls their managers’ qualifications and judgment into question.

“We wanted to reverse (the trades),” said Ted Nishio, a retiree who worked in CalPERS’ Division of Enterprise Compliance who said he was fired after he told his boss that the fund should quickly act. “But the higher ups said, ‘Let it be.’ “…

Full story from the Sacramento Bee at http://www.sacbee.com/2013/12/28/6031076/security-and-exchange-commission.html

Were those higher ups, by any chance, named John, Paul, George, and Ringo?
[youtube http://www.youtube.com/watch?v=Y4zaofnVhps?feature=player_detailpage]

Read more here: http://www.sacbee.com/2013/12/28/6031076/security-and-exchange-commission.html#storylink=cpy