Faculty associations address UCOP

The UCLA Faculty Association is part of a UC-wide coalition of faculty associations known as CUCFA–the Coalition of UC Faculty Associations. Through CUCFA, UC faculty are able to address the UC Office of the President on issues of importance to faculty, their students, and staff. Below is a round-up of recent communication between CUCFA and UCOP.

UC Union Coalition on Health Insurance Costs

CUCFA signed on to a joint letter from unions representing employees across the UC system expressing concern with large increases in the cost of health insurance. The unions requested a meeting to “address what appears to be a conflict of interest in how it negotiated the 2024 rate increases with the providers in its own system. Given that two of the major plans available to UC employees are based on the UC hospital system and professional medical groups, UCOP should have invited a third party to participate in the negotiations over the plan cost increases.”

Opposing Proposed Website Policy

Faculty addressed the UC Regents proposed new policy limiting statements on departmental websites: “At a time when free speech and academic freedom are under threat on many campuses, the proposed policy is recklessly ambiguous. The Regents are still debating whether the new policy will apply to all websites or solely to the landing pages of department websites, and that is a huge policy difference. In failing to adequately define what constitutes a political statement, it runs the risk of serious overreach and abuse. This is all the more alarming as the policy does not specify who is responsible for its enforcement: which university office or position will be responsible for policing the policy?”

Support for Math Standards in UC Admissions, Shared Governance

Addressing the Regents proposal to change math standards for admission, CUCFA wrote: “We are alarmed that the Regents have recently chosen to ignore the recommendations of the Academic Council and its systemwide Senate committees on a number of key issues. The centrality of faculty governance to the University of California is critical to maintaining its international reputation for excellence and recruiting the best scholars and teachers. It is especially concerning that the Regents have overruled their own faculty in educational matters–like admission standards, curricula questions, and academic freedom–over which faculty have greater expertise. While we consider harmful all the examples of the Regents’ interference in Senate faculty’s delegated authority and the principles of shared governance, here we are writing to address the most recent instance of the Regents substituting their wishes for the expertise of the faculty.”

Faculty Coalition at Work in Sacramento

As the budget battle grinds on in the state capital, the Council of University of California Faculty Associations (CUCFA) has been advocating on behalf of system faculty. In February, CUCFA weighed in on a proposal to alter UC governance. In a letter to legislators from Joe Kiskis (UC Davis), CUCFA noted

While some actions of the Regents and the UC administration generate criticism with which we concur, we do not believe that the UC governance structure itself is fundamentally flawed. The University’s long term goals of access, affordability, and excellence are well served by an independent, diverse Board of Regents that can represent the perspectives of the citizens of California, promote the beneficial, enduring values of the creation and dissemination of knowledge, and moderate the interaction of a public university with the political process.

The letter advocated a more open process for choosing Regents, the letter noted that a university under legislative control would be overly subject to short-term political pressures that would undermine the university’s mission.

On March 5th, about 150 faculty, staff, and students from across the system participated in a Reclaim California’s Higher Education lobby day at the capital. They visited more than 40 legislators and staff and held a rally outside the capital building.

A calendar of upcoming actions, meetings, and events is available on the Keep California’ Promise website.

The Great Gazbee

“Gazbee” is how you pronounce GASB, the acronym for the Government Accounting Standards Board. GASB determines accounting standards for public employers, including public pension plans. (It’s equivalent for the private sector is FASB – the Financial Accounting Standards Board which is pronounced – you guessed it – “fazbee.”) From calpensions.com today comes this item:

New public pension accounting rules scheduled to be issued next month, once expected by some to reveal massive hidden debt, now seem less likely to trigger a shake-up and are even getting applause from pension officials. Under the new rules, experts say, most California pension systems will make little if any use of a lower “risk-free” government bond-based earnings forecast, currently about 4 percent, that causes debt to soar. Pension systems can continue to use earnings forecasts critics say are too optimistic, now 7.5 percent for the three state funds, to offset or “discount” estimates of the cost of pensions promised current workers in the decades ahead.

But if the assets (employer-employee contributions and investment earnings) are projected to run out before all of the pension obligations are covered, the pension system must “crossover” to a lower bond-based forecast to calculate the remaining debt…

Full story at http://calpensions.com/2012/05/29/gasb-pension-rules-sticker-shock-less-likely/

So what does this mean and specifically what does it mean for the UC pension system? Defined-benefit pension systems take in employer and employee contributions and guarantee a future retirement benefit based on age, earnings history, and length of service. Their trustees, in the case of UC the Regents, are supposed to aim at 100% funding which means that current assets and the projected inflow of contributions and investment returns will cover future liabilities. To estimate the funding ratio, it is necessary to make a long-term forecast of what assets in the pension trust fund will earn. The higher the earnings assumption, the higher will be the estimated funding ratio.

“Estimated” is the key word. In fact, the earnings on the portfolio will be what they will be and the estimate by itself doesn’t change what the earnings will be. However, if the official estimate is that the ratio is below 100%, then the plan trustees are supposed to raise contributions sufficiently to bring the ratio back to 100% over some time period. Currently, the Regents officially assume a long-term earnings rate of 7.5% and project that those earnings plus a schedule of ramped up contributions will bring the UC pension funding ratio to 100% circa 2040.

Essentially, what the italicized excerpt means is that GASB rules allow the 7.5% assumed earnings rate to be used as the sole rate applied to the estimate of unfunded liability because under the Regents’ assumption, the plan will not run out of money and is projected to get to 100% eventually.

Again, it is important to stress that accounting estimates do not change what actual earnings will be. If 7.5% increasingly looks to be too high, at some point actuaries advising the Regents might suggest a lower rate. Were that to happen, contributions would have to be further ramped up to aim for an eventual 100% funding ratio. That is, the less the plan can count on earnings to meet its liabilities, the more it must rely on contributions.

But there are other points to stress, too. First, the plan will not run out of money and the Regents are obligated to pay pensions they have promised. So for old timers, you will get your pension. Second, and maybe most important (and emphasized from time to time on this blog), the pension issue is a young folks’ concern. It is not a young folks’ concern because younger folks won’t get promised benefits. It is a young folks concern because ultimately future pension contributions come out of the UC budget (state supported part of the budget and the larger part of the budget paid by hospital revenues, research grants, etc.) plus employee contributions.

The state has yet to step up to the plate – despite what you may have heard – and provide the funding for its share, as it once did. But the GASB rules – which at one time were feared as likely to undercut the 7.5% earnings assumption and create more pressure for hiked immediate pension contributions – effectively will spread the funding burden over a longer period into the future.

If you’re telling them about the UCLA hotel, could you let us in on the secret?

The Regents agenda is now posted and includes the proposed UCLA hotel/conference center. But no plan is attached to the agenda item. No plan has yet been received by the UCLA Faculty Association although a public documents request was filed by the Association and others some time back.

Below is the agenda of the Regents’ Committee on Grounds and Buildings which contains the so-far-secret plan. The full Regents’ agenda is also reproduced below.

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NOTICE OF MEETING

The Regents of the University of California

COMMITTEE ON GROUNDS AND BUILDINGS

Date: March 28, 2012

Time: 2:15 p.m.

Location: UCSF–Mission Bay Community Center

1675 Owens Street, San Francisco

Agenda – Open Session

Action Approval of the Minutes of the Meeting of January 18, 2012

GB1 Action Amendment of the Budget and Approval of External Financing and Standby Financing, Luskin Conference and Guest Center, Los Angeles Campus

GB2 Discussion University of California Capital Program: Monitoring Progress and Performance

Committee Membership: Regents Hallett, Makarechian (Chair), Newsom, Ruiz, Schilling, and Zettel; Ex officio members Brown, Gould, Lansing, and Yudof; Advisory members Anderson and Rubenstein; Staff Advisor Herbert

From http://www.universityofcalifornia.edu/regents/regmeet/mar12/gb.pdf

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The Committee on Grounds and Buildings then reports to the full Regents board (Committee of the Whole) on March 29: http://www.universityofcalifornia.edu/regents/regmeet/mar12/board.pdf

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Soon the secret plan will have to be revealed. Why not now?

The full Regents agenda is below:

Tuesday March 27

3:00 pm	Committee on Health Services (includes public comment)

Wednesday, March 28

8:30 am	Committee of the Whole (public comment)
9:30 am*	Committee on Finance (open session)
10:15 am*	Committee on Compliance and Audit (open session)
10:45am*	Committee on Oversight of the DOE Laboratories (open session)
11:00 am*	Committee on Governance (open session)
11:15am*	Committee on Compensation (closed session)
11:30am*	Committee on Compensation (Regents only session)
12:00	Lunch
1:00pm*	Committee on Governance (Regents only session)
1:05 pm*	Committee on Finance (Regents only session)
2:00 pm*	Board (Regents only session)
2:15 pm*	Committee on Grounds and Buildings (open session)
Thursday, March 29
8:30 am	Committee of the Whole (public comment)
8:50am*	Committee on Compensation (open session)
9:30am*	Committee on Educational Policy (open session)
10:00 am*	Committee on Finance (open session)
12:15 pm*	Board (open session)

*Times indicated and order of business subject to change

UC (and UCLA) Campus Climate Survey

After a series of racial incidents on various campuses (including UCLA), UCOP and the Regents hired a consultant, Susan Rankin of Penn State, to do a “campus climate survey.” She has done such survey work at other universities in different parts of the U.S. in recent years. This is an expensive endeavor. I have been told informally that the cost is something like half a million dollars. The survey instrument draft proposal is quite lengthy and there have been concerns about participation rates for faculty, staff, and students. Participation will be voluntary and anonymous. Each campus will have a survey.

Yesterday, at a session at the Faculty Center, Prof. Rankin first presented some information on her past survey work and then went on to discuss the upcoming UC survey. Below are links to the audio for the UC portion of the presentation. A complete video (not just audio) is or will be available for viewing at the media center. If you want the complete audio (not just the audio portion in the two links on the upcoming UC and UCLA study), go to the third link below.

Susan Rankin’s bio is at
http://www.rankin-consulting.com/staff

The audio is in two parts (video with still picture):
Part I:

Part II:

The full audio is available at:

Gov. Brown Says Pension Proposal Will Involve Constitutional Changes & a Vote of the People

At the Milken Institute State of the State conference today (attended by yours truly), Governor Brown was asked by Michael Milken about public pensions in California. (Cell phone photo of conference event at right.)

Brown indicated he was working on a proposal on pensions – but did not give a precise date when it would be unveiled. He did say that it would involve a constitutional amendment that would have to be approved by a vote of the people.

It was unclear what the coverage of the pension proposal would be. All state and local pensions in California? Just state-level pensions? Would it include UCRP? If so, would it override what the Regents did to modify the university’s pension system in December 2010?

What appears to be the case is that this proposal is still a work in progress. That means that UCOP and the Regents have a chance to weigh in on the proposal before it is completed.

Below is an audio of what Brown said. (Video with just a still picture.)

Update: State Treasurer Bill Lockyer comments at http://blogs.sacbee.com/the_state_worker/2011/10/bill-lockyer-says-pensions-must-be-fiscally-politically-sound.html He notes with regard to the legal obligation to pay earned benefits: “I’m also mindful that judges, too, have been promised their pensions.”

Audio of Regents Meeting on Budget, 3-16-11, For Your Listening Pleasure

The Regents meeting this morning dealt with budgetary issues. There were reports by three chancellors (from Santa Cruz, Irvine, and Berkeley) on the impact of the budget squeeze on their campuses. The Regents had various reactions to the situation. Plans were offered by Peter Taylor to generate more cash through portfolio management. He argued that even though somewhat more risk was entailed, the proposals were sufficiently conservative to insulate UC from a crisis.

There was discussion of a new plan under which UCOP would pass state funding down to the campus level so that campuses would operate more autonomously. The campuses would then pay a tax to support UCOP. It was said by President Yudof that quasi-mandates by the legislature could no longer be honored automatically, given the fund cutbacks from the state. Students urged the Regents to support the governor’s proposed tax extensions, assuming these make it to the ballot. There was also a brief reference to the anti-Asian YouTube issue at UCLA. (See the earlier post.)

The videos (actually audios with a still picture) below cover the morning session on the budget in nine parts. There was a continuation in the afternoon. Other obligations prevented yours truly from recording that session. I again raise the question of why the audio of Regents meetings is only streamed live and not archived online for future use.

Part 1:

Part 2:

Part 3:

Part 4:

Part 5:

Part 6:

Part 7:

Part 8:

Part 9 (end):

UPDATE: A news account of the meeting is at http://www.insidebayarea.com/oaklandtribune/localnews/ci_17626656

UC is on a Bridge to Nowhere: Other Public Universities are Taking Action

Inside Higher Ed has an interesting article today on various public universities that are working on establishing some type of new agreement with the powers-that-be in their states in the wake of budget cuts. Sadly, UC seems stuck in its reactive mode, a bridge to nowhere.

The legislature/governor cuts the UC budget. The Regents & Yudof responsively raise tuition and/or cut enrollment. They are then criticized for their actions by the legislature/governor.

This is a a bridge to nowhere, politically and budget-wise. We cannot get off the bridge by issuing glossy brochures and statements to the effect that UC is vital to long-run state economic growth. We can’t get off by pointing to the recycling of tuition hikes to insulate lower-income students.

The only chance for getting off is to sit down with the powers-that-be and work out a deal. There are no guarantees. But the current bridge-to-nowhere “strategy” is a clear failure.

Below is an excerpt from the article:

Thanks, But No Thanks

Jan. 17, 2011, Inside Higher Ed, Jack Stripling

When Richard W. Lariviere describes the funding cycle for the University of Oregon, he sounds like he’s talking about a crash diet. The university’s president suggests it’s simply unhealthy to subject an institution to the whimsy of state appropriations, which more often than not are insufficient to satiate Oregon. That said, Lariviere finds it remarkable that the university has done as well as it has with just 9 percent of its budget coming from state sources. “We’ve been on a bread and water diet for so long, we know how to build muscle mass on that diet,” he says.

But Lariviere doesn’t think the model as currently defined can work in the long run, so he’s joining an incremental movement in public higher education that’s predicated on the notion of asking the state for flat or even less funding over time in exchange for greater autonomy. While his plan carries unique features, the proposal at Oregon has shades of existing structures in Virginia, along with emerging proposals in Louisiana and within the University of California at Los Angeles’s business school.

It is a notable sign of the times: more college leaders are arguing that the traditional model of funding public higher education is dysfunctional, and advocates of a new way forward say they’ve reached this conclusion after frustrating years of legislative sessions that are typically defined by handwringing and disappointment. In his pitch to lawmakers, Lariviere says he’s often reduced to the same tired declaration: “We’re doing very important work for the future. We need more money to do it well. Please give us more money. “We’ve been doing that for 30 years, or at least I have been, and it really hasn’t pushed the envelope very far,” he says.

At the heart of Lariviere’s plan is a request that the state commit to its 2010 level of funding – about $65 million per year – for 30 years, using the funds to pay debt service on bonds worth approximately $800 million. The university would match the bonds with $800 million in private gifts to create a $1.6 billion “public/private” endowment, which would – along with the university’s current $435 million endowment and tuition revenues – sustain university operations within the first year, according to university officials’ estimates…

(The article goes on to describe similar efforts at other universities.)

Full article at http://www.insidehighered.com/news/2011/01/17/colleges_push_for_greater_autonomy_as_state_resources_fade

Two Unclear Issues in the Yudof Pension Proposal Clarified

Our previous post reproduced the letter from President Yudof explaining what he will be recommending to the Regents in mid-November regarding changes in the UC retirement system. (The Regents are expected to make their formal decision in December.) In one sense, the letter was no surprise since it recommended a lower-tier pension for new hires of the defined-benefit variety. Essentially, Yudof is opting for a version of what has been previous termed Option C, a defined-benefit plan that is NOT “integrated” with Social Security (as Options A and B were).

The letter, however, makes no mention of the proposal that incumbent employees would be given the option to switch future pension accruals to the new lower tier. I have been told that such an option is likely to be offered. However, because of the relatively high employee contribution envisioned for the lower tier, there would be little benefit for incumbent employees in making a switch.

The Yudof letter also refers to ending the subsidy for survivors in the lower-tier plan. Current law requires defined-benefit pensions to offer a basic spousal survivor benefit and UC does. However, employers are not required to offer the basic benefit at no cost to the employee. UC does offer it at no cost. Other employers make an actuarial deduction in the monthly pension payment to cover the basic survivor benefit but UC does not. In the new lower tier, UC would make the deduction. (Under the current UC plan, an employee can opt for more than the basic spousal benefit but the incremental cost – above the basic benefit – is paid for via an actuarial deduction.)

There may be other questions, too:

Letter to UC from President Yudof about proposed changes to UC retirement benefits

October 26, 2010

Dear Colleagues:

I am writing to share with you the recommendations I plan to discuss in November with the UC Board of Regents about changes to the University’s post-employment benefits programs.

When I established the Post Employment Benefits Task Force, I made clear that the proposed changes needed to satisfy two critical objectives: Help address our financial challenges, and preserve good post employment benefits in support of UC’s commitment to excellence and in recognition of the vital role our faculty and staff play in the quality and delivery of UC’s service to the public. I believe these recommendations achieve th0se goals.

As you know, for the past two months senior UC leaders and I have been engaged in extensive discussions with faculty, staff and administrators about how to ensure the financial sustainability of UC’s retiree health and pension programs while still providing attractive retirement benefits.

Those discussions are continuing, but the feedback we’ve received to date has been very consistent, particularly as it relates to the design of a pension tier for future faculty and staff.

My recommendations – which have the support of the chair and vice-chair of the Academic Senate, UC’s Staff Advisors to the Regents, and leadership of the Council of UC Staff Assemblies – reflect that feedback.

In short, I am proposing a new pension program for future employees hired after July 1, 2013 that will preserve good pension benefits while also reducing UC’s long-term costs. Many elements are similar to the current UCRP program, including:

A defined benefit or “pension” plan;
A five-year vesting period;
A pension benefit formula based on an employee’s highest average compensation over 36 months; and
A maximum pension benefit equal to 100 percent of an employee’s working salary.

There are also some distinct differences that make it a more conservative pension plan than the State of California offers its employees, including proposals to raise the minimum retirement age from 50 to 55 and the retirement age for maximum pension benefits from 60 to 65.

I will also recommend that we no longer subsidize survivor benefits and that we eliminate the option of a lump sum cash out.

This recommendation does not affect pension benefits for current UC employees, or those hired between now and July 1, 2013 – only future employees.

The annual cost to UC and its future employees for this proposed new pension program is 15.1 percent of annual payroll, 2.5 percent lower than the 17.6 percent that our current UCRP pension program costs UC and its faculty and staff.

New employees and UC will together pay the full 15.1 percent cost of the new plan, with future faculty and staff contributing 7 percent of annual pay and UC paying 8.1 percent.

I think this is a very fair and balanced approach, and one that, if adopted by the Regents, will allow UC’s retirement benefits to continue to be an important component in attracting and retaining excellent faculty and staff.

Although the new pension tier would affect future employees, I will also recommend changes to our retiree health program that will directly affect current faculty and staff.

Most notably, I will propose that the Regents adopt in full the recommendations from the Post-Employment Benefits Task Force on changes to our retiree health program including:

Reduce UC’s contribution to retiree health premiums over time to a floor of 70 percent;
Change retiree health care eligibility rules, effective July 2013, so that UC’s contributions to retiree health care premiums are offered on a graduated scale based on years of service and employee age at retirement;
Allow faculty and staff to remain under the current retiree health care eligibility rules if, on July 1, 2013, they have five years of UCRP service credit and their age and years of UC service together equal 50 or greater.

I will also recommend a course of action to erase the UC Retirement Plan’s $12.9 billion unfunded liability.

One of the most important components of that plan requires UC to increase its annual contributions to the UCRP by 2 percent per year, until UC is contributing roughly 20 percent of annual payroll to UCRP.

There is no question that without state funding support, it will be difficult for UC to find the resources necessary to contribute such a large amount to the UCRP each year. But given the size of our current unfunded pension liability, it is essential that we find a way to do so.

Although the state has not yet agreed to pay its share of the UCRP, we have made some important strides on that issue this year, and we will continue to press our case in Sacramento. In the meantime, we must take sensible action now to address our unfunded liability.

The Regents will hear and discuss my proposals at their board meeting in November, and will possibly take action at a special meeting in December. The full details on my recommendation will be contained in a Regents item that will be available in early November.

In closing, I want to thank you for your thoughtful input and suggestions on these difficult issues. And I encourage you to stay involved. Together we are doing the hard work that is essential to preserving this great institution.

With best wishes, I am,

Sincerely yours,
Mark G. Yudof

From http://universityofcalifornia.edu/sites/ucrpfuture/news-updates/president-yudof-proposed-changes-to-retirement-benefits/#more-911