On September 16 the UC Regents voted to raise the contributions to a pension system that has been vitally harmed by past Regent's decisions (see http://universityofcalifornia.edu/sites/ucrpfuture/news-updates/uc-regents-vote-to-increase-pension-contributions/#more-760) In 1990 when I arrived at Berkeley there were nearly 2000 faculty all contributing to the pension plan at 2% of salary (I’ll return to this at the end). In the early 90s when California hit it's first funding wall, the Regents decided that the way to solve the budget crises was simply to "early retire" employees. TWICE they offered an early retirement called the VERIP for “very early retirement incentive program” that gave employees five years of extra service credit and five years on their age. So, employees in their 50s didn't let the door hit them in the ass to get out - in droves. At the same time the Regents using their fine business acumen (don't forget most Regents are business CEOs and investors – see below) decided to eliminate employees contributions to the pension plan. So, not only were hundreds of thousands of employees no longer contributing to their pensions, but thousands were now on that very pension plan in their 50s.
This idea was by Regents predominantly business gurus? Geez, if we in the Republican disdained Middle Class handled our finances that way - hell, we'd be broke (but I digress). Also during the 90s as the pension plan, even with all the new pensioners, was well into the black, those very fine Regents, like Mr. Blum and Mr. Parsky thought that the UC Treasurer who was doing such a fine job should be replaced by an investment firm with ideological if not business ties to these fine Regents. This very problem was reported on the Bay Area,s KALW NPR station last year and no one seemed to notice. Well, this fine investment company decided that upright corporations like ENRON were great investments. Wow, good thing we of the contemptible Middle Class didn't have the money to invest in those great corporations, but our fine university did that for us.
Today, we find that our pension is in the red, and what a surprise. Sure, the broken economy, busted by some of the very same philosophy employed by our Regents and cronies is partly responsible, but don't you think that 20 years of no employee investment might also have something to do with it?
What happened to that 2% that was not invested in the plan? The Regents gave it to us to invest as we like in what was called a Defined Compensation Plan (DCP). Well, I'm a full professor and in all those 20 years I have a whole 40,000 bucks and a broken pension after over 20 years of work for UC. So let's do some Middle Class calculation. There are currently about 150,000 UC employees, dwindling as the administrators fire more staff each year. Let's say that for 20 years that 2% of what's called the DCP investment all garnered only $20,000 each (this is very conservative) that would be at least $300,000,000.00 into the pension plan. What that would mean "actuarially" is beyond my abilities to calculate. The figure would be much higher actually since 1) this does not include those VERIP employees who would have been contributing before they left, and 2) it is difficult to tell how much investments would increase even with the dippy investments scheme of the Regent's investment buddies.
The Regents. Who are these guys? Well, they are 18 people appointed by the Governor for 12 year terms (http://www.universityofcalifornia.edu/regents/about.html) including a student Regent representing the students at all campuses. Now lets look at the Governors for the last 20 years. They have all been Republicans except for Gray Davis, remember that one that was recalled by the nitwit California voters and supplanted with the Terminator (who received less than 50% of the vote during the recall). Eleven of the 18 are Schwarzenegger appointees, the rest Davis. What do (or did) these Regents do before becoming Regents (D = Davis appointee; S = Schwarzenegger appointee)? Down the list: Richard Blum (Chairman of Blum Capital Partners, L.P.; Co-Chairman of Newbridge Capital, LLC; D); William de la Peña, M.D. (Ophthalmologist and medical director of the De La Peña Eye Clinic; S); Russell Gould (served as a Senior Vice President of Wachovia Bank, providing leadership in business development and strategic partnerships as Senior Managing Director of Wachovia Portfolio Services, formerly Metropolitan West Securities, which he joined in 1996. While at Metropolitan West, Mr. Gould also served as Executive Vice President of the J. Paul Getty Trust; S); Eddie Island (retired attorney, and executive; S); Odessa Johnson (Dean Emerita of Community Education, Modesto Junior College; D); George Kieffer (Partner and member of the Executive Committee of the national law firm of Manatt, Phelps & Phillips, LLP; S); Sherry Lansing (Founder of the Sherry Lansing Foundation and former Chair and CEO of Paramount Pictures' Motion Picture Group; S); Monica Lozano (Publisher and Chief Executive Officer of La Opinión Newspaper; D); Hadi Makarechian (Chairman of Makar Properties Board of Directors and Banning Lewis Ranch Management Company Board of Directors; S); George Marcus (founder and Chairman of Marcus & Millichap; Chairman, Essex Property Trust; D); Norman Pattiz (Founder and Chairman of the Board of Westwood One [owner of 5000 radio stations]; D); Bonnie Reiss (Operating Advisor to Pegasus Capital Advisors; S); Frederick Ruiz (Co-founder and Chairman, Ruiz Foods; S); Leslie Schilling (Director of Union Square Investments, Inc.; S); Bruce Varner (Partner in the law firm Varner & Brandt; S); Paul Wachter (Founder, President and CEO, Main Street Advisors; S); Charlene Zettel (Board member, San Diego Regional Airport Authority; S).
First, geez with all these board members, business types, and lawyers you’d think they could buckle down and save the university (but I digress again). Well, you can see that there are very few on our UC Regents who have any experience with higher education. Davis’ appointee Odessa Johnson is virtually the only Regent with actual higher education experience. What we see here is the result of the California electorate’s love affair with Republican governors. If you want UC and CSU Regents who have California’s higher education in mind don’t vote for Republican governors. You can image what Meg Whitman’s appointees will look like.
The Final Nail in the Coffin of California’s higher education: Never thought I’d get here did ya: Let’s look at the proposed shiny new pension plan. The devil is certainly in the details, in this case the proposed tiered pension system that will enshrine the two tiered political system that Republicans (like most of the Regents) want to see a permanent part of America (http://universityofcalifornia.edu/sites/ucrpfuture/new-ucrp-tier/)
What fun! Someone now who after 20 years and age 60 retires, they get 50% of their highest average three years salary, 75% after 30 years and age 60 [kinda makes those other pension plans look good doesn’t it?]. We can now retire as early as 50, but wouldn’t get much, and after 2013 when these proposed changes would take effect the earliest one could retire is 55 and to get only 42% or your highest three years salary you’ll have to be 65 and if you’re a richer faculty or administrator you can contribute more, you’ll still only get 48% at 65. What a deal! But what does it do for the age grade composition of the university? One of the reasons to set the maximum benefit age at 60 is to get the old guys out and hire new and younger faculty. When that changes after 2013 it will force most faculty to stay until much older. Why will that make a difference? Well, now that the university gets such a tiny amount of funding from Sacramento (now under 20% of budget) we cannot hire new faculty until someone retires, and even then the pesky Social Sciences and Humanities are lucky to get one for each three retirees. So, the future University of California will have many fewer faculty, with more of those 20 something students, and faculty walking around with canes and no memory! Wow what a great state we live in. A fact (from above): In 1990 when I got here there were about 2000 faculty, now there are a bit over 1200 faculty and over 20% more students than in 1990. Just think of what it will be like in another 20 years – less than 1000 faculty at Berkeley as my Dean has suggested and 20% more students, and the faculty will only be 20% there mentally. Neat. What a great state we live in.
Oh, I forgot one other tidbit the “Post-Employment Benefits Task Force” has exclaimed: Don’t worry about these reduced pension benefits “with Social Security a pensioner will have nearly 100% of their salary at 40 years”. Great, let’s rely on Social Security to fill in the pension gaps. Real reliable in Washington too!
Will this pension plan be the final nail in the ever solidifying coffin of the University of California? I hope not, but we’ll see. Oh, I forgot: there were only a few faculty and staff on the “Post-Employment Benefits Task Force” that made the recommendations to the Regents. The majority were overpaid administrators. All but one of the faculty and staff members wrote a dissenting view that is being ignored: you can see that here: http://universityofcalifornia.edu/sites/ucrpfuture/files/2010/08/peb_dissenting_082510.pdf
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