Chancellor Katehi Responds To Pension Demands

In their letter, the UC executives indicated their intent to sue UC if the board failed to implement the change. While only 36 signed the letter, the increased pension benefits would affect about 200 UC executives.

They argued that ten years ago UC sought a determination from the IRS that a new method for calculating pension benefits complied with federal tax rules.

“While that determination ultimately was granted, it did not obligate  the University in any way to proceed with its proposal. In fact, the initial Regental action required that an implementation plan be developed and submitted by the President of the University and approved by the Chair of the Board and the Chair of the Finance Committee,” they continue.

Moreover, for reasons of fiscal prudence, the step was never taken to make the proposal become effective.

“For this reason, and contrary to the arguments presented in the letter, it is our belief that the action taken by the Board 10 years ago was not self-executing and that the pension proposal was never implemented,” Mark Yudof and Russ Gould argue.

On Friday, UC Davis Chancellor Linda Katehi released a statement agreeing with the interpretation of events as laid out by President Yudof and Chairman Gould.

“I personally agree with and strongly support President Yudof and Chairman Gould’s position. While I have great respect for the four UC Davis leaders who signed this letter and understand their perspective, this demand comes at a time when our university is being asked to make many sacrifices and, as such, I do not support a change in the university’s policy that would increase their retirement benefits,” the Chancellor said in a statement.

The administrators at UC Davis include: Steven Currall, Dean of the Graduate Management School (who made $294,000 in 2009); Claire Pomeroy, Dean of the Medical School and CEO of the UC Davis health system ($529,000 in 2009); Ann Madden Rice, CEO of UC Davis Medical Center in Sacramento ($574,000); and William McGowan, the health system’s Chief Financial Officer ($406,000 in 2009).

“In just the past few days, many members of the campus community and friends of the university have written to me to express their concerns about the negative impact that the letter and the potential for a lawsuit will have on our fundraising efforts as well as our ability to continue to receive adequate support from the state. I do share these concerns. The coming year will be a particularly challenging one for the university, and this issue is likely to add to our challenges,” she continued.

The letter comes at a time when the system is trying to get out from under millions in unfunded liability due to the fact that for two decades the pension system was never funded.  UC is asking employees to increase their contribution while increasing their own employer contribution into the system.

The Sacramento Bee hammered these executives.

“We’re in a time in California when everyone has to share the pain, and leaders have to set the right example,” the Bee writes.  “It is dumbfounding that some top officials at the University of California are doing the exact opposite.”

“What’s appalling is that people – who already earn far more than the vast majority of the Californians who pay their salaries – want even more in these tough times. These execs richly deserve the withering criticism they’re already getting from Gov.-elect Jerry Brown and legislators,” the Bee continues.

The Bee concludes, “Good people don’t threaten lawsuits against a cash-strapped state to enrich themselves.”

Meanwhile, this week the Bee reported on an Assembly bill sponsored by San Mateo Assemblymember Jerry Hill that would limit pension benefits available to those highly paid workers in all public retirement programs, including UCs.

According to the Bee, “Hill’s Assembly Bill 89 would require all public retirement programs in California to adhere to the IRS cap when calculating benefits for employees who join the retirement system after Jan. 1, 2012.”

But even in the face of criticism, UC Berkeley Law School Dean Christopher Edley, the leader of the effort, defended their demands.

“I accept the criticism of me personally for insisting that UC stick to a promise that is financially important to my family,” Dean Edley told The San Francisco Chronicle.

The Chronicle continued, “He gave no indication that the criticism would weaken their resolve to require UC to provide at least 200 executives tens of thousands of dollars more each year in retirement pay. And he summed up the dust-up in amused fashion, referring to himself and the executives as “craven scum.””

But UC Faculty are outraged.  The UC Berkeley Faculty issued a statement saying in part, “At a time when the UC pension system is endangered and the entire instructional and research enterprise of UC is imperiled we find it outrageous that these managers — whose very job it is to steward the system — would demand exorbitant pension compensation. They cannot have it both ways: private sector salary levels and public employee pensions.”

They continued, “The damage to the image of the university from excessive executive pay and benefits, and now from this threat of a lawsuit….has been immense. Most of us work for reasonable salaries but also for the public good. If the elite earners do not care enough about the public university to stay, then let them depart for the private sector. We believe you can find dedicated people within and without UC who would be willing and able to replace these individuals.”

The bottom line is that the executives can sue if they want, but it would only feed into the public outrage toward highly compensated public sector executives who have the perception of taking pay increases and bonuses during times of economic hardship.

The UC faculty is exactly right, such demands will only undermine the entire system and feed into those who believe that public sector employees are the cause of most of our fiscal problems – even in the face of strong evidence to the contrary.

—David M. Greenwald reportin