by Karina Piser –
by Karina Piser – Sentiments of discontent and disappointment are accompanied by widespread lack of awareness on what exactly has pushed a nationally renowned system into crisis. Yudof’s letter attempts to fill the gaps in students’ and professors’ knowledge about fiscal issues that shape the university.
Yudof paints a picture of what he believes is a roadblock to a better fiscal situation: a $21 billion unfunded liability for retiree pension and health programs that represents a spending trend privileging employee benefits over students’ education.
“This has to end,” he wrote, and continued with a presentation of his “two-pronged” approach that would have no effect on current employees’ benefits but would reduce those for employees hired after July 1, 2013.
Yudof hopes that his reforms will cost twenty percent less than the current pension program and is “confident that these reforms will…retain the quality faculty and staff that are the beating heart of a great university system.”
For many students, information about employee benefits does not resonate because they do not understand how it directly affects their experience. The letter does, however, speak to a more pressing issue: anticipated tuition hikes for the 2011-2012 academic year.
Earlier this quarter, rumors circulated regarding a potential twenty percent increase in tuition that would certainly have sparked outrage across campuses statewide. Although the reality of the situation is slightly less harsh, Yudof revealed plans to increase fees by 8%, or $822, a raise that will supposedly “ensure the resources needed to maintain excellence.”
Despite breaking some potentially disheartening news, Yudof at least explained how the increased income would attempt to resolve the crisis and benefit current and future students’ education. A third of the money, he wrote, will be dedicated to financial aid, while the remainder—an estimated $116 million—would help the university reinvest in faculty, course offerings and advising, and help reverse the damage caused by the crisis thus far.
His transparency will hopefully soften the blow of yet another increase in tuition, and should at least serve to alleviate some criticism that will undoubtedly be directed at him in the upcoming weeks.
President Yudof also provided concrete examples of how the new revenue will be put to use after its distribution. A third of the money being channeled to financial aid will allow California students with family incomes below $80,000 to qualify for the Blue and Gold Opportunity Plan that up until now only applied to incomes of below $50,000. The Plan completely alleviates these low-income families of tuition fees. The new ceiling will affect as many as 55 percent of undergraduate students.
Yudof reminded everyone of the importance of remaining involved and active in the future of California’s educational system. “These won’t be the last tough decisions the University will face,” he wrote, presenting a realistic perspective on the state of things and the real risk of UC “tumbling towards mediocrity.”
Despite the unfortunate reality of California’s budget crisis, Yudof’s letter offered a vision of hope for the future of the UC system. UC is the basis of California’s innovative and transformative potential and should not be swallowed by difficult economic times.
The student body’s reaction over the next week will be extremely telling about how the struggle to restore the UC system will play out. Will students react with angst and criticism, or will they acknowledge that California’s fiscal state necessitates this kind of action? With yet another increase in fees, one would expect the climate to intensify and for students to express even more frustration with a system they believe to be failing them.
“I’m not pleased, but not surprised,” a second-year economics major said. “I really think that there needs to be a policy implemented that puts a cap on the chancellor’s and regents’ paychecks. Otherwise, this is a bit ridiculous.”
The next several weeks will show whether students are willing to accept these difficult times and do what they can to make the best of a less-than-ideal situation, or if this recent move will be the straw that breaks the camel’s back and encourages students to engage in civil disobedience, protest and more radical action.
Whether or not they mobilize will reveal just how much students will accept before attempting to effectuate change.
Nice article Karina Piser. The UC system has some tough choices to make. But at least hooking the increase in student tuition to specific student benefits is a step in the right direction, as well as pension reform.
So Yudof says the pension and retiree health programs were exposed to billions of dollars of unfunded liabilities. A 20-year cycle of underfunding by the state had weakened the UC financial underpinnings. The administrative culture was sorely in need of modernization and transparency, and the level of pay for faculty and staff had been allowed to fall behind that of their peers.
Underfunding sounds like the state knows what things cost and they intentionally choose to not provide money. In reality, taxpayer-funded organizations build in increases to their budget and if they do not happen, they call that being underfunded. California itself has the same problem – during the “Dot Com” boom, the California legislature saw all the capital gains taxes coming from stock sales and, instead of regarding that as an extraordinary event and building roads or paying down the deficit with it, they built more costs into the annual budget – including rewarding the California university system with a lot more employees. If I give you $100 for Christmas, you should not then incur $100 of annual expenses and build that into your annual budget, much less project that it will grow.
The first job was to close an immediate $1 billion hole in our budget, created by cutbacks in state support.
The University of California is the biggest employer of state workers with 24%, followed by corrections with 17% and California State University with 14%, and they vote Democrat every election. So ‘cutbacks’ really mean that employment had along ago increased far ahead of enrollment needs and when the budget – unsustainable in 2004 and worse now – reaches crisis levels they regard that as Californians not caring about education. In the period he is talking about the California university system has tripled the number of employees but neither quality nor enrollment are 3X so it has to be considered politically rewarding the people who vote for the right party.
Yudof said solid progress has been made. US is for instance, embarked on a campaign to wring $500 million out of administrative expenses by initiating a series of practical but long overdue efficiency measures. This is money that will be put toward the core mission of serving students. He said they also have been gaining political allies in Sacramento, where the latest state budget didn’t deliver all that we sought, but at least restored one-half of the cuts made in the prior year.
The $500 million in “practical but long overdue efficiency measures” couldn’t be bothered with before the shortfall was $1 billion – which means the UC system was not concerned about taxpayers money as long as it rolled in but when it stops it is time to write an open letter to taxpayers to complain they have less budget. In other words, had they implemented the savings earlier, there wouldn’t be a budget shortfall today.
The University of California faces a $21 billion unfunded liability for its retiree pension and health programs. For 20 years the university, its employees and the state enjoyed a “holiday” from contributions to what by any measure is a generous defined benefits program.
UC employees pay nothing toward their retirement and retire at an age and a pay rate that makes European government workers envious. His solution is to make people start paying something toward their own retirement but this liability is unsustainable- California literally cannot now nor in any projected future meet these obligations.
They’re also going to raise student fees by 8%, $822 per year but that small amount tells you most of what you need to know; the bulk of the money needed by the UC system is not needed for students – and it’s sure not needed for either athletics or science, both of which generate more revenue than they cost – it’s needed because they added far too many employees they didn’t need and now, because they are state employees and can’t fire them, they have to furlough everyone.
I am proposing that we expand our middle-income grant program to cover the full amount of the fee increase for one year for financially needy California undergraduates with family household incomes of less than $120,000.
Poor people in California are those making under $120,000.