UC president’s happy talk not helpful (excerpt)
December 20, 2010
Like so many public agencies in the Golden State, the University of California has promised vastly more in retirement benefits for its employees than it can afford. Taxpayers should find the UC system’s woes particularly appalling because of this fact: For two decades, the state and UC employees didn’t put aside any money at all toward future pension costs, leading to a current overall shortfall of $13.4 billion. Earlier this year, UC President Mark Yudof finally began pushing to adequately fund pension costs. But the plan that regents approved last week for nonunionized workers – who make up nearly 60 percent of UC’s employees – is a huge disappointment. It raises the earliest retirement age for new workers hired after July 1, 2013, from 50 to 55 and requires that workers contribute somewhat more toward the cost of their benefits.
Yudof’s declaration that the changes “will go a long way in solving a major long-term challenge to the university’s solvency” is hard to fathom. Significant savings are decades away. A Contra Costa Times analysis indicates the overall shortfall still will soar to $21.9 billion by 2020.
What will happen in the meantime? If retirement benefits are funded in an actuarially sound way, the result is likely to be enormous frustration for both taxpayers and UC students, who are sure to face more tuition hikes.
Yudof’s assertion that these and previous modest changes were necessary to ensure that UC maintains its academic reputation is also questionable. UC’s reputation depends on its faculty – which represents slightly more than one-seventh of its work force.
If UC’s president and its regents really wanted to fix this problem, a bolder approach makes far more sense. First, retirement health benefits should be dropped for all new hires and for any current employee who can qualify for Medicare coverage. Second, just as more generous public safety agency benefits are often decoupled from those of general government workers, benefits for UC faculty should be decoupled from other UC workers, whose retention is simply not as important to UC’s future success...
UPDATE: The view from calpensions.com http://calpensions.com/2010/12/20/uc-pensions-did-regents-solve-the-problem/