As Chair of the Faculty Association at UCLA, I would like to emphasize again
the point that was made in the Saturday, Jan. 21, 2012 Blog on this site,
“Plenty of Nothing.”
The Governor wrote in his proposed budget: "The University of California
(UC) will receive an increase of $90 million from the General Fund for base
operating costs, which can be used to address costs related to retirement
program contributions."
The main purpose of the public employee retirement law (PERL), passed in 1931,
was to separate pension funding from all other kinds of funding. Early on, the
state recognized that pension funding is long-term funding and must follow
clear guidelines and sound actuarial principles to ensure that the state has
the resources to keep its pension promises. Those principles require that the
plan estimate many factors: the cost of service for the current year, the rate
of return earned on investments, mortality rates, projected salary and benefit
increases, etc. Based on these estimates and the plan design, the state can set
the employee and employer contributions necessary to meet the funding
requirements.
Each year public retirement plan sponsors need to ask the state to make a
specific contribution to their retirement plan based on the actuarial
principles agreed upon. This contribution is not lumped together with any other
funding. Each year the State evaluates those requests and makes a separate
allocation to the retirement plan, which can be used for nothing else.
Retirement is and should be separate.
The same was always true for UC. In the past, before 1990 when contributions to
UCRP were suspended or, one could say, dropped to "zero," the UC
Regents like all other public pension plans in the state requested retirement
funding from the state. And the state allocated UCRP funding annually as part
of the budget category, "Fixed Costs and Economic Factors," a
subcategory of "Unallocated Adjustments." The accounting categories
were different for UCRP than they were for CSU or other public pension plans in
California, but the principle was exactly the same: retirement funding is
separate, not to be comingled with any other use of the funds. Although
the Regents can spend General Fund allocations as they wish, given their
autonomy in the state, they never wavered in the past from using state
contributions for UCRP for anything other than the employer contribution unless
given specific permission by the Legislature to do otherwise. They honored the
founding principle of public retirement funding.
Contrary to this principle, the Governor now wants to fund UCRP by way of an
incremental increase to the General Fund. Although the Regents regarded the
Governor’s gesture positively -- “This represents a major step forward in terms
of securing the State’s participation in employer contributions for UC employee
support which is automatically provided for employees of California’s other two
higher education segments.” -- it neither recognizes the obligation of
the state to support retirement of the public employees at the University of
California, nor does it provide actual funding for retirement based on
actuarial principles. What the Governor awards can just as easily be removed by
a legislative reduction in UC funding. How will budget decisions such as the
minus $100 million trigger in the current budget affect long-term pension
promises?
That is exactly why the forefathers and mothers of public pension funding in
California knew that funding retirement is a serious business and must follow
separate financial principles from all other kinds of funding in order to keep
the state and the employee pension plans on a sound financial basis.
I urge clarity and transparency in talk about public pension funding. An
augmentation to UC’s budget from the state General Fund is welcome, but it is
not the same as state support allocated specifically for UCRP. And I urge the
Legislature to do the right thing: fund $90 million to UCRP directly as part of
the long tradition of supporting public employee retirement in California and
in accordance with PERL principles of retirement funding.
Dwight Read,
Chair, UCLA Faculty Association
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