Monday, September 19, 2016

Listen to (the rest of) the morning session of the Regents, Sept. 14, 2016

As noted in prior posts, the Regents now have a more complicated meeting format with concurrent sessions. On the other hand, they are posting the sessions on YouTube but only for one year. So it is a) easier for yours truly to grab the audio, but b) it has to be posted so as to archive it indefinitely. Our new policy is to post first and comment later - when we have a chance to listen to the sessions. 

The morning session was previously posted at:

On the original posting, we commented on the opening session. But there were two concurrent sessions that followed which we have now heard.

One was the Academic and Student Affairs Committee and National Laboratories Subcommittee. Much of the agenda here was devoted to the aftermath of the Committee of Two deal which - beyond the pension matter - involved UC pledging to do various things in exchange for funding. Apparently, UC has to go to the state Dept. of Finance and show that it has done what it said and the Dept. of Finance gets to decide whether that is so. A lot of what was pledged revolved around transfers, evaluating majors, offering 3-year degrees, and the use of technology. In the case of the last, what was meant was using technology to monitor the success of programs. The part of the session on the labs was informational, with a tracing of the history back to the Manhattan Project, and some complaints about the difficulty of dealing with the federal government.

The other meeting going on at the same time was the Finance and Capital Strategies Committee. There was a lot of discussion of debt policy including pension debt. During the discussion, there was reference to a 70% rule which apparently is embedded somewhere in Regental policy and which says that if the pension plan becomes less than 70% funded, other UC borrowing should halt. This is a bit odd on its face. Would all capital projects that need to borrow come to a screeching halt? There may be a perverse bright side to this rule since it gives the Regents an incentive not to let funding decline below 70%. Maybe the Senate should agitate for an 80% rule. 90%? :)

More seriously, David Crane - who was a kind of queen for a day on the Regents (he was appointed by Gov. Schwarzenegger but not confirmed so he dropped off) - is back, this time as an outside adviser to the Committee. He is pushing - and apparently got one Regent to go along - for using something like a 4% discount rate to evaluate plan liabilities. There is much to be said for using a realistic forecast to estimate the plan's projection of its long-term earnings. (UC's chief investment officer thinks a realistic rate is a 6-ish per annum number rather than the official 7.25%.) Using a much lower discount rate would significantly raise the measured unfunded liability. (We italicize "measured" because the actual rate of funding is what it is and can't be known for sure since it is inherently a forecast.) More on this at:

An alternative link is:
Let's just say that if the Crane view gets traction at the Regents, there will be problems.

The rest of the Committee meeting was devoted to discussion (and approvals in some cases) of various capital projects including at UCLA. While the new Regents format may allow more time for such discussions, it does not by itself add to the capacity of the Regents to evaluate what they are told. There were some questions asked at the session which suggested doubt about what was being presented by the campuses. But, as we have noted many times before, in the end the Regents have no independent staff to evaluate what is presented. In the end, everything gets approved, even if more info is requested along the way.

To hear these sessions, go back to the audio link at our prior post.

No comments: