From the Daily Cal: ...The Academic and Student Affairs Committee discussed plans to increase participation in the Eligibility in the Local Context, or ELC, program among California high Schools. This program allows for high school students to be admitted to the UC system based on their performance relative to the students in their own school, rather than in comparison to students on a statewide scale. UC Provost Michael Brown described ELC as a “critical tool for the university to broaden its geographical diversity of the undergraduate entering class.”
According to Brown, in fall 2020, 40% of the university’s admitted class was admitted through the ELC program and 7% of the class was only eligible for admission due to ELC. The committee also discussed the UC initiative to ‘grow our own,’ which aims to increase and diversify the pathways available for UC students to go on to work in roles as researchers and professors within the UC system. “The University of California at this time has a generational opportunity to advance educational diversity,” Brown said during the meeting.
UC Merced Executive Vice Chancellor Gregg Camfield highlighted ways UC campuses can increase diversity in their programs, including mentorship programs and providing stipends for research. Camfield explained that low-income students are often left out of research opportunities as they are in need of money, while students from higher-income backgrounds are able to access unpaid research opportunities without the same stress or concerns of their peers.
...The Finance and Capital Strategies Committee discussed funding new capital projects, the upcoming UC system budget, the past year’s expenses and a proposed reduction in the employer contribution to the UC pension plan. “Despite the fiscal impact of COVID, the university’s financial position improved quite dramatically in 2021, and it was primarily driven by the strong performance in investments,” said Nathan Brostrom, the UC executive vice president and chief financial officer, during the meeting. The UC system saw a 30% return on its investments in 2021 and received federal financial assistance in the form of $456 million in CARES Act funding and $424 million in additional assistance to its medical centers. Its net financial position improved by $5 billion. The board unanimously approved the UC system’s 2021-2027 capital finance plan and 2022-2023 budget for current operations, as well as its financial statements for 2021.
The university’s budget plan passed with an amendment, requested by Drake, to increase the projected faculty pay scales for policy-covered faculty to account for the current spike in inflation. “This is a wonderful opportunity to really have the University of California grow and serve in the way that it was intended at its founding,” Drake said of the budget during the meeting. The committee also approved funding for three capital projects and long range development plans for UC Irvine and UC Riverside.
All items passed with unanimous consent from the board except for a proposal to reduce the employer contributions to the University of California Retirement Plan to provide budgetary relief to campuses. “This proposal makes me very nervous,” said board member Eloy Ortiz Oakley during the meeting, noting that it is easier to decrease contributions than increase contributions. The motion ultimately passed with three dissenting votes. “We’re not going to zero,” said Cecilia Estolano, chair of the board, before voting for the proposal during the meeting. “We have a need right now to benefit students.”
Full story at https://www.dailycal.org/2021/
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Comment on the Pension Funding Issue and the Regents' Action
The original pension proposal would have cut the employer pension contribution from 15% to 14% of payroll. The fifteen percent figure is a step in a multiyear plan with rising steps over time that already on the books. There would also be borrowing from STIP (the liquid cash account that earns very little because it is invested in short-term assets and because interest rates are near zero) with the borrowed money put in the pension for two years. The argument was made that in that initial period, the combined reduced 14% contribution plus the borrowing would in fact be a net benefit to the funding of the pension. But several Regents expressed discomfort with the cut to 14% and referred to the long contribution holiday to the pension that was so painful to fix. In the end, the Regents adopted an amended plan that made the cut to 14% for two years but then resumed the old schedule assuming no further changes were made after two years.
What caused the dissent was that effectively, the Regents were reacting to the upward blip in financial market returns during fiscal year 2021-22 which pushed the funding ratio on a market basis into the 90% range. If you cut contributions in response to a blip, i.e., whenever a positive blip comes along, you effectively don't have a long-range plan. At the end of the discussion, the committee chair - given what had occurred - asked the university actuary whether there was some "implication" for this behavior in terms of actuarial reporting. He got back a long and convoluted answer that seemed to imply there was no reporting implication. That response presumably was technically correct, but it did not change the fact that a regental action in response to a short term blip implies that the Regents' ability to stick to a plan in Good Times and Bad Times has been put into question.
Apart from undermining the notion of a long-term commitment, the Regents - through mix of transactions - seem to be borrowing, albeit at a very low interest rate, to finance ongoing operations. There was talk that the money freed up should be used for "one-time" purposes. But the distinction between one-time and ongoing is often blurry. It appeared from what was said that the pressure to cut the pension contribution was coming largely from the health enterprise.
Finally, it is worth pointing out - as we have done at various times on this blog - that the realities of mortality being what they are, pension finance, although it may seem to be an issue for retirees and near retirees to worry about, is really a young person's issue, even if the young are oblivious to it. There is no way - short of an asteroid hitting the Earth - that anyone retired or near retirement is not going to get his/her pension. The long term financing of the pension is thus an issue that should be of interest to the young.
The links to the Wednesday, Nov. 17, afternoon sessions are at:
Afternoon:
https://archive.org/details/
Academic and Student Affairs:
https://archive.org/details/
Finance and Capital Strategies:
https://archive.org/details/
You will find the roughly one-hour pension funding discussion at about 1:36 (hour 1; minute 36) to 2:34 (hour 2; minute 34) in the link provided above to the Finance and Capital Strategies session.
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