As blog readers will know, the governor a few weeks back came out with his May Revise budget.* But budgets aren't decided by the governor; the legislature has to enact budgets. And it has to do so by mid-June.
There is a version of a legislative budget floating around on the web.** It assumes a bit more overall revenue and spending than does the May Revise, but - given the vagaries of trying to forecast - the overall amounts aren't much different from the governor's estimates.
It does say [page 16] that UC is proposed to get $50 million more in "ongoing base augmentation" than the governor proposed. It's not clear, however, whether that terminology refers to total dollars or what the governor likes to view as ongoing dollars. It is also useful to keep in mind that inflation has been running around 8%, so what looks like an increase could be a lot less in real dollars, even negative. It is also unclear whether what the legislative budget now contains is what will be its final allocation for UC.
In theory, the governor could use his line-item veto on whatever the legislature enacts. However, in recent years, there has been discussion between the governor and Democratic legislative leaders before final enactment so such vetoes are unlikely.
You may have seen a recent article in the LA Times - excerpt below - concerning a legislative effort by a Riverside state assembly member to get extra funding for UC-Riverside. It is interesting that in the video of the related news conference, although there are various speakers, you don't see the chancellor of UC-Riverside. And in the article, there is a cautious statement from UCOP that the bill in question is being evaluated.
It's not surprising that UCOP is cautious, since a process whereby each campus goes to the legislative branch to trying to get a larger share of the pie could have unintended consequences. It tends to undermine the constitutional autonomy of UC and the Regents, such as it is. One can imagine scenarios in which inter-campus squabbles over who gets what leads to less funding overall. There is the old adage about hanging together or hanging separately.
From time to time, we have pointed to the need for a renewed Master Plan for Higher Education, since the old 1960 version is clearly eroding. The legislative push for larger undergraduate enrollments is making the need for a new Master Plan more evident.
From the LA Times: Jordan Guillory, a UC Riverside junior, is never sure where his math class will meet. Sometimes, it’s outdoors. Other times, it’s an empty lecture hall. The class never received an assigned classroom as the Inland Empire campus grappled with a 4,450-seat shortfall in instructional space, the second-highest deficit in the University of California system. Guillory, a low-income transfer student from San Diego Miramar College, is already behind schedule to graduate in the expected two years. He wasn’t able to get sufficient advising and missed taking a course in a needed math sequence, which will set back his graduation by at least a quarter. UC Riverside is short more than 700 staff members and 100 faculty members, compared with the UC systemwide average per-student ratios.
And he and other UC Riverside students, faculty and staff endure leaking roofs, falling ceiling tiles laden with asbestos, lead-based paint peeling from walls and power failures that have destroyed laboratory research specimens. Those conditions outrage many campus members and influential supporters such as Assemblyman Jose Medina (D-Riverside). They question why the Inland Empire campus — which educates the system’s second-highest share of California low-income students of color — lacks the resources of other campuses.
About half of UC Riverside students are low-income, underrepresented minorities or the first in their families to attend college. A 2011 state audit found that UC distributed less per-student funding to Riverside and three other campuses with high proportions of underserved students, a finding that led to changes in allocation formulas aimed at more equity. But Medina — and UC Riverside officials — argue that more support is needed. On Friday, Medina plans to showcase new state legislation to dramatically boost support for Riverside and UC Merced, which has the highest share of low-income students of color, through an “Inland Rising Fund” that would pay for more classrooms, labs, faculty, staff and research projects aimed at powering economic development in the often neglected Inland Empire and Central Valley regions. “This is an attempt to level the playing field and do something that has been overdue and is just the right thing to do as well,” Medina said about the funding boost.
The bill establishing the fund was approved in a 74-0 vote by the California Assembly last week and has advanced to the Senate. It does not yet include the $1.4 billion that Medina has proposed. The Legislature and Gov. Gavin Newsom will need to negotiate the final funding level during state budget talks this month, Medina said, but the joint legislative budget proposal released this week includes an initial $250-million allocation for campus expansion projects at UC Riverside and UC Merced and at least $185 million to fully fund climate initiatives at the two campuses and UC Santa Cruz.
Medina, a UC alumnus and former high school teacher, says the funding boost would be a “game changer” for the state’s inland regions. His funding proposals include support for research into climate change, including a new UC Riverside clean technology park and a UC Merced center for climate and social justice, along with medical education to help train healthcare professionals for the underserved area.
The UC Office of the President is still reviewing the legislation to assess the effect it would have on overall funding for the 10-campus system, which educates 295,000 students...
In an earlier posting, we noted that another UC campus - Santa Barbara - was joining UCLA in tightening up its coronavirus rules.* But like the disease, the tightening up has spread:
From Inside Higher Ed:
The University of California, Los Angeles, restored its indoor mask mandate last week, joining the University of Hawai‘i system, Pennsylvania State University (for both the main campus and 13 others), and other colleges and universities. “The past few weeks have revealed a consistent rise in COVID-19 cases in Los Angeles County and on our campus. Last week alone, UCLA had close to 870 new cases, which, per the UCLA COVID-19 Pivot Matrix, would place us at the ‘severe’ level,” said a letter announcing the mandate.
The letter outlined limited cases where masks may be removed: performance arts rehearsals and performances, indoor dining, and when alone in one's room. At commencement, June 10-12, all attendees must wear masks indoors, but speakers may remove their masks for their addresses, and graduates “may momentarily remove their masks while walking across the stage and while being photographed on or adjacent to the stage,” the letter said. (UCLA operates on a quarter system, and the spring quarter classes are not over until June 3.) Other institutions that have announced mask mandates have already had commencement and are in summer sessions, or their renewed mandates were announced just prior to commencement. UCLA also said weekly testing for COVID-19 will continue until June 15.
For colleges, indoor mask mandates were a key part of their response during earlier peaks of the pandemic. The lifting of mask mandates was seen by many as a sign that the pandemic was behind us. But most of the colleges are citing rising COVID-19 cases as a reason for their actions. Here are some of the colleges restoring mask mandates:
Penn State University. On Friday, the university restored mask mandates for the university’s main campus and the Penn State campuses at Beaver, Greater Allegheny, New Kensington and Schuylkill. The university previously announced that masks were required at the campuses in Abington, Behrend, Brandywine, Great Valley, Hazleton, Lehigh Valley, Scranton and Wilkes-Barre. The College of Medicine also continues to require masks indoors. Penn State said it acted on the basis of guidance from the Centers for Disease Control and Prevention, based on county COVID-19 rates.
University of Hawai‘i system. The system restored its mask mandate for the entire university system except when people are working in a room alone or at least six feet from others. “The indoor face mask requirement will remain in place and be re-evaluated when the level of COVID-19 transmission in the state decreases,” the university said.
University of Pittsburgh. The university on Friday cited the CDC in restoring the requirements for the Pittsburgh, Greensburg and Titusville campuses. Masks remain optional on the Johnstown and Bradford campuses.
University of Delaware. The university imposed an indoor mask requirement last week, citing “rising numbers of COVID-19 cases and hospitalizations around the country, including in Delaware over the past week.” The university permitted people to be outdoors without a mask, but administrators at commencement appeared with masks outdoors...
All of those colleges acted last week. Some of the colleges that acted earlier to restore indoor mask mandates include Gallaudet, Georgetown, Howard, Johns Hopkins and Rice Universities; and the University of Rochester. California State University, Los Angeles never removed its mask mandate.
Rochester had promised when instituting its mandate on April 15 to update the policy in early May. On May 4, Rochester announced, “Campus health officials believe indoor masking has reduced the number of COVID infections among students in recent days. Based on the effectiveness of the mask requirement in returning COVID cases to more manageable levels, as well as the still relatively high rate of COVID infections in the greater Rochester community and in New York State—the current face mask policy will remain in place for now, including at indoor commencement ceremonies and events.”
UC Berkeley Athletic Director: Teri McKeever investigation could take 6 months
Orange County Register, Scott M. Reid, 6-1-22
A University of California Berkeley investigation into allegations that Golden Bears head women’s swim coach Teri McKeever routinely bullied and verbally abused swimmers for decades could take up to six months, Cal athletic director Jim Knowlton told the team’s parents during a video call Tuesday night that often became heated. While Knowlton acknowledged that some of McKeever’s alleged bullying took place on his watch, parents both during the meeting and in interviews on Wednesday expressed frustration and anger over what they characterized as Knowlton and Cal’s failed response to the allegations, the lack of a plan for current team members moving forward and the university’s commitment to investigating other coaches or officials who ignored reports or enabled McKeever’s misconduct.
“The general take away from the meeting is the lack of urgency on something that should have been taken care of a long time ago,” the parent of a current Cal swimmer said. McKeever was placed on paid administrative leave by the university last Wednesday. Cal’s response, said a parent of a current Cal swimmer, “seems inconsistent with truly taking the steps that lead to getting to the truth, resolving this issue and moving on as quickly as possible.
“The pace and speed doesn’t bring a lot of confidence to the parent group that (Cal) is willing to do a true investigation and get to the truth.” Another parent said the video call “seemed thrown together with no agenda. I really felt like it was put out there to gauge us.” The external investigation by a Los Angeles-based law firm and commissioned by the university is in response to a Southern California News Group investigation that revealed that McKeever, the most famous and successful female swim coach in the sport’s history, allegedly bullied, verbally and emotionally abused, swore at and threatened dozens of swimmers on an almost daily basis for nearly a quarter-century.
“We have an institutional interest in finding out the truth,” said Dan Mogulof, Cal’s vice chancellor for public affairs. Launching such an investigation, Mogulof continued, is essential to the university ensuring “that the people who work for us are abiding by our policies and values. “The university can only be harmed by an investigation that fails to reveal the truth in a timely manner.” Cal at the same time must follow university, state and federal privacy laws and policies, he said. Mogulof added, “Inherent to any investigation is a certain degree of uncertainty. We have no idea what will be discovered.” The university, Mogulof said, understands that uncertainty “makes it difficult for those whose lives and plans will be impacted by the investigation.”
...The parents also expressed frustration that Cal officials have not addressed the concerns of the current team members, leaving the swimmers and their families in limbo and facing a number of questions: What if McKeever is reinstated, is the NCAA transfer portal still an option? Who will train them for events such as the U.S. Championships in Irvine (Aug. 2-6)? ...
The UCLA Anderson Forecast presented its June update yesterday in a hybrid fashion (in-person and Zoom).
From the Forecast news release:
Global, Domestic Impediments Will Slow Down Economy, but No Recession Yet
UCLA Anderson Forecast says war in Ukraine, COVID lockdowns in China, supply chain constraints, inflation will stymie growth
Los Angeles (June 1, 2022) — In March, the UCLA Anderson Forecast cited the uncertainties facing the U.S. and California economies. Seemingly, just as the economy was returning to normal as the effects of the COVID-19 pandemic began to abate, the Russian invasion of Ukraine destabilized global economic conditions.
In the UCLA Anderson Forecast’s June reports for the nation and the state, the effects of a number of economic impediments — including the Russia-Ukraine war, COVID lockdowns in China, supply chain constraints and inflation — continue to affect the U.S. and California economies. And while there is no recession forecast in the June report, economic slowdowns in California and across the U.S. are expected.
The national forecast Given growing concern about the possibility of a recession caused by rising interest rates and a slowdown in housing, Professor Edward Leamer, in an article titled "A New Way of Forecasting a Recession: Not Much to Worry About Right Now," examines the evidence through a statistical analysis of past recessions. Leamer's analysis concludes that a recession in the next 12 months is unlikely.
However, according to UCLA Anderson Forecast Senior Economist Leo Feler, author of the June forecast for the nation, there is no doubt that parts of the U.S. economy are abruptly slowing, as waves of economic shocks continue to cause damage. With the war in Ukraine and COVID lockdowns in China both continuing, the global economy continues to experience supply constraints and higher prices for raw materials.
Related to those shocks, what once seemed like transitory inflation has become persistent, and consumers have begun to expect higher rates of inflation for the coming years. In other words, the concern that inflation expectations could become unanchored has begun to materialize, which will make it more challenging for the Fed to rein in inflation. The UCLA Anderson Forecast expects that in order to do so, the Fed will significantly increase interest rates this year, which will slow consumer demand, especially for housing and related consumer durables. Higher rates will also slow business investment.
The slowdown in both consumer spending and business investment should bring demand back in line with supply and help alleviate some of the current supply chain constraints and shortages. Although a recession is not expected in the next two years, the risk has certainly grown. It is possible that continued global economic shocks will hurt the U.S. economic recovery and that the Fed will tighten too quickly, which could lead to a recession. The UCLA Forecast does not expect this to be the case, but a recession has become more possible.
The Forecast team also does not expect the Fed to be able to bring core inflation down to its 2% target until after 2024, even with the tighter monetary policy that is expected for this year and into 2023.
The June Forecast expects U.S. economic growth will likely slow to 2.8% in 2022, followed by 2.0% in 2023 and 1.9% in 2024, below the trend rate of growth in these later years. Just a few months ago, the forecast was for growth of 4.3%, 2.8% and 2.3%, respectively, for the same years. On a quarterly basis, the latest Forecast expects the depth of the economic slowdown and the highest risk of recession to occur in the middle of 2023.
According to Feler’s report, the GDP contraction that occurred in the first quarter of 2022 was a “one-off.” He expects a rebound in GDP of 3.1% on an annualized basis in the second quarter and 3.6% in the third quarter, as consumers shrug off COVID-19 and shift back to services like airline travel, recreation and dining.
“By the end of 2022 and into 2023, as the impact of the Federal Reserve’s interest rate increases begin to bite, we expect growth to slow to below 2%,” Feler says. “Only by the end of 2024 do we expect GDP growth to pick back up to trend rates.”
With that economic slowdown, the level of GDP is expected to remain below what it would have been had the pandemic never occurred. That is, real GDP is not expected to return to its long-term trend even by the end of 2024. Unemployment will likely rise in 2023 as the Federal Reserve increases interest rates and the economy slows. The forecast for inflation does not see consumer prices easing any time soon and calls for 7.4% year-over-year inflation, as measured by the consumer price index, by the end of 2022, falling to 2.2% by the end of 2023.
Feler expects the Fed to raise interest rates at each of its meetings for the rest of the year, with the likelihood of 0.5 percentage point increases in June and July, and even the possibility of a 0.75 percentage point increase if inflation does not begin to come down. The forecast expects the federal funds rate to peak between 3.75% and 4.0% in mid-2023.
The California forecast
In California, the pandemic continues to be a major factor influencing the economy, but it is no longer the sole influence. Higher energy prices due to Russia’s invasion of Ukraine as well as uncertainty on Wall Street that will impact funding for the state’s technology entrepreneurs are headwinds, in addition to continuing pandemic-related supply chain interruptions.
But there are also some positives, including California’s record surplus general fund and a significant rainy-day fund to protect against future tax revenue downturns.
Still, according to UCLA Anderson Forecast Director Jerry Nickelsburg, who authored the June California forecast, the headwinds affecting the state’s growth are significant. As a result, the forecast has been shifted downward from the previous one. It is not a recession, but it is a shallower growth trend than before.
Nickelsburg’s June analysis includes an examination of sectors that are now experiencing constraints but are expected to drive the California economy in the coming years.
The California forecast calls for solid gains in employment. The current data indicate that broad-based hiring in retail trade, health care and social services, technology and construction is likely to mean solid gains in the coming three years. Increases in defense spending and the continued demand for tech will also be factors in the California economy’s continued growth.
But there are real risks to the economy in the near term. As a consequence of the expected slowing of growth elsewhere in the U.S., the California forecast is now a bit weaker than it was three months ago. Further risks to the forecast are the continuing pandemic and domestic migration on the downside, as well as increased international immigration and accelerated onshoring of technical manufacturing on the upside.
Technology-laden industries have been driving the California economy since the end of the Great Recession, as the demand for new software and technological solutions to 21st-century business and consumer activity has been evident in both the San Francisco Bay Area and Southern California. Today, this spans aerospace, manufacturing, life sciences, energy, entertainment and computing.
Although tech is not a sector itself, two sectors — professional, technical and scientific services being one, and information the other — are arguably the most tech-intensive sectors. The information sector includes film and television production and broadcasting. By June 2021, employment in these two sectors had recovered in the Bay Area, and in April 2022, the level of payroll employment was 7.2% higher than its previous peak. Also, April employment grew at an annual rate of 7%. Between the last three months and the previous three months, employment grew by an annual rate of 4%.
In addition, the logistics industry has been hiring rapidly since the downturn in March 2020. This has been driven by a shift from services consumption to goods consumption during the worst of the pandemic, an increase in home remodeling and a shift in purchase behavior from brick-and-mortar retail to online retail. The impact can be seen in the sea port and airport data. As California is the port of entry for most of the goods produced in Asia's industrial centers, the state has disproportionately benefited from this increased demand.
The unemployment rate for the third quarter of this year is expected to be 4.3%, and the average rates for 2022, 2023 and 2024 are expected to be 4.5%, 4.1% and 4.5%, respectively. The forecast for 2022, 2023 and 2024 is for total employment growth rates to be 4.3%, 1.5% and 4.7%. Non-farm payroll jobs are expected to grow at rates of 5.1%, 2.3% and 1.2% during the same three years. Real personal income is forecast to decline by 4.5% in 2022 and grow by 2.4% in 2023 as a function of the transfers from the stimulus packages expiring, and it is expected to grow by 2.9% in 2024.
In spite of the slowing economy, the continued demand for limited housing stock, coupled with low interest rates, leads to a forecast of a relatively rapid return of homebuilding. The economists’ expectation is for 124,000 net new units to be permitted in 2022, growing to 143,000 by 2024. That level of homebuilding means that the prospect of the private sector building out of the housing affordability problem over the next three years is nil.
Note from yours truly: There is a lot of anomalous behavior in the economy at present, undoubtedly due to the pandemic. The recession of 2020 was directly due to the pandemic and the shutdown of large sectors of the economy, not the usual cause of recessions. The first quarter real GDP showed negative growth, attributed to an inventory buildup in the prior quarter (as firms overbought to deal with supply chain issues - also pandemic related - and consumers shifted demand to imports which are not produced domestically). But the drop in domestic economic activity did not show up in rising unemployment, rising new claims for unemployment insurance, or even decreased vacancies. In short, the labor market seemed to be detached from other economic activity. Ultimately, forecasting depends on looking back at historical data and patterns and seeing what the past says about the present and the future. However, a pandemic-induced recession followed by a pandemic-afflicted recovery is not something with which we have had a lot of experience. You have to go back to the pandemic of 1918 and beyond for a precedent, and it's not clear that the economy of a century ago has a lot of information to give us. There was a severe downturn in the early 1920s, followed by the "roaring 20s" thereafter. So, let's hope we get the roar and not another recession.
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You can see the Forecast presentations at the link below:
CalSTRS, the state pension plan for school teachers, has a system in place to deal with the impact of high inflation on pensioners. It normally provides a 2% COLA (cost of living adjustment) which "works" OK when inflation is in that range to maintain purchasing power. But it also has a system in place to deal with the impact of higher inflation, basically by limiting the erosion of purchasing power so that pensions don't fall below 80-85% of their real starting value.
There is relevance in the CalSTRS approach for the UC pension plan which I will explain below. But first, note the item below from the Sacramento Bee:
THE STATE WORKER
Retired California teachers could receive checks to help cover inflation costs
Wes Venteicher, 6-1-22
About 55,000 retired teachers would receive new payments to supplement their pensions under a proposal moving through the California State Legislature. Aimed at offsetting inflation, Senate Bill 868 would provide quarterly payments to teachers who retired before 1999. The proposal would deliver increases of 5% to 15% of their pensions depending on retirement year, with those who retired before 1980 eligible for the biggest bumps, according to a summary prepared by the California State Teachers’ Retirement System. The CalSTRS board supported the proposal early this year. The legislation cleared the state Senate last week. It requires approval from the Assembly and Gov. Gavin Newsom to become law.
The new benefit would cost about $592 million, according to CalSTRS. The money would come from an account established in 1989 to help retired teachers cope with inflation. The account, which is separate from the system’s $318 billion investment fund, is supported by the state’s general fund, revenue from leased school lands and payments related to federal land grants to California schools. The proposal, introduced by Sen. Dave Cortese, D-San Jose, would provide additional payments on top of two other inflation-based CalSTRS benefits.
The retirement system provides a 2% increase to all retirees and beneficiaries each year. The increase is not compounded. Rather, the system increases retirees’ payments each year by an increment equal to 2% of what they received upon retirement. Additionally, the system tracks how retirees’ pensions are affected by inflation. When inflation shrinks the “purchasing power” of a pension below a certain floor — 80% to 85%, as set by the CalSTRS board — a retiree or beneficiary becomes eligible for supplementary payments. Those supplements restore purchasing power to between 80% and 85% of what it was originally.
Cortese’s bill would provide additional payments from the same account to teachers who retired before 1999, bringing their purchasing power closer to 100%. Retirees would receive quarterly checks starting July 1, 2023 that would increase their benefits by average amounts ranging from about $1,860 per year to about $3,768 annually, according to CalSTRS.
The account that would fund the payments is called the Supplemental Benefit Maintenance Account. It’s meant to supply supplemental benefits through 2089, and has about $11.9 billion more than estimates say it will need, according to CalSTRS. Cortese’s proposal would reduce the surplus to about $11.3 billion.
In contrast to CalSTRS, the UC pension plan does not have a formal guarantee of maintaining 80-85% of starting purchasing power. Its formal COLA arrangement is more protective against inflation than CalSTRS' system, but it only partially compensates for inflation above 2%. The partial protection means that some long-time pensioners eventually have their starting purchasing power fall below 80-85%. In the past, when there was high inflation, the Regents had a periodic "practice" (not a formal obligation) of protecting pensioners from falling below 80-85% by making periodic ad hoc adjustments in the pensions of those below that level. In effect, the Regents would voluntarily do what CalSTRS automatically does.
Inflation has picked up in the past year. The latest UCLA Anderson forecast (which we will discuss in a separate post) indicates that the Consumer Price Index won't get back to a 2%-ish level until 2024. Thus, in response, past practice of the Regents would be to restore those pensioners who have fallen below 80-85% of purchasing power - there won't be many at this point - to that level. However, no such discussion at the Regents has taken place.
There are now new Regents who were appointed in the era of low inflation who probably know nothing of the past practice. The fact that there is discussion in the legislature with regard to having CalSTRS go BEYOND the 80-85% guarantee and go all the way to 100% - as the article above shows - would be a good starting point for a discussion of the 80-85% practice for UCRP.
A report was issued by the systemwide Academic Senate on May 26th dealing with the impact of the coronavirus pandemic on faculty, particularly with regard to the academic advancement process. When the pandemic began, faculty suddenly had to pivot to Zoom teaching, a time-consuming change that required substantial effort and adjustment. That change alone impeded research, simply because of the time diversion.
However, the pandemic suddenly shut down research labs, interfering with research projects, grant writing, etc., for those faculty whose research depends on labs. It closed off travel for those faculty whose research depends on travel. It closed off access to libraries and other facilities needed for research.
Obviously, the degree to which research was impeded varied from field to field and individual to individual within a field. Some individuals had family obligations because of kids home from school, etc. The report deals with steps campuses should take in reviewing dossiers for promotions and other advancements. That said, the report is very complicated. Even the acronym for the group that produced it - MCIF-WG - Mitigating COVID-19 Impacts on Faculty Working Group - is off-putting. The old adage that a camel is a horse designed by a committee quickly comes to mind when trying to read it.
The cover of the report has a picture of a man who seems to be wearing a white coat (from a medical center?) high up on a balcony, presumably a faculty member whose research was delayed. Is he so upset by the delay that he is planning to jump? Yours truly couldn't figure out what the cover means.
Anyway, there is a basic principle in the report that comes with another acronym - ARO - Achievement Relative to Opportunities - that essentially means that in examining cases for advancement, decision-makers should consider what the candidate was able to accomplish given the impeded opportunities that were available.
