What the Latest PPIC Poll Tells Us

The Public Policy Institute of California has released its latest poll data. Jerry Brown seems to be pulling ahead of Meg Whitman. The poll covers the period including the last debate and "whore-gate." (If you don't know what that is, it apparently doesn't matter to voters so forget it.)

As far as UC goes, Whitman favors defined contribution pensions for new hires of public employees, but it appears the Regents will select a defined benefit option. Would she insist on DC for UC? As noted in earlier posts, regardless of who wins, there could be a ballot initiative mandating DC. It ain't over 'til it's over.

The PPIC poll also covers ballot issues. If you believed legalizing and taxing marijuana would solve the state's budget problem (you would be wrong about that), it doesn't look like Prop 19 is going to pass. (So you can continue blissfully to believe it without contradiction.) If you thought suspending upcoming business tax breaks would help the state budget (Prop 24), it doesn't look like that will happen, either. And if you think UC would be helped by a majority vote (rather than a 2/3 supermajority) on state budgets (but not on taxes), Prop 25 looks like a "maybe."

Full poll available at http://www.ppic.org/content/pubs/survey/S_1010MBS.pdf

A Guide for the Perplexed:

What Happens to Recruitment and Retention of UC Faculty When the Privates Discover They Ain't Poor?

When the stock market fell and rich higher ed institutions such as Harvard looked at the absolute value of their loss, they froze in panic and cut budgets. But yours truly predicted that the day would come when the Harvards and Stanfords of the world would realize that they are still rich with what remains. (Their losses would be proud endowments for many institutions!)

That realization is beginning to settle in - as the excerpt below from the Boston Globe indicates. Harvard is making various adaptations to increase its liquidity. It has suspended certain additions to its physical plant. Now what happens when Harvard et al enter the academic job market and compete for top faculty?

Harvard says cash holdings climb to $1b (excerpt)

By Beth Healy, October 20, 2010

Harvard University more than tripled its holdings in cash and US Treasuries, to $1 billion, by the end of fiscal year 2010, following sharp investment losses during the financial crisis that left the nation’s richest institution temporarily cash-strapped.

Harvard, in its annual report for the 2009-2010 year, ending June 30, said it made “significant progress’’ reshaping the university’s pool of operating funds “to be more readily available, and less susceptible to illiquidity and market fluctuations.’’ Harvard said it started to put the money in safer, shorter-term investments, starting in fiscal year 2008 and will stick with that strategy over the next year.

The university’s top financial officials said in the report that Harvard had made progress in responding to changed economic circumstances. “Nonetheless, we must continue to be vigilant in managing our finances in order to ensure that Harvard can fulfill its mission even with the continued uncertainty that surrounds us,’’ they wrote.

With an annual operating budget of $3.7 billion — trimmed by 1 percent, or $32.5 million, from the previous year — Harvard said it expects to further add to its cash holdings in 2011, according to the report...

Read the full article at http://www.boston.com/business/articles/2010/10/20/harvard_says_cash_holdings_climb_to_1b/

And consider the outlook if UC cuts retirement benefits and neglects total remuneration.

Good News/Bad News on UC Budget

The Sacramento Bee reports good news/bad news on the UC budget. Although the article doesn't say so, part of the funding for UC (and CSU) for this fiscal year is coming from federal stimulus monies which disappear next year.

After massive cuts, higher ed funding rises in new California budget (excerpt)

Oct. 20, 2010, Laurel Rosenhall

A wave of mass student protests, a new lobbying strategy by university leaders, and the governor's desire to leave a positive legacy in education during his final year in office led to a remarkable turnaround for California's public colleges in the budget he signed earlier this month.

In a state budget full of funding cuts – to social services, child care, prisons and state worker benefits – higher education was one of the few areas of government to receive more money this year than last. State funding for California State University went up by more than 11 percent over last year, while state funding for the University of California went up by more than 12 percent.

Compare that to the prior year, when both university systems saw state funding slashed by 20 percent. They responded by eliminating classes, reducing the number of students they served and jacking up tuition – prompting protests throughout the state and a new focus on advocacy.

The two university systems and the community colleges banded together in their lobbying efforts this year, creating what many people described as a more effective message. Campus and student leaders worked together to persuade lawmakers that investing in higher education would help California's economic recovery – and that continued cuts would ruin one of the state's strongest assets.

It was "in those thoughtful meetings, where very powerful arguments were made" that Gov. Arnold Schwarzenegger decided he should increase funding for higher education, said Bonnie Reiss, the governor's secretary of education.

So now that universities are receiving more money from the state, what can students expect?

A mixed bag.

The good news: At UC and CSU, it should be easier to get classes because universities will use some of the new money to expand course offerings. And many community college students who couldn't transfer to CSU last year because of the budget cuts will be able to get in this spring when California State campuses admit 30,000 new students.

The bad news: Tuition will probably continue to rise.

That's because even though universities fared well in this year's budget, they're still getting less money from the state than they did a few years ago and are looking for ways to fill the gap.

...UC's governing Board of Regents is likely to vote on next year's fee levels in November or January.

Given the bleak predictions for next year's state budget, it's unlikely universities will hold the line on fees, said Steve Boilard, director of higher education for the Legislative Analyst's Office.

"I would be shocked if there was not a fee increase," he said. "If I had to guess, I'd put it in the range of roughly 10 percent for each segment again."

Full article at http://www.sacbee.com/2010/10/20/3117160/after-massive-cuts-higher-ed-funding.html

The Downhill Slide of Private Pensions: An Issue for UC?

A report based on U.S. Bureau of the Census data notes that the proportion of full-time, full-year employees in the private sector that were participants in some kind of pension plan (defined benefit or defined contribution) has been dropping over the past decade. The participation rate was about 60% in 1999. In 2009, it was about 54%. There is no breakout of California data.

The decline suggests why public pensions have become an issue, even apart from concerns about pre-funding. In an earlier post, I noted that much of the focus in the UC discussion of its retirement plan has been on internal politics, i.e., what do UCOP administrators, Regents, UC Academic Senate officials, faculty, and staff think. There has been little analysis of the external political environment.

The report is available at http://www.ebri.org/pdf/briefspdf/EBRI_IB_10-2010_No348_Participation.pdf

UPDATE: A description of the Mayor's proposals on LA pensions and the debate over them is at http://www.latimes.com/health/la-me-la-pensions-20101019,0,2786824.story

Sales of Class Notes for Slackers Are OK With the LA Times

An earlier post on this blog noted that CSU was trying to use a state law to ban commercial sales of student notes from classes. The notion behind the law is that the class materials are the property of the instructor. Today, the LA Times editorializes against the law. Excerpt:

The law goes too far... If the notes belong to the students who jotted them down, the state has no business interfering with what they do with them — share or sell (assuming they could actually find a buyer). And copyright laws already exist to protect the professor's words from being copied more or less verbatim without permission, or otherwise published without the professor's permission.

Full editorial at http://www.latimes.com/news/opinion/la-ed-notes-20101019,0,633597,print.story

Study Indicates California Public Employees Receive Total Compensation About Equal to Private Sector Equivalents

A UC-Berkeley study released recently indicates that California state and local workers receive roughly the same total compensation as private workers, once you standardize for various demographic variables and education via regression analysis. Taken together, public workers receive about 6% less in wages and salaries. But they get higher benefits so that the difference washes out, i.e., no statistical difference between public and private.

Although the authors don’t say so directly, nationally – as a table in the study shows – non-mandated benefits are about 30% of total comp for state and local workers. (Mandated or legally-required benefits are things like Social Security which are roughly the same in public and private jobs.) So to close the 6% gap, benefits must be approximately 20% higher in the public sector compared with the private (6/30 = .20).

Undoubtedly, critics will note that the authors evaluate the benefits at current employer costs. So if there are unfunded promises being made (pensions & retiree health), it could be argued that their estimate of benefit value is too low. But note that even if benefits are 50% underestimated (i.e., if the benefit premium were 40% instead of 20%, you would end up with overpayment in the public sector by only 6%.

The study is at http://www.irle.berkeley.edu/cwed/wp/2010-03.pdf

A press release from UC on the study is at http://www.universityofcalifornia.edu/news/article/24306

Finally, a news account is at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/10/19/MNUJ1FUAOH.DTL&tsp=1

No, the authors do not break out UC employees and it probably could not be done using the database they had.

UC Administrators in Denial Over Pension Options?

Professors Jim Chalfant of UC-Davis and Helen Henry of UC-Riverside served on the Post-Employment Benefits (PEB) Task Force and signed the dissenting report. The majority of the PEB endorsed options A and B which are “integrated” with Social Security. The dissenters found A unacceptable and B possibly acceptable if combined with a strategy to make total remuneration (salary + benefits) competitive.

Option C was added to the menu by the dissenters. It is a simpler and more generous pension than A or B, but adds to the employee contribution as a result. Dissenters found C to be acceptable, again with the qualification that a plan was needed to restore total remuneration to competitive levels.

An “op ed” by Professors Chalfant and Henry explaining their position is at

https://docs.google.com/fileview?id=0BzVLYPK7QI_4NzJkNmI2MjEtM2UwNi00MjFlLWI5ZDctMzdmZWIwOTU3Mzdh&hl=en&authkey=CPTrmYMO

The op ed highlights the seeming departure from competitive remuneration in the majority PEB position, which assumes that money can be saved by cutting benefits without offsetting adjustments in other elements of pay.

Three high-level UC administrators – Provost & EVP Lawrence Pitts, EVP of Business Operations Nathan Brostrom, and EVP and Chief Financial Officer Peter Taylor - wrote a response to the dissenting report. In turn, the dissenters annotated their response. The annotated version can be found at

https://docs.google.com/fileview?id=0BzVLYPK7QI_4NGQ5M2UyYzYtZDRkYS00Y2RjLTg0NWUtYTcxMzY1ZjMwOTYw&hl=en&authkey=CJeflbYE

Professors Chalfant and Henry sent an email to various individuals who had received the UNannotated version of the Pitts-Brostom-Taylor paper providing them with the annotated version and the op ed. In addition, the Chalfant-Henry email – reproduced below – provides additional explanation of the dissenting position and points to certain inaccuracies and potentially misleading statements in that paper.

From: Jim Chalfant

Date: October 18, 2010 9:33:39 AM PDT

To: Academic Council , chancellor@berkeley.edu, katehi@ucdavis.edu, chancellor@uci.edu, chancellor@ucmerced.edu, sue.hellman@ucsf.edu, tim.white@ucr.edu, chancellor@ucsc.edu, henry.yang@chancellor.ucsb.edu, chancellor@ucsd.edu, chancellor@conet.ucla.edu, bresl@berkeley.edu, Enrique Lavernia , gene.lucas@evc.ucsb.edu, gottfred@uci.edu, kalley@ucmerced.edu, dallas.rabenstein@ucr.edu, swaugh@conet.ucla.edu, jbluest@diabetes.ucsf.edu, svcaa@ucsd.edu, cpevc@ucsc.edu

Cc: "Mark G. Yudof" , Nathan Brostrom , Lawrence Pitts , Dwaine Duckett , Peter Taylor , Helen Henry

Subject: In Support of an Integrated Plan Design: Annotated Version and an Opinion Piece

PRESIDENT YUDOF

PROVOST PITTS

EXECUTIVE VICE PRESIDENT BROSTROM

EXECUTIVE VICE PRESIDENT TAYLOR

VICE PRESIDENT DUCKETT

CHANCELLORS

EXECUTIVE VICE CHANCELLORS

ACADEMIC COUNCIL

Dear Colleagues:

Attached please find a version of the paper you recently received in support of an integrated new-tier design for the UC Retirement Plan, co-authored by Provost Larry Pitts, Executive Vice President Nathan Brostrom, and Executive Vice President Peter Taylor (PBT).

We have annotated this version to highlight areas in which there are differences of opinion regarding a common set of facts. We believe these differences arise, not from a lack of understanding of the features of the integrated plans by either us or PBT, but from a difference in emphasis.

In particular, to provide a brief summary,

1. PBT have accurately described the mechanics of Option B, but their claims about fairness and equity are not as easily supported.

2. Their claims that it is considered "appropriate" to replace 70 to 90 percent of pre-retirement income, in the form of pensions, are simply inaccurate. They are correct about how to achieve those levels of replacement, but such levels are not adequate, not competitive, and apparently not deemed sufficient by many UC employees.

3. UC faculty and staff seem to us to be saying that they prefer a better pension benefit, and they are willing to pay their share in employee contributions to achieve it.

4. The costs to the University are substantially overstated by PBT. One source of overstatement is the comparison between Option A and Option C, which has been estimated at $211 million annually (this figure is not adjusted to present dollars) or $5 billion between 2030 and 2038 (also not adjusted to present dollars). The latter figure is expressed elsewhere as $1 billion in present dollars, only 1/3 of which will be from state-funded payroll if current patterns hold.

Option A is not advocated in the latest PBT document, so comparing costs between Options A and C, to provide support for Option B, runs the risk of confusing many readers.

More important, these costs apparently ignore the best idea from the financing plan, which applies to all Options, borrowing from STIP to more rapidly reduce the unfunded liability. We are eager to see careful, accurate budget information along with advocacy, and we think that the campus administrators targeted by PBT, and by this email, would like to recommend options for a new-tier pension design that reflect reality. We are under no illusions that dealing with UC's unfunded liabilities will be anything but painful, but it is very important that the policy recommendations be discussed with a common understanding about the nature of the problem.

Hence, we hope you will find this material useful as a means to better understand the apparently growing preference for Option C among the faculty and staff of the University.

Also attached is an opinion piece which we are circulating among our colleagues and which presents our views more fully.

Please feel free to forward this email and the two attachments to the many others from campus administrations who received Nathan Brostrom's email from Friday afternoon. We did not have the full set of emails from Nathan's distribution list, but would very much like to reach each person on that list, particularly those in the areas of Budget and Human Resources.

Sincerely,

James A. Chalfant, Professor, Agricultural and Resource Economics, Davis Campus

Helen L. Henry, Professor Emerita, Biochemistry, Riverside Campus

Note: I have obtained permission to make all of these documents available.

And finally, a recording of the UCOP Administrators Tabernacle Choir has surfaced atop Mt. Oakland: