Changing Universities

Throughout the last year, I have discussed many of the ways universities are scaring faculty and workers into accepting lower salaries and benefits as their workloads increase. This great squeeze echoes the general move of our “winner-takes-all” economy; workers are being asked to do more for less as the wealthiest among us continue to increase their earnings and political power. In the case of the UC system, I have documented how an exaggerated fiscal crisis helped to usher in furloughs, layoffs, and increased fees and tuitions, and I have warned that the retiree liabilities will be used to institute a permanent state of fiscal crisis. We have now entered fully into the great pension scare.

My argument is not that UC employees should reject any increase in their contributions to the retirement plan; however, I have stressed that we need to understand the truth about the financial status of the university and the pension plan. Unfortunately, university officials cannot stop themselves from circulating half-truths as they hope to force more concessions from workers. To begin my analysis of this administrative strategy, we can look at a recent ">article from the Chronicle of Higher Education entitled, “As Pension Costs Rise, Public Colleges Pay the Price.”

This article opens with the usual rhetoric of panic and crisis that we find in most pieces dealing with public pensions: “Pension costs are spiraling out of control at the University of California, which, unlike most college systems, runs its own pension plan. Within two years, the 10-campus system expects to contribute $700-million per year just to keep its plan afloat—nearly as much as the cuts in state support last year that generated protests and threw the system into crisis.” The first thing to point out about this statement is that it does not distinguish between the amount the university itself has to pay and the amount it will make external grants and services contribute. Since the UC itself claims two thirds of the employer contributions will come from external sources and services, the $700 figure can be reduced to $230 million. Moreover, the university is asking the state to pay for the $230 million, and while this funding from the state does not seem likely this year, it could be arranged in the future.

We also have to question why The Chronicle sought to compare last year’s protests over the state reductions to the pension issue. It appears that they are fueling the idea that the greedy workers are making tuition costs go up because they refuse to give up their great pension deals. This common discourse of pension envy is coupled with a repression of the true cause for the university’s financial woes: “But the recession reduced the university's investment by $16-billion, or a third of the plan's value. Now, in order to keep the fund solvent, the system and its employees must contribute billions of dollars in the coming years just as the system struggles to survive deep cuts in state support. Workers will most likely be paid less over all, and campuses will need to divert.” The first thing to note about this passage is that it begins by simply blaming the loss of $16 billion on the “recession.” There is no acknowledgment here that perhaps bad investment strategies are the real cause for the pension’s underfunding. Furthermore, the article predicts that the need to fund the pension plan will inevitably result in the decrease in workers’ salaries and a diversion of university funds.

In a now repeated view, Peter Taylor, the head budget person for the UC system, argues that the university will have to spend more money on the pension than it does on instruction: “Unless it makes changes, the system is on track to spend more on retiree pensions and health care than it does on instruction by 2014, says Peter J. Taylor, the system's chief financial officer.” What Taylor does not say here is how little the university currently spends on instruction, but the rhetorical strategy is to pit the students against the faculty and workers and blame the employees for both the increase in student fees (tuition) and the decrease in instructional budgets.

To help clarify the reality of the pension situation, we should keep in mind several important facts. The first is that many of the long-term projections for the pension liability and underfunding were made during the lowest point of the global financial meltdown. In fact, after the UC pension lost $16 billion in 2008 and 2009, it gained back $10 billion in 2010. This fact is important because many of UC’s projections do not take into account these recent investment increases. Moreover, we see that even if the UC employees contribute 5% of their earnings to the pension plan, they will only be adding $400 million to the fund, while a good investment year can bring in $10 billion. Thus, the most important issue is how the UC invests its money, and how it can protect against major losses.

The simple fact of the matter is that the huge swing in investment losses and gains makes it impossible to make any long-term predictions with any accuracy, and yet current accounting requirements force the university to predict future returns, interest rates, faculty salaries, and other unpredictable elements far into the future. Given that these accounting projections are always wrong, I have suggested that the university sets up a system to negotiate every year or every year the needed employee and employer contribution rate.

Another important fact is that, currently, the university calculates the normal yearly cost of the pension plan to be $1.4 billion, and as of March 30th, 2010, we had $37 billion in the pension investment accounts. To cover the $1.4 billion cost each year, the UC needs to put in about 17% of payroll (the total covered payroll is $8 billion). If employees contribute 5% of their salaries ($400 million), and the university only pays for the state-funded workers (one third of all employees), the university needs to pay out $320 million, and if the state does not pay this $320 million, the university can either take out a bond or borrow money from its own short-term investment fund to pay some or all of the amount.

While $320 million is not a small amount, we have to remember that the UC operating budget is over $20 billion. The rhetoric of crisis thus seems to be misplaced, and what we really have to look at is how the UC invests its money, and why it is trying to scare workers into accepting lower pay and benefits for more work. We also have to pay attention to the temptation for current employees and administrators to sacrifice future workers in order to keep their own pension benefits.

The university has now entered into a giant media campaign to convince workers that the UC system faces an immediate crisis caused by retirement issues. For instance, in the Los Angeles Times article, “UC retirement funds face a shortfall of more than $20 billion, report says,” we are told that “Yudof has warned of terrible consequences if the problem is not tackled quickly. ‘If we do nothing, in four years, the University will be spending more on retirement programs each year than we do on classroom instruction.’” Once again, the public media strategy is to oppose the interests of the workers against the interests of the students.

By repeating the claim that the university now faces a $20 billion liability, which will soon balloon into a $40 billion liability, UC administrators follow the right-wing attack on public pensions. Since virtually no one understands how these long-term liabilities are calculated, the university feels that it can use this scary number to turn the people against public workers and defined benefit plans. While I am not claiming that the UC system does not face a future problem, the extreme exaggeration of the problem makes it hard to determine the right solution. We should all keep in mind that the UC is currently only spending about $240 million on retiree healthcare and $200 million on the pension plan, and so it is absurd to make it seem that the UC will be $40 billion in the hole in just three years.

By using the huge future liability number, the Post-Retirement Benefits Task Force justifies moving the minimum retirement age move from 50 to 55 and the age for receiving a full pension from 60 to 65. The plan for people hired after 2013 would also reduce pensions by the amount of an employee’s social security. This change would reduce some people’s pension allowance by more than 50%. It is important to stress that the dissenting senate faculty report rejected the use of social security to reduce the pension payout. The dissenting report also did not support the Task Force’s suggestion to to have a second tier where employees could choose to pay a lower contribution rate and receive a reduced pension.

While some of the unions have endorsed the need to increase employee and employer contributions to keep the pension well funded, they have also rejected the need to adjust the age requirements and payout calculations. In fact, UC-AFT and AFSCME have been in conversation with senate faculty members in order to push for a united front against a two-tier system. Finally, after years of negotiating, President Yudof has offered the unions the chance to have one union representative to sit on the investment advisory board. The unions have decided to forward the name of Bob Samuels to Yudof. Let’s see what he says.

The state senate voted in favor of the Assembly Concurrent Resolution 138 by a 23 to 11 margin on Monday August 23rd. This bill calls for community colleges to staff at least 75% of their student credit hours by full-time tenure and tenure-track faculty. Moreover, the bill affirms the principle of non-tenured part-time faculty receiving equal pay for equal work. However, all of these requirements are based on available funding and collective bargaining agreements.

It is important to stress that in the California community college system, one cannot be full-time and not be on the tenure track. Unlike the UC and CSU system, there are no full-time, non-tenure-track positions, and community college faculty who are not eligible for tenure can only work up to a 67% appointment.

The current legislation is part of the AFT FACE campaign that tries to do two seemingly opposing things: increase the number of tenure-track positions and provide equity and job security for non-tenured faculty. While UC-AFT supports this effort for community colleges, we argue that this type of policy does not work for research universities since faculty members in these institutions have distinct job descriptions.

In the context of research universities, it is hard to determine what equal pay for equal work would mean because faculty are doing very different jobs. For example, the University of California contends that the reason it pays tenured professors so much more than non-tenured lecturers is that professors are required to do research, teaching, and service, but most lecturers only teach. While it is untrue to say that lecturers do not do service and research, we do recognize that lecturers are defined by their teaching responsibilities, and this is not necessarily a bad thing.

Since lecturers have teaching as their primary mission, they become central to the undergraduate mission of the university; and yet, a major problem exists because these teachers in charge of instruction are not members of their academic senates. In fact, lecturers are often referred to as “non-senate faculty” in order to stress their exclusion from shared governance. One of the results of this denial of democratic participation is that faculty senates often make curricular decisions without consulting the people who are actually doing the teaching. To correct this problem, UC-AFT hopes that in the future, lecturers will be granted full rights to participate in their faculty senates.

As lecturers have been denied their role in university shared governance, UC-AFT has concentrated on negotiating and enforcing collective bargaining agreements that improve the job security and equity of non-tenured faculty in the UC system. We have also shown how the working conditions of lecturers directly determines the learning conditions of undergraduate and graduate students, and while we have not pushed for pay parity with senate faculty, we have gained parity in benefits and academic freedom rights. Furthermore, unlike the AFT FACE campaign, UC-AFT has not sought to push for more tenure-track lines or total pay equity for part-time faculty. Instead, we have tried to make non-tenure-track positions as secure and equitable as possible.

Last year, more than a hundred lecturers with continuing appointment were given one-year layoff notices and hundreds of other lecturers in their first six years of service faced job losses. We are happy to report that almost all of the continuing appointment lecturers have had their layoff notices rescinded, and many of the other lecturers have been rehired. To get these jobs back, we had to expend a lot of time and resources on grievances, protests, and media campaigns, and it looks like we will have to continue this defense of our jobs and undergraduate education in the coming years. While we do not think we can legislate the UC into supporting non-tenured track faculty, we do intend to continue our efforts for promote equity and job security for all faculty members.

I recently returned from the Coalition of Contingent Academic Labor meeting in Quebec City where I heard representatives from Canada, Mexico, and the United States discuss the current challenges facing higher education. It turns out that things are bad all over, and even the seemingly progressive Canadian system is being undermined by tax cuts and right-wing ideology. Not only are Canadians being asked to pay more tuition for an education that was once free, but part-time teachers are losing their rights to unionize and strike, while university budgets are being slashed. In fact, the current conservative government in Canada appears to being taking its marching orders from America’s backlash against public education, public employees, and public pensions.

Three growing shared trends that many speakers mentioned were the casualization of the labor force, the defunding of the public sector, and the privatization of public institutions. All across the globe, it appears that there is a growing desire for higher education, but the increased demand is being met by a decrease in supply, and the result of this mismatch is that public institutions are being stratified, while private corporations step in to take advantage of desperate, low-income students. Moreover, many of the private, for-profit organizations throughout the world are using the same business model to cut costs and increase profits, and this system relies on eliminating job security (tenure), increasing managerial control, and relying on the Web to deliver course content to students/consumers.

In the developed world, the same story is being repeated: due to a growing divide between the super-wealthy and everyone else, there is an increased demand by the elites to cut taxes and reduce the funding for public education. Since these public schools are losing their state funding, they feel that the only thing they can do is to copy the practices of private institutions, and a favored model is to look to corporations to fund research, while tuition is raised so schools can cater to the rich. Furthermore, while the high tuition/high aid model looks like it protects some semblance of fairness, the result of this system is the decimation of the middle class. In fact, all of the global trends point to elimination of the middle and the rise of a two-tiered hierarchy that pits the wealthy against everyone else.

The solution to this global stratification should be clear; we need to defend the middle class, and a central way to do this is to fight for public funding and to rollback tax cuts for the wealthy and corporations. However, conservatives across the world have convinced the non-elites that we can no longer afford things like public higher education, and the real enemy is the public employees with their unions, pensions, and job security. In this context, the conservative solution is to get rid of all job protections and benefits so that everyone can be put in the same situation. In this type of race to the bottom, all that public employees can do is to fight givebacks and hold onto what they have.

Yet, what would it mean if all public employees started to fight back, and instead of running the race to the bottom, they reversed course and tried to push more people to the top. This strategy would entail fighting for tax increases for the wealthy and increased state funding for public institutions. It would also mean defending pensions, healthcare benefits, and job security as essential basic rights. Perhaps this campaign for the Race to the Top will be led from below, but it needs the support from all of our major organizations. Also, we need to put pressure on our political leaders to follow a more progressive agenda and stop being afraid of the conservative backlash.

Inside Higher Ed has a new article on Dean Edley and his promotion of online education as the solution to all of the University of California’s problems. It is clear from this piece, and Edley’s constant efforts at promoting a UC version of digital education, that the push for an online solution serves two important functions for the university’s administration: it hides the true causes for the UC’s fiscal problems, and it offers an avenue for more centralized control.

I have been writing for a year that the university has been blaming Sacramento for all of its problems because it does not want to look at its own issues. As I have shown, the central driving force behind the UC budget crisis is the loss of $23 billion of investments during the period of 2008-09. This huge loss dwarfs the state reduction of $600 million, and yet the university has never had to explain why and how it lost so much money and what it plans to do to prevent this from happening in the future.

Another major issues that is starting to get some attention is the idea that the university is losing money on its externally funded research grants. Even the Commission on the Future of the University has argued that the UC system is losing at least $300 million a year because its grants do not pay for the full cost of research. It is clear that a turn to online undergraduate education will not solve the research funding problem and will only function to obscure the investment losses.
However, one thing that the push for online education will do is to help the administration develop and control the undergraduate curriculum. As the Inside Higher Ed article states, the Berkeley Faculty Association “was particularly unnerved by the idea of graduate student-instructors being the “frontline of contact” with online students, as Edley put it. For some, that sort of talk evokes a model many for-profit institutions have used to keep payroll expenses low and administrative control high: have full-time faculty put together the syllabus, then hire less-expensive adjuncts to deliver it.” The idea here is that once the online courses are developed, the central administration can decide who teaches the courses, and the faculty senate will lose their current control over curricular decisions.

Edley’s response to the fear that the administration will take over and replace tenured faculty with adjuncts and graduate students is to argue that the online programs will generate huge profits that can be used to hire more tenured faculty, and this project offers the only hope for the economically challenged system. However, when Inside Higher Ed asked Edley and others to provide details on how the online courses would make money, they received the following response,” The university could not immediately provide the details of its financial modeling, but other documents suggest that the money would come from tuition, fees, and perhaps licenses for "premium access" to course content.” In other words, the UC has no idea how much money it will lose or gain, and it plans to use student fees and tuition to pay for the online courses.

It is interesting that the first comment on the Inside Higher Ed article comes from “Dean Dad,” an administrator who writes regularly for Inside Higher Ed: “It's increasingly clear that public higher ed won't be able to rely on the state to the extent it has in the past; that's especially true in California. As awkward as it can be to grow revenues, it beats cutting costs. The details matter, and I assume they'll evolve, but Edley is broadly right to look at ways to make the core educational mission self-sustaining.” The administrative logic here is that since states are cutting their support for higher education and because undergraduate instruction loses money, the only way to make education sustainable it to let it turn to online education as a mode of making money off of undergraduate students. Yet, as I have continued to show, undergraduate education already turns a huge profit, and these profits are used to sustain the unprofitable sectors like administration and external research.

Jerry Brown’s recently released plan for education has a few good vague ideas sprinkled amongst some very bad notions. Starting with the good, Brown does recognize the problem of increasing tuition due to the decrease in state funding: “Recent state budgets have raised tuition drastically, reduced the number of new students--as well transfers from community colleges--to CSUC, cut class sections so that students cannot get basic classes they need, and driven good professors to other states. Students are dropping out because of high costs and the extended time needed to finish. California’s historic public university research base is declining.” Not only does Brown stress that the reductions in state funding have led to higher tuitions and fewer classes, but he also laments the loss of professors due to budget reductions.

Is first solution to this problem is to following the current governor and demand that money being spent on prisons is transferred to higher education: “We must also reverse the decades long trend of transferring state support from higher education to prisons. We can do this without sacrificing public safety. For example, as Attorney General, I recently blocked a proposed $8 billion prison hospital expansion—which was unnecessarily expensive and which would have added substantially to our state’s deficit. By relentlessly pursuing similar cost savings, we can channel needed funds to our higher education system.” The problem with this solution is that it is hard to imagine how it can take effect without changing the Three Strikes law and major drug decriminalization.

The next solution that Brown proposes should scare all of us. Like the UC upper administration, Brown endorses online education as a solution to many of high ed’s fiscal problems: “ The introduction of online learning and the use of new technologies should be explored to the fullest, as well as extended University programs. Technology can increase educational productivity, expand access to higher learning, and reduce costs.” Brown’s take on distance education recycles all of the questionable premises that drive the current UC initiative. In this naïve assessment, Brown thinks that access can be increased and costs deceased by some magical form of high-tech efficiencies. I have already written why the result of this process may be to increase costs, produce more work for faculty, and lower the quality and reputation of the university’s education.
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The other great fantasy solution that Brown copies from the UC Commission on the Future of the University is to increase the number of transfer students: “Transfer courses should be closely aligned with, and accepted by, the CSUC and UC systems. For example, transfer students are often forced to take redundant courses to graduate from the CSUC system even though they have completed equivalent coursework in community college.” As I have previously argued, increasing the number of transfer students will only decrease the funding of the university since most of the UC’s profit is made from lower-division, high-enrollment courses that transfer students do not have to take. Of course since Brown, like most of the UC administrators, does not actually understand how the UC makes its money, all he can do is propose unrealistic and unhelpful suggestions. However, we must keep in mind that the other candidate is actually much worse. In other words, we face another election of holding our collective noses while we vote.

Check out this great video by professor Eva von Dassow from U. of Minessota. No, that is not me in drag, but she could easily be speaking about the UC system. She discusses how a small reduction in state funds is being used to justify major changes in the allocation of resources. Like the UC system, activites that make money are being supported, while basic educational and research activities are being starved. In her video, she makes the following important observation: "those programs engaged in the production of knowledge that is readily turned into the money are the targets of investment while the rest are to be downsized into an efficient credit and degree factory.” She also mentions that the university’s revenue has actually gone up, but still they are making dire cuts and forcing faculty and workers to do more for less.

In an interview with Inside Higher Education, von Dassow adds that the new budget cuts "leaves undiminished the numbers of vice presidents, not to mention the salaries of coaches. No, these highly-paid positions are not to be reduced. Rather, the university must shed faculty.” In the UC’s case, the loss of faculty is happening covertly by not replacing retiring professors and not rehiring lecturers; meanwhile the number of administraors keeps going up as the cost of administration increases. Even with recent efforts at administrative efficeincy, the university shows where its values are by continuing to hire more high-level, high-paid bureaucrats.

In response to von Dassow’s comments, a university spokesperson told Inside Higher Ed, “"Professor von Dassow's perspective is one of many faculty perspectives at the University of Minnesota. We certainly appreciate her taking the time to express it. The University Senate overwhelmingly supported the president's plan for temporary pay cuts and his operating budget was unanimously supported by our Board of Regents." Doesn’t this sound familiar: yes, the university values the input of respected faculty members, but sorry, the regents and the official committees are the only ones that really matter, and they really like what we are doing.

As I have been arguing in this blog, the next big fight will be over online education, and here, we will see if the faculty in the UC system have any power or values. The UC administration has decided to simply bypass the faculty senates by taking control of the online initiative. This plan, which seems modest at first, will give upper-management the ability to control who teaches, what gets taught, and how it is taught. In fact, Dean Edley has argued that an “army of graduate student instructors” will man the courses, which will be initially funded by outside private sources. The next step will be to expand the project for online degrees, and at that point, there will be no difference between education and mass marketing.

I ask faculty to speak loudly against this administrative takeover. The question is not so much whether the quality of the education will go down (it will) or that the university will generate extra funds (it won’t), the question is who will determine the structure and content of our classes and what will these changes say about our values and interests.

One of the most annoying parts of any UC Regents meeting is the constant, time-consuming ritual of self-praise. Near the start of the meeting on July 13th, Chairman Gould announced that he would like to praise the board for their successful effort at turning anger away from Oakland and aiming it directly at Sacramento. In other words, the head regent wanted to make sure that people blamed the state and not the regents or the Office of the President for any of the UC’s problems.

Gould later responded directly to my public comment concerning the university’s loss of $23 billion in investments during 2008-09. He flatly said, “Over the last twenty years, our investments have outperformed our peers.” Not only is this statement completely false, but it reveals the defensive and misguided nature of the regents’ thinking.

Another great example of defensive group thinking occurred during the discussion of UC admission statistics. After stating that the system ended up with 2,000 more transfer students than they wanted, a regent exclaimed that this high rate of transfers shows that the Master Plan is still working. No one questioned why none of the admission targets were met, but the VP of Budget did warn that this level of over-enrollment means that the UC system now has 15,000 students that are not being funded by the state.

A very uncomfortable moment occurred when the ethnic breakdown of new admits was being discussed. On one of the charts, it showed that the percentages of new freshman who are Asian American, Latino/Chicano, African American, and American Indian have all gone up; however, next to Caucasian, there was no arrow. A regent asked why the percentage of white students didn’t also go up? I thought to myself, doesn’t he realize that you can’t have the percentage of all of the groups go up; after all, some group has to go down. Yet, in the delusional thinking of the regents, they should be able to increase every group, while they commit themselves to decreasing undergraduate enrollments.
One regent even ventured that the result of increasing student fees was that there was more financial aid available, and so there are now even more low-income students. No one stated the obvious that someone must be losing out.

Of course, the magic bullet presented at this meeting to solve both the budget problems and diversity issues was online education. In Dean Edley’s showy presentation on how the UC can use online courses to democratize elite higher education, he claimed that digital education is the new civil rights issue, and he ended his presentation with a slide stating “Si Se Puede.” I am sure that Cesar Chavez used this slogan to tell his people that they would soon have access to a high-cost, low quality educational option.

After Edley’s presentation, there was a press conference, and I asked him how UC is going to offer high-quality online education to low-income students if these are they very students who do not have broadband, fancy computers, and the needed software. He replied that the UC would have to provide students with new computers and broadband access, but it would only cost a small drop in the bucket.

Edley also announced that he has been going around with the governor asking private donors to support the pilot program that he hopes to roll out this Fall. I asked him if he was afraid that the donor’s might have a different agenda than the University of California, and he assured me that none of the gifts will come with any strings attached. I didn’t get to ask him about regent Blum’s business interests in online education, but it is clear that the regents are feeling defensive concerning recent media exposure of possible conflicts of interests.

One of the central ways that the regents and UCOP are trying to polish their public image is by showing how they will save money through administrative efficiencies. In a major move, the regents granted President Yudof the power to force campuses to adopt common systems and practices. It was clear that the Chancellors in the audience were not happy about their sudden loss of power, but they had to suck it up as the regents extended Yudof’s executive reach.


Here is my final conclusion; since the regents have no understanding or interest in actual education, they turn their attention to other areas like new community outreach programs, online education, green technologies, and diversity issues. Not once, during two long days of discussions, did I hear anyone touch on the subject of providing high quality education and research. It is clear that the faculty, students, and unions have to change the conversation and interupt the love affair between the regents and the Office of the President.

Throughout the year, faculty, students, and employees have been meeting at UCLA to discus the UC fiscal crisis and the Commission on the Future of the University. We decided to form an Alternative Commission because the official commission did not have any union leaders, librarians, and lecturers as members, and the working groups had very little student representation.

One of the first activities of the Alternative Commission was to create and distribute a survey regarding the official commission’s recommendations and other related issues. So far, over 1,000 people have responded to the survey, and we will present the findings on July 15th at the UC Regents meeting in San Francisco. A full copy of the report on the survey can be accessed here.

A major finding of the survey was that most of the students have very little knowledge or understanding about the creation and role of the commission. Moreover, when we outlined the central commission recommendations, most of the students and faculty gave these solutions very low ratings. In fact, we asked people to grade the commission recommendations, and we compiled the following results:

1) The lowest rated recommendation was to reduce the teaching staff by 10%. The vast majority of responses rated this proposal as an F.

2) The second most unpopular idea was to eliminate some majors and to get rid of majors that are duplicated on different campuses. Once again, almost everyone gave this recommendation an F rating.

3) Another idea that did not garner much support was the proposal to schedule yearly fee increases of 10-15%. It is important to note that many people feel that the UC does need to do something about its finances, but students and faculty resist the idea of making students continue to pay for the decrease in state funding.

4) Responders also rejected the notion of different fees for each campus, and there was a strong desire expressed to maintain the unity and equality of the system by holding onto a single fee structure.

5) We also asked people about the idea of having more online courses, and once again, the vast majority of responses were strongly against this recommendation. Many people wrote comments on this idea, and they stated that the move to online education could wind up costing the university more money, while lowering the prestige and quality of UC instruction.

6) We also asked people about the idea of increasing professional fees by 15%, and while this recommendation did receive some positive support, most people felt it would hurt the students who did not pursue the most profitable occupations.

7) Another recommendation that did receive some positive support was the idea of increasing the number of out-of-state students. It is important to note that the people who did support this move wanted to make sure that the number of in-state students also increased.

8) Finally, the recommendation that received the highest support, somewhere in the D+ range, was the notion of three-year degrees. Most people thought that this was a strange idea since so many students can not graduate in four years, but some thought the three-year degree idea showed promise if it could be done correctly.

The key to the future of the University of California relies on our ability to answer several major questions: 1) How much does it cost to educate each graduate and undergraduate student each year?; 2) How much money is lost or gained by externally funded research; 3) How much will it cost to fund the pension and retiree healthcare?; 4) How much revenue is unrestricted and can be shared between units?; 5) How much waste is there in the system?; 6) Is there a way of improving educational quality and decreasing costs?; and 7) Can the UC pursue a more stable and effective investment strategy? While some of these questions are touched on by the Commission on the Future of the University, most of these essential issues are ignored or misrepresented.

On the positive side, the university has opened up the question of cutting waste and excess by proposing to save $500 million through some vague process of centralization and cost reduction. However, these proposals do not directly address the question of the increased number of administrators and the rapid rise in their compensation packages. In fact, during the time of our “fiscal crisis,” people at the top have increased their earnings, while everyone else lost money.

A hopeful move by the Commission is to look at the rate the university charges external research grants for indirect costs. The commission claims that many of these grants are losing money and that the university should be more aggressive in bargaining for a higher rate of support from external sources. What no one knows is which grants make money and which ones lose; moreover, due to the abstract way of calculating indirect costs, it may be impossible to determine the profitability of most research projects. There is also the question of whether the university wants to base its research decisions on economic criteria.

One reason why this issue of grants is so important is that many faculty members in the humanities and social sciences feel that their budgets are being robbed to pay for expensive scientific research projects. One again, due to the decentralized nature of the UC budget, no one knows if externally funded research is being subsidized by high-enrollment undergraduate courses. Yet, what we do know is that money generated by undergraduate instruction is going somewhere other than instructional budgets.

This question of undergraduate instruction brings us to the unanswered question of how much does it actually cost to educate undergraduate and graduate students. Since there has been no effort made to answer this question, many of the Commission’s recommendation are based on unclear assumptions. For instance, the UCOP appears to be pushing for a decrease in undergrad enrollment and an increase in graduate enrollment, but they have never studied what this change would cost. The Commission has also pushed for more transfer students and three-year degrees, but it is unclear if these programs will save or cost money.

According to my studies of UC salaries, class sizes, and course loads, the university makes a large profit on each undergraduate student and loses money on each graduate student, and thus it would be economic suicide to decrease undergraduates, while increasing the number of graduates. Even if one believes that the key to the future of the UC is to focus on graduate education, one should have some idea about the costs of this move, and yet no one is basing their recommendations on actual numbers or facts.

The speculative nature of the Commission and the Office of the President tells us that we are a long way from budgetary transparency, and the main reason for this lack of transparency is that the university has to simultaneously tell its bond raters that it is in great fiscal health, while it tells everyone else that it is deep in a fiscal crisis. By claiming a large budgetary hole, the university can impose drastic cost-cutting measures, like furloughs, layoffs, and increased class sizes; meanwhile, it increases its assets by diversifying its revenue streams.

Like most research universities in America, since 1980, the UC has made up for its loss of state funding by increasing tuition and bringing in more funds from research, services, and investments. One of the problems with this transformation is that universities claim that they cannot share the profits of the non-state-funded units with the state- and tuition- funded instructional budgets. The result of this budgetary system is that money is drained from educating undergraduates in order to support supposedly profitable units, and making matters even more complicated, is the fact the universities often invest their endowments, pensions, and operating cash in risky investment vehicles.

If we look at the amount of debt the UC has recently taken on ($13.2 billion) and if we account for all of the UC’s investments in the stock market, hedge funds, real estate, private equity, and securities ($65 billion as of March 2010), we see that its yearly budget of $20 billion is dwarfed by its financial stakes of $78 billion, yet none of these statistics have been presented to the working groups of the Commission. Instead, the university has reiterated dire predictions concerning the cost of the pension plan and retiree healthcare. In one of the their graphs presented to the Commission, they estimate how much it would cost the university to increase its current pension contributions of 4% of salary to 22% by the year 2019. This increase could overwhelm the entire system, so the UC has added that it plans to save $310 million a year by restructuring post-retirement benefits; as far as I can tell, this is the first mention of estimating the costs of changing retiree healthcare.

Since all of the members of the Commission’s working groups were given presentations on the UC budget by the Office of the President, we can be sure that driving the Commission’s recommendations is the idea that the university has to cut educational costs to make up for the decrease in state support and the increase in retirement costs. At no point were the Commission members briefed on the UC’s investments, debt, or actual instructional costs. As Aristotle argued, if you start off with faulty premises, there is no way you can arrive at correct conclusions.

The state assembly and senate have responded to the governor’s request to increase the funding for the UC system by $305 million. While the assembly supports the increase, the senate has stated that they will only endorse the augmentation if the state brings in at least $2 billion in new General Fund revenues above the May Revise level. In other words, unless the state has a major increase in revenue, the senate will try to block the new money.

The assembly has also supported additional funding for the UC system so that the scheduled student fee increase of 15% can be brought down to 5%. So far, the senate has not decided on this fee decrease, which would cost the state $200 million.

Finally, in response to the UC’s request that the state fund the employer contributions for the pension, the assembly supports the governor’s idea that general fund allocations can be used for the pension. However, the senate decided to reject this new language. It looks like we are in for a long summer battle over the state budget.

I have a Huffington Post article on how several schools in New England have followed the same high-risk investment strategy that the UC has pursued for the last several years. According to the Tellus Institute’s study of Haravard, Dartmouth, Brandeis, MIT, Boston University, and Boston College, by moving their investments from more stable assets to volatile gambles (private equity, real estate, and hedge funds), these universities have produced a growing income inequality at their campuses. Moreover, since they have now been forced to stop ambitious expansion projects, the surrounding communities have been devastated.

An important lesson that the University of California should learn from this analysis is that the investment strategies of hired traders should be closely monitored; this study also shows that the trustees and regents of these wealthy institutions often have a huge conflict of interest. Since many of the people overseeing universities now come from the world of speculative finance, they are unlikely to shift money into more stable forms of investments. Moreover, due to the tax-exempt status of these schools, they are more prone to engage in high-risk trading.

Another issue discussed by the Tellus report is that since these schools pay very little taxes on their huge real estate holdings, they end up impoverishing their home towns and cities. Furthermore, all of these schools continue to increase their huge income disparities as money flows to the top, and low-paid workers see their salaries stagnate.

While this study does not look at pension investments, most of their finding can be applied to the UC retirement situation, and the central lesson is that there needs to be more faculty and employee oversight over risky investment strategies that cater to the interests of wealthy trustees and regents. As the stock market continues its rollercoaster ride, universities are motivated to seek out high-risk investments in order to make up for past losses; this is truly a recipe for disaster.

Using Jeffrey Bergamini’s excellent compensation database, we can examine salary information just released by the UC system. Between Jan. 1 2009 and Dec. 31 2009, the total number of employees listed as having regular employment (excluding graduate and undergraduate student workers and other casual employees) went down by 1,180, but the total gross pay for the system went up $257 million. If we include student employees and other “casual employees” into the mix, in 2009 we saw 3,822 fewer jobs. However, the number of people making over $200,000 went up by 200, and the 3,843 people making over 200K had a collective gross pay of $1.088 billion for an increase of $63 million over the previous year.

This initial reading of the compensation information tells us that during the UC “Budget fiscal crisis,” the university did reduce the number of low-wage employees, as well as cut their total compensation, while the number of high earners actually went up. This growing income inequality has now been coupled with a decrease in work for the lowest-paid employees. Moreover, the imposition of the furlough/salary reduction program did not reduce the total budget; instead it shifted wealth to the wealthiest.

Last summer, I wrote to the federal government to file a complaint regarding how the state of California was using federal stimulus dollars. My concern was that federal recovery money (ARRA) dedicated to higher education was being spent by the state for other purposes. Moreover, I argued that the state was failing to follow the federal mandate of protecting jobs.

On May 27th, I received the following response from the feds:
“This is in response to the complaint that you submitted to the U.S. Department of Education’s (Department) Office of the Inspector General’s Hotline on July 11, 2009. Your complaint indicated that California reduced its support for higher education upon receiving Federal stimulus funds. You further indicated that the University of California used the State’s reduction in support to justify a “fiscal emergency” that would “allow the UC President to impose furloughs, salary reductions, and layoffs.” The Department encourages public universities to use funds awarded under the State Fiscal Stabilization Fund (SFSF) program to avert layoffs and maintain essential educational services. We recognize that some States are reducing their support for education after receiving SFSF funds. Please be assured that the Department is thoroughly reviewing State financial data to ensure that each State meets the statutory maintenance-of-effort provisions. We will continue to monitor California’s support for education to ensure that the State is complying with those provisions. While we appreciate the concerns that you have expressed, the information you provided does not indicate any violation of the applicable statutory requirements.”

I guess I should be happy that I got a response to my inquiry, but the larger question remains of what the state and the UC did with the ARRA money. It still remains unclear how much ARRA money actually made it to the campuses, and I have asked the state auditor to follow the money trail. To be continued . . .

Throughout this academic year, I have been arguing that while the state may have cut the UC’s total $20 billion budget by $600 million in the last two years, the university lost over $23 billion in its investment portfolio during the same time period. In fact, there has been a huge outcry over the reduction of state funds, but no one has questioned UC’s investment losses. It appears that people assume that since everyone lost money during the global fiscal meltdown, we cannot hold the university responsible for its investment decisions. However, a new study concerning the pension losses at six New England universities should make us re-open the question of how the UC lost so much money.

According to a new report by the Tellus Institute, Harvard, Dartmouth, MIT, Boston College, Boston University and Brandeis University all embarked on a high risk investment strategy that has now resulted in reduced endowments, budget cuts, delayed construction projects, and job eliminations. Like the UC, these universities all followed Yale University's investment chief, David Swensen’s endowment model of relying on alternative assets such as commodities, real estate and private equity.

While this report only looks at the six New England schools, its findings can also be applied to many universities, including the University of California. As I have written, the UC also copied Swensen’s strategy of moving money from stable securities to high return areas. In fact, the UC is still following this advice, which is evident in the following statement from Moody’s regarding the university’s investments: ““The long-term targets for the endowment pool would bring alternative assets (including hedge funds, real estate and private equity) to 35% of the total, with domestic and international equity accounting for another 45% of total assets.” Instead of shying away from the high-risk Yale investment model, the UC is increasing its exposure to these volatile assets.

Like the UC, one of the driving forces behind these risky investments is the role of trustees or regents with conflicting business interests. According to a Bloomberg Businessweek article ,“The investment committee at Dartmouth, in Hanover, New Hampshire, included more than six trustees whose firms oversaw more than $100 million in investments for its fund over the last five years, the report said. Stephen Mandel, who is relinquishing his post as chairman of the school’s investment committee to lead the board later this year, originally managed $10 million for the school at his firm Lone Pine Capital LLC. . . . Other trustees who manage money for Dartmouth include Leon Black, with at least $40 million in his private-equity firm Apollo Global Management LLC, and William Helman, a partner at venture capital company Greylock Partners, the report said. Helman, who will take over the committee’s helm from Mandel, has received $10 million from the endowment.” These types of conflict of interest are evident in the UC system since many of the regents have major holdings in private equity, real estate, and construction.

As the UC union coalition told state senator Darrell Steinberg during Charlene Zettel’s conformation to be the next UC regent, we need to have employees on the pension board to make sure that the university’s investment decisions are not guided by the personal business interests of individual regents. Moreover, we need a full investigation into how the UC lost $23 billion during the global fiscal meltdown.

As we come to the end of this academic year, it is important to look back at some of the accomplishments of the student-faculty-union movement in the UC system. Since I am most familiar with the UCLA situation, I want to highlight some of our recent success, and what we might want to do in the future.

First of all, it is clear that our protests have had a profound effect not only in California but around the world. According to the governor’s chief of staff, it was the protests at UCLA during the November regents meeting that persuaded him to increase the funding for higher education. These protests were covered all over the globe, and many students have written to us saying that our actions helped to motivate them to get involved in fighting their own systems.

One of the targets of the UCLA actions was to reverse the layoffs of 67 continuing appointment lecturers at the College of Arts and Sciences. After several protests, union grievances, and private negotiations, all of these lecturers have been rehired. This means that many classes will not be cancelled next year, and students will be able to get the courses they need to graduate in a timely fashion.

Another important victory is that our coalition of students, faculty, and unions helped to put together a slate of graduate students to run for student government, and all of our candidates won. The new Public Education Party (PEP) will be a strong advocate for access, affordability, and quality at UCLA. In fact, the new GSA president has been an active participant in our protests, and he has used his legal expertise to make sure that students were protected during our actions.

While our protests did not result in stopping the fee increases, we are confident that we can build on our other successes to push for a freezing of fee increases next year. We also intend to keep the pressure on the university to increase student diversity and to provide funding for undocumented students.

In order to help shape our agenda for next year, we held an open Alternative Commission on the Future of the University at UCLA. One of the results of this meeting was to formulate a new vision for a more democratic university. We plan to continue to work on our vision and present it to the public. So far, we have concentrated on asking students if they endorse the Commission’s recommendations to move classes online and to create three-year degrees. We have also surveyed students to see what they think about multi-year fee increases, accepting more out-of-state students, differential fees, and eliminating majors. We hope to continue these research efforts and report our findings in the future.

Perhaps the biggest lesson of the year is that people can make a difference, and it is important to fight for the system you want. Please join us this week at the regents meeting in San Francisco as we make our voices heard again.