Today, we hear constantly that “taxpayers” shouldn’t fund such “entitlements” because they represent cave-ins to powerful unions. This is certainly not the case with the UC retirement system. The current problems with the retirement plan began back in 1991: During a state financial crisis, the regents and the state decided to suspend all contributions to what was then a technically overfunded retirement plan, hoping that its investment income would fill the gap.

Not contributing saved the tax-starved state of California hundreds of millions of dollars and softened the impact of state budget cuts on university operations. But it impoverished the UC retirement system. Within little more than a decade, as the disastrous consequences became clear, the UC Academic Senate began calling for the resumption of contributions. The state refused. Without state funding, the regents declined to restart either the employer or employee contribution.

The situation worsened with the financial crisis of 2008 and the Federal Reserve System’s policy of keeping interest rates at historically low levels. The financial managers of the retirement plan began to borrow from future retirees to honor the pensions of those who had already retired. They spent funds that they had counted on to generate the investment income needed to cover the cost of financing future pensions. The percentage of funded liabilities began to plunge, beginning a downward spiral that could have led to the plan’s financial implosion.

To forestall this, the regents boldly agreed to self-finance the employer contribution in 2010. To reduce the financial shock, however, they approved a plan to ramp up contributions gradually over eight years. The slow ramp-up meant that the unfunded liability continued to grow — to roughly $10 billion (yes, billion!) in 2011. Even with this year’s contribution increases and the start of a tiered system in which new employees receive reduced pension benefits, our combined employer and employee contributions don’t yet come close to covering the interest on this huge unfunded liability. We won’t begin the long, costly process of paying off the interest on this debt until 2018, when the employer contributions rise to 18 percent and total contributions reach 26 percent.

The state’s decision to shift the entire cost of funding the university’s retirement plan onto the university itself has had a terrible impact on students, faculty and staff members. Together with repeated state budget cuts, it has forced the university to keep raising tuition, pushing more students and their families into debt. It’s degraded operations by necessitating massive staff layoffs. Because the 3 percent and 2 percent salary increases that went into effect in October 2011 and July 2013 only partly offset the increase of employee contributions to 8 percent and the skyrocketing cost of health benefits, the decision has also created hardship for many employees raising families in our state, which has a high cost of living. It’s also put the university’s ability to maintain the quality of its faculty at risk by adding to the cost of recruiting and retaining world-class scholars. (Berkeley now ranks 24th in faculty salaries at elite research universities.)

Our new president, Janet Napolitano, should make correcting this situation one of her top priorities. She could start by urging the regents to reduce the current $250,000 cap on retirement plan pensions to $200,000 until the unfunded liability is extinguished. Except for top administrators — whose bloated salaries are so unpopular with many Californians — and some medical and professional school faculty members, very few UC employees are close to reaching this cap. Reducing it would ensure that the pensions of the best-paid few will not drain the retirement funds of the rest while the retirement plan is being restored to financial health.

Above all, Napolitano must use her political skills to remind those in Sacramento that the state’s refusal to fund the employer contribution threatens the university’s historic mission to provide world-class, affordable education to all qualified Californians. It is a shameful retreat from a legal obligation that it continues to honor with all other state pension plans. Napolitano needs to convince the legislators and citizens of California that the refunding of the current retirement plan is in the public interest. UC faculty and staff members serve the public. They are already doing their part to restore the retirement plan’s fiscal health. So are UC students. It’s time for the state to share the burden.

Christine Rosen is an associate professor at Haas School of Business and vice chair of the Berkeley Faculty Association. James Vernon is a campus professor in the department of history and a co-chair of the Berkeley Faculty Association.

Contact the opinion desk at opinion@dailycal.org.

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Phoenix Delman/Staff

Everyone should be able to retire with dignity with a pension after a lifetime of work. Productivity has increased dramatically over the last 30 years, but most of this increased income has gone to the top 1 percent of earners. At the same time, these earners in the top 1 percent have made the decisions that have taken away pensions, so most will be forced to try to work into their 70s. 401k plans have not made up the difference, as 57 percent of Americans have less than $25,000 in their 401k plans and other savings. Many will be laid off at an earlier age and be forced to live in poverty or move in with their adult children. What happened? The top 1 percent have underfunded pensions, then claimed they are too expensive and discontinued them. IBM underfunded its employees’ pensions, then converted them to 401k plans, resulting in the loss of hundreds of thousands of dollars each for many IBM employees. United Airlines went bankrupt in order to stop paying its pensions, ruining the lives of many former employees. Is the UC system following this example?

From 1990 to 2010, no taxpayer money or student fees went into the UC pension system. UC employees were assured that the pension was so overfunded that the regents actually took money out in 1991 to 1993 and even 2002 to 2003. By 2006, the regents claimed that contributions were needed again but refused to allow an actuary hired by the unions to verify this. It took five years of litigation for the UC system to allow a union-hired actuary to even get the data. What was UC system trying to hide? The union-hired actuary found a potential $1 billion in savings. Meanwhile, the state got used to not funding UC pensions despite funding CSU pensions at 20 percent of salary — compared to a 5 percent employee contribution. Has UC management displayed competence and transparency in allowing this to happen?

Who gets hurt by these changes? In the case of the UC system, executives like President Mark Yudof come out unscathed. He’ll receive an additional $230,000 per year after his five years of service. But UC workers pay more for fewer benefits. For younger workers, the system has drastically changed the rules on qualifications for retiree health care benefits. As of July 1, one’s age and years of service must equal 50 — and one must be vested — in order to avoid cuts to health care benefits in retirement. These cuts could equal one-third of one’s retirement income. For faculty and staff members hired on or after July 1, the UC system has a new retirement tier in which employees must pay a little less and get a lot less, about one-third of what some co-workers will get and about half of what others will get.

Two unions, UPTE-CWA 9119 and California Nurses Association, oppose the tiered retiree benefits and are in bargaining over these and other matters. The UC system refuses to consider any proposals from the unions.

Before the contribution holiday, the sysetm had contributed two, three and five times as much as employees contributed to the fund. The retirement benefits helped retain faculty and staff members. Now, with two tiers of retirement, why would newly hired employees spend lifetimes at the UC system for meager pensions? And if these tens of thousands of employees do not stay, how does the fund stay solvent?

The UC Regents now want UC employees to pay more and get less, an experience familiar to UC students. It’s really up to us to say no to these ongoing shifts of resources from students and workers to, yes, executives, Regents with connections to development and finance, CEOs, consultants …

Turning the tide means working together to challenge decisions and priorities that diminish our future and the future of the university and working together to preserve (and, where needed, reintroduce) decent pensions for all.

No to exorbitant UC executive pensions; yes to decent pensions for UC faculty and staff members.

Paul Brooks is an elected staff representative on UC Retirement Advisory Board. Tanya Smith is president of the Local 1 of UPTE-CWA 9119.

Contact the opinion desk at opinion@dailycal.org.

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Beginning on July 1, 2014, the “1976 tier” of the UCRP, which consists of the majority of employees hired before 2013, will increase its contribution rates from 6.5 percent to 8 percent, and the university contribution rates will increase from 12 percent to 14 percent. This decision has been met with mixed  reactions, with some faculty members supporting the decision and some unions criticizing the increase in employee contribution rates.

The UC Academic Senate voted unanimously to support the contribution increases, and the UC Board of Regents expressed similar support at its meeting on July 17.

From 1990 to 2010, the university stopped paying into its pension program due to a surplus in funds. Following the economic downturn in 2008, however, UCRP suffered a significant decline in the value of its assets, resulting in an underfunded status that has since propelled increasing contributions, such as this last decision, by the university and employees to the plan.

“A gradual ramp-up will be less detrimental,” said Nathan Brostrom, UC executive vice president of business operations. “The trade-off is reasonable.”

As a part of the approved change to UCRP funding, contributions from members who were hired before July 1, 2013, will be decreased by $19 a month.

Although the total contributions to the UCRP fail to meet the regents’ funding program, they will surpass the plan’s normal cost, which is the cost of benefits earned per year.

“It is absolutely necessary, and more needs to be done,” said Academic Senate chair Robert Powell regarding the UCRP change. “The employer contribution needs to increase to 18 percent as soon as possible.”

Many other faculty members are also in support of the new plan because they said they want to preserve their pension funds.

“Right now, the pension fund has an unfunded liability,” said Christine Rosen, vice chair of the Berkeley Faculty Association and an associate professor at Haas School of Business. “We’re trying to fill the hole, but it’s extremely difficult to do it, because it takes a lot of money.”

However, not all are in favor of this plan. The University Professional and Technical Employees Union is among several unions that have expressed discontent regarding the plan.

“We are for contributions and for increased contributions to the fund, but we are also for accountability,” said Tanya Smith, president of the Local 1 chapter of UPTE-CWA 9119, which represents technical, research and professional health care workers at the university. “Employees who are contributing more also should have increased salaries.”

Similarly, members of the American Federation for State County and Municipal Employees 3299 strongly oppose the contribution increases.

“What happened at the UC Regents meeting is a continuation of a terrible pattern,” said Todd Stenhouse, a spokesperson for AFSCME 3299. “This is about doing everything and anything to avoid doing the right thing, which is capping executive pensions.”

The UCRP media release predicts that UC employer contributions will continue to increase in the future.

“Today’s action is part of a broader effort to maintain financially sustainable pension benefits for employees,” the statement says.

Contact Jane Nho at jnho@dailycal.org.

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The adopted resolution asks that the city manager create a report of the city’s unfunded liabilities — costs the city must pay in the future but are not due presently — beginning in February 2013, with future reports to be published every two years.

The resolution cites projected unfunded liabilities of up to $1 billion. According to Councilmember Laurie Capitelli, around half of those costs are derived from employee pensions and benefits while the other half is mostly composed of backlogged infrastructure projects and maintenance.

Although a local group called the Committee for F.A.C.T.S. — fiscal accountability, transparency and sustainability —  has asked for similar action to the resolution passed Tuesday, members spoke in protest of the council’s actions at the meeting.

The committee gathered around 4,000 signatures to place their “F.A.C.T.S.” initiative on the ballot this November. The initiative is similar to the city’s resolution in that it would require the city to prepare and publish a biennial report specifying financial obligations for a 20-year period, including employee-related expenses and necessary capital improvements.

Committee members fear that the initiative now has to compete with the council’s resolution.

Moreover, members accused the council of passing a resolution they have little intention to follow up on. They cited a resolution passed in 2010 to provide information on unfunded liabilities that they say the city has yet to produce.

“That’s a complete misrepresentation of the facts,” said Councilmember Gordon Wozniak in response to the comments. “Their beef is that it’s not in a single report … the way they want it. All the info is there.”

Wozniak said efforts to provide information regarding these liabilities came in a number of forms, including city-run workshops regarding the subject.

Jacquelyn McCormick, coordinator for the committee, said Wednesday that although some efforts have been made by the city, they have not been comprehensive enough.

At the meeting, Capitelli expressed frustration with the fact that this resolution has been deferred by the council multiple times. He also denied allegations that the resolution was brought up to compete directly with the initiative, citing that he had brought up the resolution before any petitions were circulating.

Mayor Tom Bates said that passing the resolution would not compete with the initiative. He stated that the resolution could be passed while still allowing voters to approve the initiative this fall.

Though McCormick feels that the council’s resolution is still in direct competition with the initiative, she remained confident Wednesday that the initiative would pass come November.

“There’s a good chance that the initiative will pass,” McCormick said. “I think there were enough people that were interested in it and understand the differences.”

Jaehak Yu is the lead city government reporter.

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The city of Berkeley must move more quickly to solve its pension problem by capping retirement returns and implementing a new, fiscally responsible program for new employees. The matter has already taken more time to resolve than Berkeley can afford.

City staff and council members have long been aware that current city contributions to employee pensions are unsustainable, and yet have moved slowly to fix the issue. Yes, progress has been made: Negotiations have occurred, and the discourse about city pensions has continued. Councilmember Gordon Wozniak asserts that the council has actively pushed for a two-tiered solution — which would put new employees on a different pension plan than current ones — but it clearly needs to push harder.

And although negotiations with one of five unions representing city employees have ended, no changes will go into effect until all of the unions are satisfied. While every union deserves its fair chance to have its voice heard on every matter that affects its members, drawing out the process hurts all Berkeley residents and city workers.

Admittedly, championing reform for the city’s pension system does not make for good election year politics. Council members and city employees must remember, though, that a functional municipality must be solvent before it can fulfill any of the obligations or services it must carry out. In particular, those council members whose seats are not on the ballot this year must be far more vocal and lead the effort to speed up changes. Because ultimately, a quick adjustment, not a hemorrhaging budget, is what this city needs right now and in the long term.

The post Running on empty appeared first on The Daily Californian.

Faith Buchanan/Staff

In deciding how to contend with the city’s aging infrastructure, Berkeley City Council discussed potential ballot measures Tuesday for the November 2012 election.

The purpose of the council’s discussion at its meeting Tuesday night was to begin determining what types of projects the council should consider funding through 2012 ballot measures, a process that will rely on an upcoming survey of community members.

The discussion on renovating the city’s infrastructure made strides last fall, when the council held a series of work sessions to review the current status of the city’s camp and recreation facilities, roads, watersheds, public buildings and information technology. A report from the city manager’s office presented Tuesday called the city’s infrastructure “aging” and said deferring its maintenance would plague the city with higher future repair and replacement costs.

According to the report, it would cost more than $500 million to complete the infrastructure projects outlined by the council at the fall work sessions. The community survey is meant to inform the council about which projects the community wants.

Community input at the meeting indicated that renovating the city’s pools ranked high on the list of potential improvements.

“Warm water pool loss is causing pain and suffering for disabled seniors every day,” said Councilmember Kriss Worthington during the discussion.

The warm water pool at Berkeley High School closed in December, despite much resistance from its users who said it provided unparalleled benefits for the disabled and elderly community.

Other infrastructure suggestions the council discussed included seismic retrofitting of public buildings, improving city streets and renovating parks and community centers.

Despite the suggestions for improvement, the city’s lack of finances also proved to be a major concern for community members present at the council meeting.

Berkeley resident Tim Wallace, 50, a member of Berkeley Budget SOS, spoke during the public comment section of the meeting about his concern about the “huge financial hole” he said the city has dug itself into and called for further fiscal analysis.

“We need to find out (a) full picture of city’s funds before we move on,” Wallace said. “If we don’t find out, it’s the blind leading the blind.”

But several council members insisted that renovating the city’s deteriorating infrastructure is necessary even amid economic struggles.

City Councilmember Susan Wengraf said that if certain buildings are not retrofitted, the result could be a “case of demolition by neglect.”

Berkeley Mayor Tom Bates said that in a community that is more than 100 years old, “we have to reinvest in infrastructure or it’s going to get worse.”

The next step in the process of determining which items to put on the 2012 ballot is to conduct the community survey in March, which aims to reach 400 Berkeley voters. The cost for an initial community survey would be $24,000, which is included in the city’s General Fund budget for this fiscal year, according to the city manager’s report.

City staff, along with the opinion research firm chosen to conduct the voter surveys, Lake Research Partners, will then present the survey findings to City Council in April. Based on the results, the council will direct staff to develop specific measures for the ballot. A second survey will then be conducted in May, after which the council will make final decisions about specific ballot measures, the report said.

Staff writer Adelyn Baxter contributed to this report.

Annie Sciacca covers city government.

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Kamlarz, who worked for the city for 36 years, will have an annual pension of $249,420, which is slightly larger than the $242,580 he made when he left as city manager. Berkeley’s pension funds have suffered since the stock market crash of 2008, forcing the city to pay more out of pocket — a problem that some claim could eventually drive the city into bankruptcy.

Berkeley currently faces $329.87 million in unfunded liabilities, which are costs that are not presently due but must be paid in the future, according to city spokesperson Mary Kay Clunies-Ross. Of the nearly $330 million in unfunded liabilities, pensions account for approximately $205 million.

Part of the high pension costs lies in the fact that the city covers not only the employer contribution but also most employees’ 8 percent individual employee contribution for CalPERS, a state pension fund that uses investment returns to provide for employee pensions. Most city employees receive 2.7 percent of their salary at age 55 for every year that they worked. Firefighters and police, who do pay their CalPERS employee contributions, receive 3 percent at age 50 instead.

This means that if an employee offered 3 percent at age 50 were to work 30 years, he would get 90 percent of his salary after retirement past age 50.

Vallejo City Councilmember Marti Brown said that not even Vallejo, which went bankrupt in 2009 from plummeting tax revenues and high spending on employee salaries and benefits, was paying employees’ full contribution as Berkeley does.

“Hardly any cities anymore are doing that,” Brown said. “I can’t see how cities can afford to pay employee contributions for (CalPERS).”

The city had to close a projected budget deficit of $12.2 million in fiscal year 2012 and is looking at a similar shortfall for the upcoming fiscal year.

While lowering the city’s pensions contributions would ease some of these costs, the city has to negotiate with the unions that represent its employees to change the pensions agreements, and since that has yet to happen, the city has instead been faced with rising CalPERS cost.

The city is expected to pay $32.8 million to CalPERS in fiscal year 2012, according to CalPERS spokesperson Amy Norris. And without any change to the current system, CalPERS costs are expected to increase by $7 million over the next two years, according to the city’s budget report for fiscal year 2013.

This is a problem that members of Berkeley Budget SOS say the city has been sweeping under the rug for years now.

“The city auditor … she’s warned the City Council that they’re in real trouble, but the City Council pays no attention,” said Tim Wallace, a member of Berkeley Budget SOS and an agricultural economist with UC Berkeley.

Berkeley City Councilmember Gordon Wozniak, however, said that the council has been actively pushing for a two-tiered pension system, which could help alleviate pension costs by offering new employees a different pension package from that offered to current employees.

According to a budget report from a special meeting of Berkeley City Council Feb. 14, if all employees hired after July 1 of this year agreed to 2 percent instead of 2.7 percent at 55, the city would save $176,000 in fiscal year 2013 and $2.67 million by 2023. Over 10 years, the city would have a combined savings of $15 million, according to the report.

The Service Employees International Union Local 1021, which represents the city’s maintenance and clerical workers, agreed to a two-tiered system in June of last year. However, this will not be implemented until the city negotiates a similar system with all its other unions, according to union spokesperson Carlos Rivera.

This means that the city will have to reach agreements with all four of the other unions that represent the city’s employees and whose contracts expire in June of this year.

The city is currently negotiating with the Berkeley Police Association, and negotiations with the Berkeley Firefighters Association will not begin until that is finished, said Jim Geissinger, president of the Berkeley Firefighters Association. He added that BFFA negotiations typically last about 18 months.

Jeff Apkarian, business agent with Public Employees Union Local 1 — another union that represents city employees — said negotiations for his union normally start in March or April and last a few months.

“The only thing we know for sure is that we’ll be talking about retirement,” Apkarian said.

While the unions negotiate with the city, the city of Berkeley will be trying to balance its budget for the upcoming fiscal year in the coming months, taking into account the pensions costs they have agreed to pay while also dealing with a projected shortfall expected to surpass $10 million.

Vallejo City Councilmember Marti Brown remained optimistic but advised that cities like Berkeley learn from Vallejo’s mistakes — to take action now before it’s too late.

“I’d be surprised if they (Berkeley) ever reach the situation that Vallejo is in,” Brown said. “I hope that our experience tells other cities, ’Don’t wait until it hits you.’ You need to make cutbacks now. You need to make concessions from your employees now.”

Jaehak Yu covers city government.

Jaehak Yu covers city government.

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