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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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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Ellen Zeng/Staff

On Wednesday, July 18, the UC Board of Regents endorsed Gov. Jerry Brown’s Schools and Local Public Safety Protection Act of 2012 tax initiative after securing a $125.4 million tuition increase buyout. If the initiative, Proposition 30, is successful, the 2012-13 academic year will mark the first time since the 2006-07 academic year that undergraduate student fees do not increase. However, if the initiative does not pass, the university will lose the tuition buyout and face an additional $250 million cut. Thus, if the initiative fails, the University of California will experience a $375.4 million shortfall in the upcoming academic year. This type of shortfall would be absolutely devastating.

What does this mean for the university? The initiative presents an opportunity to pursue financial stability. While the initiative is far from perfect, it provides students with immediate relief. Students have carried the burden of inadequate state funding for far too long. The initiative would provide funding to ensure that students do not experience another fee increase in the 2012-13 academic year. Additionally, the governor’s administration has stated an intention to enter a multiyear funding agreement with the UC and CSU systems to provide steady increases to each university’s budget over a four-year period. Alternatively, if the initiative fails, the UC system will face an enormous budget deficit, which could lead to cuts and fee increases. In short, passage of the initiative could redirect the trajectory of the university for the better, while its failure could lead to business as usual.

Finally, the initiative serves as an opportunity for Californians to reclaim the university. In recent years, the state Legislature has significantly cut funding for higher education, yet there has not been a unified statewide response. The initiative provides Californians with the opportunity to demonstrate their support for the university. The initiative’s passage depends on the collaborative efforts of UC students, staff, faculty, employees and Californians. Students must mobilize on each campus and lead effective voter registration drives to build student vote power. UC faculty and staff must emerge from behind their office desks to voice their support for the initiative. UC workers must continue to support higher education and garner support from their constituency. Californians from every city across the state must reclaim their stake in the state by casting a vote in favor of its future. The initiative’s passage would mark an electoral victory, but, most importantly, it could foster a greater sense of ownership from California’s public.

The university has reached a critical point. If we do not act now, it will face incredibly difficult times. Californians must act for university to continue to fulfill its mission to educate the state’s best and brightest, to produce cutting-edge research, to employ hundreds of thousands of workers and to produce national leaders. The university’s success depends on Californians as much as California’s success depends on the university.

Cinthia Flores is the UC student regent-designate.

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Watch a video interview with Jonathan Stein, the UC Student Regent-designate.

On June 30, Stein will assume his role as the next voting student member on the UC Board of Regents, charged with representing over 222,000 students, making decisions for a system plagued with dwindling state support, rising fees and governance issues — all of which Stein has begun to tackle through a unique focus on student engagement and activism. Read the full article here.

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-Saturday: Tedx Berkeley hosted a series of accomplished speakers to share their innovations with students and faculty.
-Saturday: Berkeley Hackathon hosted yet another event in Soda Hall where students gathered and competed in a coding-marathon.
-Saturday: Men’s Basketball Cal vs. Arizona.
-Tuesday: Decision at SF that Prop 8 is unconstitutional.
-Wednesday: Regents recruitment event at Unit 1.
-Midterms are beginning.

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