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.

The post Fixing the UC retirement system time bomb appeared first on The Daily Californian.

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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Anna Vignet/Senior Staff

Helmut Drewes, 78, reminisces about his longtime tailor business just off Telegraph Avenue.

The post VIDEO: Jim the Tailor closes shop appeared first on The Daily Californian.

Sebastian Miller-Hack/Staff

A modest and unassuming shop off of Telegraph Avenue, Jim the Tailor is filled with pressed suits, an ironing board and the exuberant personality of the store’s owner and tailor, Helmut Drewes.

Drewes, who has worked at Jim the Tailor for 50 years, will close his shop’s door for the last time on Friday to start his retirement.

Jim the Tailor — named after the original owner who left the shop to Drewes’ father — has long been a fixture in the Telegraph community. Though the store was initially established on Bancroft Avenue, Drewes moved the store to Channing Way in 1962 when he inherited the shop after his father’s death.

Now, with no one to take over the family business, Drewes will retire and Jim the Tailor will close.

“I think not many people can run a business for 50 years,” said Roland Peterson, executive director of the Telegraph Business Improvement District. “The key thing is to build up a regular enduring clientele. I saw (Drewes) had a number of people regularly in his shop, and I know he had a following and a regular clientele.”

Drewes, 78, similarly credits part of his longevity and success to the relationships he was able to build with his customers — he does not ask for phone numbers from customers as a symbol of his trust. However, the personal attentiveness that Drewes and many other small business owners provide to their customers isn’t always enough to compete with larger companies.

“It’s tragic, but we’re losing (Drewes), and we’re losing so many of our small businesses here and across the country,” said Berkeley City Councilmember Kriss Worthington, whose district includes the Telegraph area.

As a close witness to the transformation of the greater Telegraph area throughout the past five decades, Drewes has a unique perspective on one of the most tumultuous eras in Berkeley history.

After immigrating to Oakland, Calif., from Germany in 1955, Drewes saw a different side to the numerous protests that dominated campus life in the 1960s and 70s as a store owner affected by the Free Speech Movement and the anti-Vietnam War demonstrations.

“There were times we went home around 2:30 or 3 o’clock at night because it was too violent outside the shop, you know, with tear gas and stuff like that,” Drewes said. “Coming in the mornings was sort of similar to having to go into combat, with all the anxiety, because you were always wondering if your shop was still there.”

A self-proclaimed “survivor” of the 1960s and 70s, Drewes saw business improve in the 1980s and 1990s as “peacefulness” returned to Telegraph. However, throughout all the turmoil, he has never had to face the possibility of going out of business.

“I’ve been here 50 years, and I’ve seen business go up and down, but I’ve never worried about not having enough business,” Drewes said. “If you satisfy your customers, the word will spread.”

[youtube http://www.youtube.com/watch?v=v9VcaNomkIc&w=560&h=315]

This week, Drewes said he is moving toward his retirement calmly and happily, tying up loose ends at Jim the Tailor without taking on any new work. His building has been sold, but he doesn’t know to whom  and he does not care.

When asked how he plans to spend his retirement, Drewes said he wants to relax by spending winters in Mexico with his wife and visiting his daughters as often as he can.

“I’ve never had any time to develop any hobbies,” he said as he shrugged and smiled. “I just want to watch the world go by. In two years, I’m going to be 80, so I think it’s time for me to look at the other side.”

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