Union research shows potential paths for UC budget without salary cuts

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Local union researchers revealed findings Tuesday that indicate the UC system may be able to avoid austerity measures such as cutting salaries when dealing with the economic impacts of the COVID-19 pandemic.

American Federation of State, County and Municipal Employees, or AFSCME, Local 3299 Research Director Claudia Preparata and her research team conducted the study through an analysis of the UC system’s policies and guidelines, annual financial reports, investment reports, credit agency reports and UC Board of Regents meeting minutes over the last 12 years. Preparata’s research team took note of factors including Coronavirus Aid, Relief and Economic Security, or CARES, Act funding, reimbursements by the Federal Emergency Management Agency and savings from the lack of travel and maintenance due to shelter-in-place policies to conclude that the university can avoid austerity cuts.

UC Office of the President spokesperson Claire Doan said in an email, however, that although the CARES Act will provide some relief, the direct assistance that campuses will receive will not be sufficient to cover the March financial impact on the university.

“The university has choices,” Preparata said during a research presentation. “Ultimately, our research finds that the UC has resources to weather the crisis, preserve the integrity of the enterprise, maintain quality education and research and, at the same time, avoiding austerity that would disproportionately hurt its most vulnerable communities.”

Preparata also presented two strategies that can be used individually or combined by the university to avoid austerity. One strategy would be to scale down $5 billion to $6 billion of funding from working capital pools and $1.8 billion from the university’s endowment fund.

With that strategy, the UC system can temporarily increase the utilization of endowment funds to make an “extraordinary payout” that will provide an additional $100 million to $500 million of funding for campus needs such as financial aid, according to Preparata.

The second strategy is to access low-cost borrowing techniques amid historically low rates.

“These are not ongoing, long-term solutions, but during such extraordinary times, these are solutions that UC has at its disposal to lead the way toward economic recovery and to ensure that its most vulnerable members are not disproportionately impacted,” Preparata said at the presentation.

UC administration has taken steps to address COVID-19’s economic impact, including a 10% budget cut from the state, by implementing leadership pay cuts and a hiring and salary freeze, as well as a paid leave program for employees impacted by COVID-19, according to Doan.

She also highlighted the necessity of continuing to fund student instruction and support services, along with basic operations and facility maintenance.

“Successfully navigating this crisis will require a strong partnership between UC and our union leaders,” Doan said in the email. “We are grateful for the dedication and hard work of our employees across the system in support of UC, our communities, and our greater mission of public service, which is now more important and impactful than ever.”

Contact Dina Katgara at [email protected] and follow her on Twitter at @dinakatgara.