A Plan to Protect the University of California

I would like to suggest here a concrete plan to defend high quality public education for the University of California.

The first step is to build coalitions around a set of specific demands. This strategy is necessary in order to unite diverse interest groups within the UC system, and in fact, unions, students, and faculty have already done a good job centering our demands around five basic issues: furloughs, layoffs, budgetary transparency, alternative budget solutions, and shared governance.

By saying no to furloughs for people making less than $40,000, we have united around a very modest and realizable goal. Moreover, this demand shows our commitment to economic justice and a basic sense of fairness.

Linked to the demand to limit the furloughs, and to stop all furloughs by July 1 2010, is the need to halt the layoffs on each campus. The unions have been working on this demand, but it will take a united front to stop the elimination of jobs throughout the UC system. Students need to realize that when the university gets rid of lecturers, courses are eliminated and class sizes expand. Furthermore, faculty, need to know that without lecturers and teaching assistants, professors will not have time to do research, and the quality of education will go down. It is also important to stress that when workers and staff lose their jobs, everyone loses.

Of course, the UC administration will argue that layoffs and furloughs are necessary to maintain the quality of the university, but without budget transparency, we have no way of knowing if the money saved by furloughs and layoffs will actually go to protect things like undergraduate instruction and graduate research. Right now, it seems that students are being asked to pay more for less, while workers and faculty are being asked to do more for less. Furthermore, decisions are being imposed from above, and we are seeing a serious lack of shared governance.

The reason that we have to insist on shared governance and budget transparency, then, is to make sure that decisions are not being made in secret, which will result in the privatization of the university. And privatization, means not only the raising of student fees to such an extent that the university becomes indistinguishable from private universities, but more fundamentally, privatization says that education is no longer considered a free, public good and that knowledge is no longer the free pursuit of knowledge. Privatization also means that decisions are made in private, and private gain becomes the over-arching goal.

One way to fight all of these forms of privatization is to insist on the alterntaive budget solutions that the unions have presented to the administration. These solutions start with a very basic human concept: sharing. Not only should the profit-making units share with the less profit-oriented sectors, but the highest earners should share some of their wealth with the lowest earners. Moreover, if positions have to be eliminated, it should not only be the lowest paid workers who lose their jobs.

A growing number of UC workers, faculty, and students believe that the UC does not have a fiscal crisis; rather it has a crisis of priorities, and we can work together to change these priorities. We need to use the regents meeting at UCLA on November 17-19 to present our demands to the general public and to rally around our shared interests.

The next step after the regents meeting is to go back to our respective campuses and to make sure that our shared demands are accepted. Following some recent success, we need to put pressure on the chancellors on each campus, and this may take the form of sit-ins and other modes of civil disobedience. By working with students, we can force the local leaders to make local changes, which can lead to more system-wide changes. For example, the chancellors can stop layoffs and provide budgetary transparency that enables shared governance. The chancellors can also demand an end to furloughs and service cuts.

The chancellors have to be accountable to the students and faculty, and we need to work together to make them accept our demands. We need to fight for the university we want. Please come to UCLA on the 18th and 19th, and let your voices be heard.

UC's Attack on the Middle Class

While most people think that the biggest cause for the future reduction of a diverse student body at UC is the rapid increase of student fees, other factors may play a much bigger role. One of the main reasons why we will be seeing a decrease in both underrepresented minorities and Californians at UC in the future is that there is a plan to reduce the total number of enrolled students. At the same time, several campuses are planning to increase the number of high-paying out-of-state and international students, and this means there will be even less space for in-state students.

However, the biggest driving force behind the coming loss of diversity is the use of SAT scores to determine admissions decisions. As Peter Sacks points out in his Book Tearing Down the Gates, studies show that SAT scores do not predict the success a student will have in college; rather SAT scores predict the average wealth of the parents of the incoming student. Since campuses in the UC system are now motivated to rely more on endowments, they have a strong incentive to accept more wealthy students who will give more money in the present and the future. Universities know that the best way to build an endowment is to make SAT scores the central force in determining admissions. While UC now has a comprehensive admission policy, several campuses still base most of their admission decisions on test scores, which also helps to maintain high ratings in the U.S. News & World Report ranking system.

Nationally, many universities have now replaced need-based financial aid with merit-based aid in order to compete for the highest scoring students. The result is that wealthy students are being subsidized by middle-class students. In UC’s case, middle-class students subsidize lower-class students through a system that raises fees for everyone, and then gives a third of the money back for financial aid to the students whose parents make less than a combined $70,000. It is these same middle-class families that have seen their investments wiped out and their home values plunge. This is the true war on the middle-class: we are now seeing middle-class students dropping out of college because their parents cannot afford the tuition increases. Meanwhile, the middle-class students who do remain in the UC system face huge student loans with high interest rates.

Several Regents Support Cutting Taxes, Reducing State Funding for the UC system, and Privatizing Higher Ed

In a recent article on the UC regents, “Beyond UC vs. Sacramento: It’s Relationships That Matter,” Hillary Violet Lehr shows that the people who are supposed to be fighting for the financial health of our university have been working to help defund higher education. Not only have many of the regents funded Republican candidates that have voted against all revenue enhancing measures, but several of the regents have pushed to lower taxes during the recent budget crisis. It is important to stress that Republican governors have appointed most of the UC regents, and several of these regents have been working behind the scenes to reduce the university’s reliance on state funds. In fact, the current Regent Chair, Russel Gould, helped Schwarzenegger in 2004 to negotiate the recent compact between the state and the UC system.

In her article, Lehr discovered that, “New Regent Makarechian spearheaded a Republican strategy group and his elite real estate company gave over $100,000 to Schwarzenegger, and Regent Zettel gave thousands of dollars to the Lincoln Club’s efforts to reduce state taxes.” In other words, the fox is guarding the hen house, and while Yudof and the regents argue in public that Sacramento is the problem, the truth is that some of them are working secretly to cut the state funding of the university and block any new initiatives that would generate additional funds for the system.

Not only are several regents against any new taxes to fund public institutions, but they are actively working to privatize higher education. For instance, regent Blum is a major stake-holder in a company called Career Education Corporation. This organization invests in for-profit colleges and has recently been sued several times for providing sub-prime loans to students at institutions that do not provide the services they advertise. It turns out that the median graduation rate at proprietary schools is 38%, and many students end up without a degree, while accumulating huge student loans with interest rates in the double digits. Moreover, a new law passed by congress uses governmental funds to guarantee these loans, and since over 70% of these loans go into default, taxpayers are left paying the bill, while profiteers like Richard Blum, turn a hefty profit.

Of course, Blum is no longer the head regent, but his replacement may be even worse. As Chris Newfield wrote on his blog, “The ‘UC Commission on the Future’ is headed by Regent Gould, a partisan Republican who, as Senior Vice-President, helped drive Wachovia Bank from one of the nation’s largest banks holding millions in student loans into bankruptcy because of toxic sub-prime home mortgages and credit default swaps.” While Blum’s company funds for-profit schools, Gould helped to supply high-interest, high-default student loans. Gould and Blum thus have a long history of profiting off of student loans and seem to have no qualms about raising student fees to increase their own profits.

It should be obvious that we need a different system for appointing the regents. We must fight to have faculty, staff, and students make up the majority of the regents so that the people protecting the financial health of the institution actually support the notion of high quality public education.

Know Your Regents, Part Two: The Case of Richard Blum

After Gerald Parsky ended his term as the head regent, Richard Blum took over this powerful position, and this change was important for many reasons. First of all, Blum was a major investor and owner of real estate, and he had major stakes in companies that handled defense projects and infrastructure building for the U.S. Military. Blum is also married to Senator Diane Feinstein, who sat on the defense appropriations committee, while her husband was submitting bids for defense contracts. According to Feinstein, she never knew which contracts belonged to her husband’s interest because the contracts were listed without the names of the bidder. However, an investigative reporter, Peter Byrne, asked Blum’s lawyer about this potential conflict of interest, and the lawyer responded that they gave Feinstein a list of all of Blum’s bids, so she would know to remove herself when they were discussing her husband’s contracts. Congressional records show that she never did remove herself.

Since Blum, as head regent, was involved in the process of choosing the money mangers and investment strategies for the UC system, it seems highly likely that he was able to steer UC money into his own interests. In fact, we know that Blum was a major stakeholder in the construction company URS and that in May 2001, UC announced that it would pay URS $150 million to manage the reconstruction of Santa Monica Hospital. In other words, just as his wife approved her husband’s bids for defense contracts, Blum himself got the regents to accept his own company’s construction bids.

But the story gets much worse; Byrne has reported that, “URS, which designs and sells advanced weaponry, also held a $125 million design and construction contract at UC's Los Alamos nuclear weapons lab. So URS had substantial interests in UC capital projects when Blum, its principal owner, became a "decider" on construction planning and awarding contracts.” Blum was then not only married to a powerful senator who was the member of the defense appropriation committee, but as a regent, he helped steer the university into contracts with companies in which he held a major stake.
Perhaps the most destructive role Blum has played as a regent is his constant push to get the UC to invest more in real estate and high-risk derivatives. Even as the stock market was falling and real estate was crashing, Blum is on record telling the finance committee that they should increase investments into what we now call toxic assets. The UC now holds billions of dollars of assets and investments that cannot be priced, and this loss of money goes along with a loss of $23 billion in its investment and pension funds (see the assets links below).

The case of Richard Blum should leave no doubt that the regents need to be democratized and that we should all gather together at UCLA on November 18-19 to fight for a fundamental change concerning how the regents are chosen and how priorities are made in the UC system.

How to Find UC Assets:
For latest report, click here, and go to Page 3:

UCRP is the pension fund

GEP is the collective endowment fund

STIP is the short-term investment fund

TRIP is a new investment fund

High point for total assets (over $74.6 billion) is 9/30/07, click here.

Recent low point: 3/30/09 ($51 billion, click here.

New link to short alternative budget video, click here.

Why You Should Care About the UC Regents

The Regents are one of the most powerful groups of people in the UC system, but their activities and their priorities often remain hidden from public view. Political appointees serving 12-year terms, most of the regents are successful business people with no background in education. Their central role appears to be to ensure the financial health of the UC system. However, for the past nine years, they have done very poorly at this task.

In 2000, the head regent, Gerald Parsky, was able to oust the highly regarded treasurer of the UC, Patricia Small, in order to outsource the control of some UC investment accounts. Until the time of her departure, Small oversaw one of the most successful university investment portfolios in the country (for a detailed analysis of Parsky’s role in the UC regents, click here). In fact, the UC’s pension investments were so good that the employees, the employer, and the state did not have to pay into the pension system for close to twenty years. However, this once over-funded plan is now under-funded.

Starting in 2008, in just fifteen months alone, the UC pension fund, endowments, and other investments lost over $23 billion. While UCOP and the regents will tell you that everyone lost money during this time, Charles Schwartz has shown that the UC’s investments have been underperforming most comparable institutions since the outsourcing started in 2000. In other words, UC investors have gone from being the best to being one of the worst, yet no one has lost their job or has even been admonished. Instead, people are getting raises and special retirement deals.

The regents seem to have a penchant for secrecy and private negotiations that directly conflicts with the UC’s status as a public institution. In fact, unions and faculty members have sued the regents on several occasions to force them to follow laws regarding public meetings and financial transparency. One reason why the regents may prefer that their dealings remain relatively shielded from view is that they have many vested interests that can affect their judgment and priorities. For example, Regent Parsky pushed the regents in 1999 to hire an outside investment firm, the Wilshire Group, to look at the UC’s financial strategies and assess their effectiveness. This private company reported that the UC could get a much higher rate of return if it outsourced the control of many of its investments and got rid of the current treasurer. The Wilshire Group also recommended that UC hire the Wilshire Group to manage the transformation of the UC’s investments. In other words, the result of their careful analysis was to recommend themselves for a giant contract. The Wilshire Group ultimately also made significant contributions to the reelection campaign of George W. Bush; Regent Parsky was Chair of Bush’s California Campaign Committee.

Under Parsky’s leadership, the UC not only began to invest in riskier financial instruments, but it also lost its ability to know how its own money was being invested. Not only did Parsky and the regents privatize the investments of a public institution, but they also began to make some of their most important decisions in private. During this same period, a series of scandals broke out in the UC system regarding executive pay, and once again, the regents were shown to be breaking the law by not following public transparency rules. It turns out that the regents were granting lavish compensation packages to top administrators, and many of the perks going along with the high salaries were not reported. After several articles in the San Francisco Chronicle and a legislative hearing, it was discovered that the regents were repeatedly breaking their own rules in order to give people hidden compensation. According to one Chronicle article, “University auditors told the UC Board of Regents they had found that 143 exceptions to the university's compensation policies had been made to give extra pay or benefits to 113 senior managers.” Even though the UC is a public institution, it failed to fully disclose many of its decisions and policies, and this secretive nature also relates to the handling of UC investments. In fact, it took legal action to force the university to begin to reveal the full nature of its compensation and investment activities.

The regents still insist on making public decisions in private. But with so many questions raised by the current budget crisis, many unions and faculty members are calling for changes to UC’s regental system. Most importantly, the regents must become democratized. Instead of having the governor appoint the regents, UC employees should elect UC faculty, staff, and students to sit on the pension board and the board of regents. Without these changes, the regents will continue to make decisions that undermine the already ailing health of the UC’s finances. Please come to the regent’s meeting, November 17-19 at UCLA and demand a democratic role.

How Administrators Took Over the University of California

In the UC system, we have a saying, “When two administrators walk into a room, three always walk out.” The question then is how do administrators reproduce and what effect does their reproduction have on the University of California. While I will not describe the mating habits of administrators, I will show how the growing rise of the administrative class means less money for everyone else, higher student fees, and a loss of shared governance.

According to a 2008 UCLA Faculty Association report, “Over the past decade, the numbers of Administrators in the UC almost doubled, while the number of faculty increased by 25%. The sharpest growth took place among Executives and Senior Managers: 114%. Because Administrators command high salaries and benefits, any increase in their number higher than the expected growth rate for the University results in high costs: rough estimates of the costs of carrying extra administrators at UC range around $800 million.” The first thing to stress here is that during the last decade, as the number of students increased in the UC system, there were fewer faculty to teach them, but many more administrators to run the show. In this structure, power shifts to the administrative class, while the faculty are pushed out of shared governance. Moreover, due to their high compensation packages, administrators suck up the funds that could be spent on faculty salaries and wages for the lowest paid workers.

As I pointed out in a previous post, “In 2008, there were 397 administrators in the over 200k club making a total of $109 million, and in 2006, the same group had 214 members for a collective gross pay of $58.8 million. This group and its collective salaries, then, almost doubled in just two years.” Not only has the administrative class grown in numbers and the percentage of the budget they consume through their salaries, but during the current period of “fiscal emergency,” we have seen several million dollars spent on increased compensation for administrators.

UPTE has documented that during the same regents meeting where a fiscal emergency was declared and the furlough system was approved, hundreds of administrators got compensation increases, which came under the form of administrative stipends, supplementary retirement contributions, houses, low-interest mortgages, automobile allowances, slush funds, airfare (for non work-related travel), relocation expenses, and salary-range adjustments (for a detailed list of all of the increases, click here). Thus, while President Yudof says there have been no salary raises, he is not mentioning all of the different ways that administrators are being compensated. Moreover, these highly compensated individuals are only having their base pay reduced by the furlough system, and so the majority of their compensation is not being taxed.

One of the most egregious examples of how administrators end up costing the university so much money is the hiring of the new Chancellor at UC Davis. Linda Katehi’s salary is not only 27% higher than her predecessor, but the outgoing chancellor will be paid $315,000 per year, while he will be on administrative leave. The former chancellor will also get a new executive assistant, who will make over $91,000 (not including benefits). In other words, by getting a new chancellor, UC Davis will have to spend an additional half a million dollars a year.

Let’s remember that these incredible compensation deals are being made during a time when the UC president says we have no money so we will have to all take pay cuts and students fees will have to go up 42% in one year. It should be obvious to anyone that UC does not have a budget crisis; it has a crisis in leadership.

UC-AFT List of Demands for the UC Administration

1. Our first demand is to stop the fee hikes.
We feel that Yudof should have made a deal with the governor with a trigger that if the state does not fund the UC at a certain level, student fees would go up. But Yudof has already pushed for drastic fee increases, and so the state has no reason to increase our funding. Undergraduates are now subsidizing everyone else, and yet the administration continues to cut undergrad courses and programs. Moreover, due to the reliance on non-senate faculty to teach over 50% of the student credit units and the increase in class sizes, the cost of undergraduate education has gone down significantly. We say increase enrollments and stop fee increases. In other words, protect access, diversity, affordability and quality.

2. Our second demand is to reverse the layoffs, protect vital services, and stop pay cuts for the lowest paid workers.
We are seeing layoffs, furloughs, increased workloads, increased class size, the closing of libraries, and decreased services, and we don't think it has to be this way. Pay cuts to the lowest paid workers have created safety and health issues for students, faculty, and Staff. Moreover, at UCLA, the administration has laid off most of the long-term lecturers in the College, and they are talking about suspending all writing and language requirements. This loss of essential courses will hurt UCLA's reputation for years and threaten its accreditation.

3. Our third demand is to consider progressive budget solutions. The unions have suggested alternative budget proposals, like borrowing money from the medical centers and sharing profits between units and reducing administrative units. In fact, UCSD is lending itself $40 million, and other campuses could do the same. Also, UC lent the state $200 million; we ask, why didn't they lend $200 million to the core fund?

4. Our fourth demand is budget transparency. The UC budget is $20 billion, and the state contribution represents about 16% and only 3% of the total budget was cut. We think this reduction should be shared equally between units. Medical centers bring in hundreds of millions in profits every year, and parking, housing, and services, all turn a profit. Taxing all units 5% would resolve the budget crisis. Moreover, according to its own legal financial statements, only 35% of the UC budget is legally restricted; in fact, courts have ruled that the UC budget is only restricted by its priorities.

5. Our final demand is to stop the union busting and bargain in good faith. UC administrators are claiming that the unions refused to discuss the furloughs, while in UC-AFT’s case, the librarians did accept the furloughs, and the lecturers were removed by the Office of the President from consideration. Other unions have had temporary layoffs forced on them, and their contracts have not been honored. We are also seeing outsourcing of union jobs and increased work with less time and for less money. UC should be a leader in fair and equitable employment practices.

It is too easy to blame the state for all of UC’s problems. While we need to fight for increased state funding, we have to look at the UC’s own budget structures