UCOP Responds to Our Fiscal Solutions

Last week I posted a set of alternative budget reductions that AFSCME has presented to the University of California, Office of the President (UCOP) (seehttp://changinguniversities.blogspot.com/2009
/09/fiscal-solutions-for-uc.html). These suggestions seek to protect the core mission and services of the campuses without the need to rely on increased student fees or the current furlough plan. By using a combination of cost saving measures and short-term borrowing, AFSCME was able to put together a package that would allow us to limit the damages done by the recent decrease in state funding. However, we have now gotten a response from UCOP, and their message is clear, the UC administration prefers to undermine the quality of the university in order to enhance the compensation of the highest earners. While it may seem that I am making an outrageous claim, I will now quote directly from UCOP’s letter (written by Dwaine Duckett), which outlines the reasons why they feel they cannot follow AFSCME’s prudent suggestions.

In response to AFSCME’s recommendation that the UC should save $220 million through a reduction of the salaries of the employees making over $200,000, Duckett argues that this cost cutting measure, “ignores the reality that a fair market and competition ultimately determine what individuals are paid for their work.” This statement says it all: as I have shown before, UCOP feels that there are two types of employees in the UC system, the few who deserve competitive salaries and the many who do not. According to this logic, even though the UC has a fiscal emergency, the university still needs to raise the salaries of the highest earners in order to compete with other institutions. Here we see how the UC does not have a budget crisis; rather it has a crisis in priorities.

In a very telling passage, Duckett adds that the “competitive system” judges the market-worthy high earners based on, “Education/Achievement, Experience and Skill Sets, Past Professional Accomplishments, Having Effectively Competed Against Other Candidates for the Job.” Yet, don’t the vast majority of the UC employees also meet this criteria, and shouldn’t they also have their salaries increased instead of decreased? Isn’t Duckett simply saying that the university has decided arbitrarily that certain employees need to be protected, and everyone else should take a pay cut in order to fund the market-worthy minority. It is this type of market ideology that makes faculty and students reject the need to increase student fees and cut core programs.

Duckett’s second main point reinforces this trickle-up economic theory. In returning to the furlough plan, he argues that Yudof adjusted the system in order to make it fair and progressive, yet, since the initial announcement of the salary reductions, we have found out that many of the highest earners have been able to remove themselves from the furlough plan. First we had the decision to exclude everyone funded out of external grants, next came the idea that the highest paid faculty, the medical professors, would not be having their salaries decreased, and then, we found out that other faculty members could make up for any loss of pay by earning money through “non-competitive grants,” outside work, and increased summer pay. The progressive tax was therefore turned upside down because any group with a lot of money and power could buy themselves out of the furlough plan.

Duckett’s next main point is that many of the people at the top will be getting a 10% pay cut, and this is a lot for people who make so much money. However, we need to place these salary reductions in relation to the incredible increases of salaries over the last few years. As I have pointed out before (http://changinguniversities.blogspot.com/2009/08/who-are-high-earners-in-uc-system.html), in just two years, from 2006-2008, the number of people making over $200,000 in the UC system almost doubled, and this increase of people at the top cost the university $358 million. Moreover, the average salary increase for these top earners over the two-year period was 40%. I am sure a lot of other employees would feel happy with a 10% reduction after getting a 40% increase.

In another standard UCOP response, Duckett goes on to argue that the reason why the UC was able to lend $200 million to the state, while it was cutting the salaries of its lowest paid workers, was that it would be “imprudent” to borrow money in order to pay for “short-term needs without a repayment source identified.” According to this argument, when you lend money, you can get the cash back with some interest, but if you use the same money for things like salaries for teachers, the money just disappears. If we follow this logic, the university should simply just end the unprofitable task of undergraduate education and become an investment bank. Moreover, we once again find the idea here that only the people who bring in outside money should be rewarded, and the other people who just do their job should be punished.

Like a good investment banker, Duckett claims that in order to keep the shareholders happy, the university must continue to increase revenue and lower salaries. In this case, the shareholder is Moody’s, which just gave the UC a high bond rating. As we are seeing in the greater economy, investors and credit rating firms like the idea of companies increasing their productivity by decreasing their labor costs, and this ideology explains why we are now witnessing a jobless recovery. Once again, money is being shifted to the top as the lowest earners are either being laid off or are having their salaries reduced.

Duckett adds that it would be unwise to borrow money to pay for current expenses because Moody’s would lower the UC’s credit rating, but isn’t this how universities use their endowments? The whole idea of a university having investment funds and endowments is to use the money when it is needed. However, UCOP seems to think that the university should only generate revenue and save money so it can borrow more money in the future in order to later make a profit on the savings. When did our university become an investment bank?

It seems that Wall Street has come to Main Street, and the UC is bent on turning the university into a corporate giant with multiple revenue streams and a reduced workforce. Yet, the university is not a profitable business and because of its tax-exempt status, it cannot generate profits, and so it must funnel its “positive income flows” into the high salaries of the wealthy minority. Duckett makes this point by insisting that the hundreds of millions of dollars the medical center makes in net income should not be called “profits,” and because these centers have earned their money, they should be able to keep it. Furthermore, Duckett points to uncertain costs in the future, which force the medical centers to hold onto their cash and not share it with others. Yet, isn’t the present already uncertain for an employee making $40,000 and facing escalating mortgage payments?

In the last rejection of alternative cost saving measures, Duckett returns to the UCOP favorite excuse/myth/lie that almost all of the UC money is restricted legally. I guess they feel if they keep on repeating it, it will become true, but it simply is false. The UC is only restricted by its priorities, and it should be clear by now that the guiding priority is to guarantee the high compensation of the few who have been determined to be market worthy.