Monday, April 5, 2010

Warning: Tricky Accounting is Threatening Our Benefits

The UC system has embarked in the process of downsizing retiree benefits, and it looks like their manipulative campaign is working. Last week, The Council of UC Faculty Associations made the following statement: "UCRP is badly underfunded in terms of its liability for future benefits that employees began accruing after June 30, 2008. Moreover, the unfunded future liabilities are increasing very rapidly. In 2009, UCOP and TFIR estimated that if contributions were not immediately restarted, the percentage of funded liabilities would fall to 61% and the dollar amount of the unfunded liability would increase to $18 billion by 2013 – 3 years from now!" This focus on unfunded liability for the pension plan is in part a scare tactic to force the older faculty to push for higher employee contributions and may help the administration gut the plan for new hires.

Like the Commission on the Future of the University, the faculty association is buying all of the administration’s questionable accounting moves. First of all, as I discussed in relation to the Executive Summary of the Commission’s initial recommendations, due to an accounting change from 2006, the UC has been forced to declare as a liability on its books all of the future costs for pension and retiree healthcare. This means that while the UC is still funding the healthcare for retirees on a “pay as you go” basis, they are declaring a multi-billion dollar liability. Thus last year, as they spent $279 million on healthcare for retirees, they declared a $1.5 billion liability, which helped them to claim a budget deficit as they moved funds from unrestricted to restricted accounts. Once again, it is important to stress, the UC did not actually spend $1.5 billion, it only moved the money on its books. The UC currently has over $6 billion of retiree healthcare liability on its book, which means that the university looks a lot poorer than it actually is.

The council’s claim that the UC faces an $18 billion liability echoes the Commission’s claim that an $18 billion liability will threaten the basic mission of the university: “The funding gap is exacerbated by a significant unfunded post-retirement benefit liability, which is currently $1.9 billion and expected to reach $18 billion by 2013. Similarly, the University’s unfunded post-retirement healthcare liability is projected to grow from $13 billion today to $18 billion by 2013 . . . Because the PEB Task Force is scheduled to finalize recommendations by this summer, we do not address PEB issues in this report, but recognize that more than any financial challenge facing the University, the cost of providing these benefits has the potential to overwhelm our ability to continue our tripartite mission of teaching, research, and public service.” In other words, the crisis in the university is being driven by the university’s commitment to pension and retiree healthcare.

Moreover, the Council has also accepted the administration’s argument that the underfunding of the pension plan has nothing to do with the bad management of the UC’s investments: “Although the 2007-09 stock market crash was responsible for some of this unfunded liability, most of it results from the fact that no employee or employer contributions have been made for nearly 20 years. While the recent rise in the financial markets has eased the problem, the gap is still enormous.” The truth is that the UC’s pension investment record went from being one of the best to being one of the worst after the management of the funds was outsourced in 2000. Moreover, in the middle of the global financial meltdown, UC increased its holdings in real estate and mortgage-backed securities, and these moves may have been motivated by several regents who have strong investments in real estate and securities. It is irresponsible for the council to not call for direct employee oversight over the UC’s pension investments.

Since our university is full of famous economists and accountants, it should be possible for someone to challenge the university’s accounting mechanisms. If we do not question their assumptions, we will all see our benefits and compensation go down, as the core mission is threatened. While it is necessary to protect our pension plan and healthcare for retirees, we need to know the truth about the UC’s finances.

12 comments:

  1. Thanks Bob. I think the liability for future medical care is simply good accounting... trying to prepare for predictable future costs. Similarly for future pension costs. I don't those as accounting tricks, just solid accounting.

    I tend to agree that the pension fund has been mismanaged, including the elimination of Patricia Small and the use of consultants.

    --Harry Nelson

    ReplyDelete
  2. http://www.stanford.edu/group/siepr/cgi-bin/siepr/?q=/system/files/shared/GoingforBroke_pb.pdf

    half a TRILLION DOLLARS?!

    ReplyDelete
  3. Grad Students as Higher Ed Senior Administration-Stanford report: Shortfall for California's pension systems as much as a half a trillion dollars
    Thankful for Grad Students doing the real work:

    Going For Broke: Reforming California’s Public
    Employee Pension Systems
    By Howard Bornstein, Stan Markuze, Cameron Percy, Lisha Wang, and Moritz Zander.
    Faculty Advisor: Joe Nation

    Stanford report: Shortfall for California's pension systems as much as a half a trillion dollars

    By Denis C. Theriault

    ReplyDelete
  4. Given the funding uncertainties, should a person who is about to retire prefer a lump sum payout, or doesn't it matter at that point?

    ReplyDelete
  5. it's good to see this information in your post, i was looking the same but there was not any proper resource, thanx now i have the link which i was looking for my research.

    Accounting Dissertation Proposal

    ReplyDelete
  6. Thanks for sharing this one. Seems that there are a lot of precautions and rechecking to be done in the part of the budget department. The initial input allows to foresee precautions, yet are not enough to prevent the problems. As for me, I see the use of accounting crm software and distribution accounting software
    in helping me deal with accounting and auditing. The new technology allows us to create a new face of accounting.

    ReplyDelete
  7. http://www.burbagssale2013.com/ Burberry Outlet
    http://www.airmaxshoesfactory.com/ Air Max Shoes
    http://www.coachblackfriday2014.com/ Coach Black Friday
    http://www.coach-storeoutletonline.com/ Coach Black Friday
    http://www.coachcoachoutlet.com/ Coach Cyber Monday
    http://www.coachxfactory.com/ Coach Factory
    http://www.coach-factoryoutletonline.net/ Coach Outlet Factory
    http://www.coach-outletonlineusa.com/ Coach Outlet USA
    http://www.coach-pursesfactory.com/ Coach Purses Factory
    http://www.coachpurseusa.com/ Coach Purses USA
    http://www.coach-storeoutlet.com/ Coach Store Outlet
    http://www.coach-pursesonline.com/ Coach Purses On Sale
    http://www.monsterbeatsbydres.com/ Monster Beats Outlet
    http://www.louis-vuittonblackfriday.com/ Louis Vuitton Outlet
    http://www.lv-guccishoesfactory.com/ Louis Vuitton Factory
    http://www.marcjacobsonsale.com/ Marc Jacobs On Sale
    http://www.mcmworldwides.com/ MCM Outlet
    http://www.mcmoutlet-jp.com/ MCM 店铺
    http://www.oakleysunglassesfactory.com/ cheap oakley sunglasses
    http://www.michaelkorsmas.com/ Michael Kors Outlet
    http://www.michaelkors.so/ Michael Kors Outlet
    http://www.michaelkorsfactory-store.com/ Michael Kors Factory
    http://www.michaelkorsoutletr.com/ Michael Kors Outlet
    http://www.michael-korsfactoryonline.com/ Michael Kors Factory Online
    http://www.newcoachfactoryoutlet.com/ Coach Factory Outlet
    http://www.north-faceoutletonlines.net/ North Face Outlet Online
    http://www.polo-outletstore.com/ Polo Outlet Store
    http://www.ralph-laurenhome.com/ Ralph Lauren UK
    http://www.saclongchamppairs.com/ Sac Longchamp Pairs
    http://www.tcoachoutletonline.com/ Coach Outlet Online
    http://www.the-coachfactoryoutlet.com/ Coach Factory Oultet
    http://www.barbour-jacketsoutlet.com/ Barbour Jackets Outlet Online
    http://www.canada-gooser.com/ Canada Goose Outlet
    http://www.guccishoesuk-2014.com.net/ Gucci Outlet Online
    http://www.michaelkorsstates.com/ Michael Kors Outlet
    http://www.moncler-clearance.com/ Moncler Clearance
    http://www.moncler-jacketsoutletonline.com/ Moncler Jackets Outlet Online
    http://www.northsclearance.com/ North Clearace Outlet
    http://www.polo-ralphlaurensoutlet.com/ Polo Ralph Lauren Outlet Online
    http://www.woolrich-clearance.com/ Woolrich Clearance
    http://www.cvshopfactory.com/ shop.coachfactory.com
    http://www.mksfactoryoutlet.com/ Michael Kors Factory Outlet
    http://www.zxcoachoutlet.com/ Coach Outlet Online USA
    http://www.thebeatsbydre.net/ Beats by Dre
    http://www.newoutletonlinemall.com/ Coach Purses Outlet Online
    http://www.clickmichaelkors.com/ Michael Kors USA

    ReplyDelete
  8. To start with the primary line of my statement – I do resembling to honor a large-scale as a results of the diary tribute. If truth be notified it's associate big work by him that i discovered out associate honest facilitate by his/her spectacular detail and numbers. I merely emerge price any very to inform cash advances for you norman oklahoma, Brobdingnagian nice pleasure keep it up your work. seldom ar throughout a foothold to|i'll} be able to establish with you're posting and alter. wanting ahead to your any mails.

    ReplyDelete
  9. Like this useful info and I would like to say that Paperwork can be tedious and tiring, causing employees to get distracted and become less productive. Online accounting software is much more efficient than filling out paperwork because half the work is already done. This helps employees be much more productive than they were before.


    Station Accounting Software

    ReplyDelete
  10. Visit Us

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    http://annemearadeadmotherofbenstiller.blogspot.com/2015/05/serum-korea-asli-produkkecantikangrosir.html Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original http://annemearadeadmotherofbenstiller1.blogspot.com/2015/05/serum-korea-asli-produkkecantikangrosir.html

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original http://annemearadeadsmotherofbenstiller.blogspot.com/2015/05/serum-korea-asli-produkkecantikangrosir.html

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original Visit Us

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    http://annemearadeadmotherofbenstilleri.blogspot.com/2015/05/serum-korea-asli-produkkecantikangrosir.html Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
    http://annemearadeadsmotherofbenstiller.blogspot.com/2015/05/serum-korea-asli-produkkecantikangrosir_25.html Serum Korea Asli Produkkecantikangrosir.com Black New Formula Original

    xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx



    ReplyDelete
  11. Among the online endless exhibit of accessible auto financing choices to suit all circumstances, you are certain to discover what you are searching for. Your inclinations will rely on upon what you characterize as great auto advances. cash advance chicago

    ReplyDelete
  12. An awful credit can have genuine ramifications; here are a couple tips to help you discover auto advances with terrible credit. On the off chance that you are bankrupt, no moneylender would need to give you a credit. https://www.usacheckcashingstore.com/corona

    ReplyDelete