Wednesday, January 19, 2011

Fighting for Funding and Administrative Reductions

Next week, I will be going with several union leaders to speak to state legislators regarding the UC budget. We will propose that the state limits Governor Brown’s funding cuts if the UC promises to reduce its administrative costs by $500 million. Our strategy is to help restore funding and to protect vital services without having to resort to furloughs, layoffs, and tuition increases.

Here are the administrative savings AFSCME and UC-AFT will present to state legislators:

1. Eliminate $530 million in Management Inefficiencies.
Since 2004, UC’s management has grown twice as fast as non-management employees. In fact, $1.6 billion in cash compensation went to management in 2009. Thus, adjusting UC’s system-wide management ratio from 7:1 to 10:1 would save over $530 million annually. Also, in addition to cash compensation, UC’s senior managers are compensated through a number of supplemental health, welfare, and retirement benefits. Many of the senior managers who receive these benefits are paid through state funds, causing this benefit to include state funding.

2. Eliminating the Senior Management Supplemental Benefit Program would result in $2.5 million in savings annually. UC puts 5% of about 200 highly paid executives’ annual pay into retirement savings accounts. These funds are available to executives after they retire, in addition to UC’s standard retirement benefits. The cost of this supplemental benefit is about $2.5 million per year. One UC Task Force recommended that this program be eliminated and that “other compensation solutions should be developed and adopted” for senior managers.

3. Eliminating the 415(m) Restoration Plan would save $20 million each year after 2020. This plan mostly benefits long-service, high-income faculty and senior managers by supplementing their annual retirement income with additional income beyond the $195,000 pension limit established by the Internal Revenue Code.

These reductions would be very popular with the public and the legislature, and they could force the administration to change its priorities.

11 comments:

  1. Bob - this is a bad plan, and I say this as someone who has publicly questioned the wisdom and value-added of core members of the SMG. It is unethical, because essentially plays the "lets do mass layoffs" game that we rightly opposed when management does it (e.g. "The Disposable American" strategy that has damaged the American economy and society and caused enormous unnecessary individual pain). It is divisive - it will split employees at least three ways (senate faculty, non-represented staff, represented staff), and maybe more, at the very moment when we need to work together. It is authoritarian, in that it invites Jerry Brown to act as a unitary executive in telling the Regents & UCOP what to do to fix their system. It is destructive, in that it validates what is the only rational justification for balancing the budget in no small part on the backs of higher education, which is that UC is indeed wasting $500 million every year that it can easily do without.

    We are now in the Alice-in-Wonderland situation in which the unions and the CFO offer the same number for the amount of administrative waste that UC can rapidly cut (though from different sources), and in which a 20% cut, which caused loud, widespread distress when Arnold did it in 2009, is being greeted with near total silence on all sides. This is a recipe for disaster, and it's not good to imply to rank-and-file folks that everything will be fine because the governor will help us file a lot of executives.

    In reality, the situation is worse than in 2009, and Brown is arguably worse for higher ed than Arnold because he has closed off the only revenue stream -- (totally undesirable) tuition increases -- that even partially made up for constant cuts. All the remedies take time -- fixing cross-subsidies that short undergraduate instruction, delayering senior management, drastically simplifying compliance and other procedures. I would say 3 years, assuming an administration that actually focuses on operations. These cuts are just going to produce layoffs, and it is the less protected who will be laid off first. Brown would need to spend huge political capital to shift the balance of power away from senior management to the point that UC won't be looking at a giant version of Berkeley's Operation Excellence though with many fewer powerpoint slides, and I don't seen Brown doing that.

    It would be great if the unions drew on their members' expertise to develop a grassroots reengineering plan that would avoid layoffs while increasing efficiency and improving the quality of people's jobs, so UC could take more eligible students without adding staff costs for a few years. Your 10:1 management ratio may well be right. I could see freezing the budget while we continue to retool, but not endorsing another 20% cut as leading to sustainable, desirable savings.

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  2. Some of the unions feel that we just can't say no to the budget cuts and simply ask for more money from the state. One idea is to ask Brown to bring back $300 million if the administration shows it can reduce senior management by a certain amount. The $530 million would be over a few years, and it would also help pay down the huge pension obligation, which is on the horizon.

    Chris, besides just asking for more money or raising tuition, what concrete solution do you have? Moreover, this plan protects students, faculty, and most staff. It also stops the continuous growth of upper management. While it does get the governor involved in the UC budget, it is not authoritarian, and many of us feel that the state does need to put pressure on the administration to change its priorities.

    I agree that it will take time to fix the other problems of indirect cost recovery and cross subsidies, but we need to show that we are willing to give something up as the state tries to dig itself out of its financial hole. This would be the first step in getting the state to contribute to our pension plan and would avoid some of the more drastic things being considered like closing academic programs and moving quickly to online courses.

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  3. Bob - it's not about asking for more money. It's about asking not to be cut again and again and again, and by crazy one-year amounts. You know the history: Compact ceiling and cuts. There is no way the union plan protects anybody you and I care about. The University will raise tuition again, and cut enrollments. Students will be shut out both before and after they get to campus. Instruction is the most dependent on liquid dollars and will get cut first because it is easiest to cut (most other activities have partial protection through extramural contracts, etc.). Newer and lower-level staff will be chopped, TAs not renewed, sections and courses killed - as happens now every year, and is the ONLY academic planning that now goes on at UC. The unions, the FAs, the Senate should all be saying NO CUTS TO HIGHER EDUCATION. We have done giveback after giveback. We already gave at the office. We have been giving general funds back to the state to fill whatever holes it digs for 20 years, never more than under Schwarzenegger, except now for Brown. We have not grown like other agencies in the past, and get the deepest cuts, which are all excused and explained by the capacity to raise tuition. The union position makes no sense - asking for 3/5ths back on a contingency of administrative actions over which neither Sacto nor the unions nor the faculty have any control? And this will protect untenured staff? (See the many comments about who will be cut here (http://utotherescue.blogspot.com/2011/01/ending-bad-uc-week-much-remains-to-be.html) Honestly I am dumbfounded - I don't know what the heck is going on in people's heads. Is it shellshock?

    Concretely: yes it's a good idea to reduce administrative units more than instructional units. There IS administrative bloat that is tied to mission creep, and it need to be addressed quickly and lucidly. Yes the upper levels are much more in need of "rightsizing" than the lower. But NOT through across-the-board, number-driven mass layoffs. The concreteness should flow from analysis of operations. Why doesn't UC-AFT float a plan for a sample division, UCLA humanities, with estimates where data is not made available, and start an enlightened and not draw-out discussion. I don't know that UC has the cultural intelligence that it takes to do this, but it does still happen in places like Germany, and maybe Iowa too who knows, where information is circulated and the stakeholders hash it out to something that everyone can live with. I know that UCOP has not treated the unions fairly and respectfully, and see the temptations to retailiate, but this is going to help make everything worse.

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  4. Chris,

    I read Remaking quite regularly and, while I do not always agree with your point of view, I respect your voice.

    I'm only dropping in here to tell you how much I appreciate your rebuttal to Bob's inane "plan."

    You've pointed out the most glaring holes in this "plan" so I'd offer a few comments regarding your statement that "UCOP has not treated the unions fairly and respectfully."

    Perhaps UCOP has not (treated the unions fairly and respectfully) but (most of) the unions have been quite well rewarded for their continued criticism of the University's leadership (never quite noting that this particular hole precedes the arrival of Yudof et al).

    Most recently, the new UPTE contract provides for salary increases of 4.5%, 5% and 5% over the next three years + a $1,000 cash bonus that was paid in 10/11 for not receiving raises in 08/09 or 09/10 (and one notes the contract doesn't even require employee performance to be particularly good - a simple "satisfactory" rating is sufficient to receive these compensation increases).

    In contrast, the University's "policy-covered" staff population (to which I belong) also received no increases in 08/09, 09/10, no $1,000 cash bonuses in 10/11, and I'd keel over of shock if we receive anything remotely resembling 4.5%, 5% and 5% in 10/11, 11/12 and 12/13.

    My point is then that "fair" is relative I suppose. From where many of us sit, the University has treated the unions with nearly obscene "fairness" over the last few years.

    I'd add it is not a case of sour grapes, most of the folks I work with understand the University is in a dire situation and that funding is - at the moment - quite literally a zero sum game (it's actually a negative sum game), where any wage increases are likely to result in offsetting wage reductions elsewhere and we value our colleagues enough to not want anyone to lose their jobs in such a terrible economic environment. Many of us actually believe in the "shared sacrifice" narrative but that narrative seems not to apply to _all_ of the University's employees.

    I have little respect for much of what Samuels writes (his number one bit of exceedingly damaging libel from 2010 was his repeated public assertions that online education was a Machiavellian scheme to decrease underrepresented minority populations on our campuses) but he is to be commended for being clear about what he wants, as last year he wrote:

    "...the only way to counter the power of administrators and the decreased power of professors is to demand job security and respect for the vast majority of faculty. As the New Faculty Majority organization has made visible, non-tenure-track faculty are the majority, and they should fight for their proper power and recognition."

    To that end, Samuels treats all crises the same - those self-imposed (and we've had many) as well as those imposed by the State (far more common as of late) - an opportunity to further enhance the reach and control of the University by the unions.

    The end result is short-sighted, fractious, and damaging what should be the common good of the University.

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  5. The problem with anonymous postings is that people don’t have to be accountable, but let me respond to a few issues. Most union employees receive low pay, and only a few unions have been able to get anything lately at the bargaining table. I also do feel that it is a big problem that unrepresented staff have not gotten better raises; however, when I am discussing administrative reductions, I am talking about the highly compensated employees who have gotten very large increases. On another front, the move to online education, as we have seen recently with for-profit schools, often offers an inferior product at a high cost to minority students. Also, while my plan is called “inane,” I don’t see anyone coming up with a better one.

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  6. "My point is then that "fair" is relative I suppose. From where many of us sit, the University has treated the unions with nearly obscene "fairness" over the last few years."

    Well, certainly not the clerical union (now CUE TEAMSTERS).

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  7. "Fair" has nothing to do with it. The only reason the unions have received anything from UC is because members pay dues, organize, and get contracts signed - despite UC's best efforts to delay and obstruct. In fact, the historic achievement of organized labor in this country has been the raising of wages across the board, both union and non-union. If you're dissatisfied with your compensation, carping at the unions is the last thing you want to do.
    - TBachand

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  8. Operational Excellence. UC Berkeley. I believe mass layoffs of unionized workers in on the way in the next three years. Listening to a member of the Student Services Initiative team speak I hear him say that they expect the greatest savings to come from places like Housing and Dining services. How? Well, the speaker doesn't give specifics but if we refer back to the Bain Co report. They asked -- why is a university running food services or housing? Outsource is their recommendation.

    Who works in food services and housing services. Lowly paid union workers. Yes, getting rid of all these employees will said money. But, as I have long believed, the unspoken agenda (or just happy coincidence) is union busting (why else did UCB hire contract employee specialists to help "departments" with layoffs. High performance culture, indeed.

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