Here is a series of statements that Mark Yudof made during his address to the Regents on Sept. 16th (you can watch these comments at: http://www.youtube.com/watch?v=7DaX7Jh8-R8 ):
1. “We don’t have any reserves.”
2. “In the last fourteen months, our reserves – so called – are down, I suspect, at the end of the day by one third.”
3. “We actually spent 300 million in the so-called reserves in the current year.”
4. “We better be alert and I will be alert that we are not out of reserves in another year.”
5. “The real challenge is, if we are not careful, and this downturn continues a couple of years, there won’t be any checking account.”
These statements show why faculty, students, and unions do not trust Yudof’s leadership. He first claims that there are no reserves, and then he states that they do exist, but they are going down, and finally he argues that the reserves have to be saved for the future. It is impossible for all of these statements to be true at the same time, and so we must conclude that the UC does have money, but it chooses not to spend it. Instead, fees will go up 42% in a year, employees will have their salaries reduced, and services will be cut.
On September 24th, faculty, students, and workers rallied to demand a more fair and transparent budget. We want to know the truth about the UC’s fiscal status, and we do not want to be told one moment that the reserves don’t exist and then hear the next moment that they need to be saved. What needs to be saved is the reputation of the world’s greatest public university.
Saturday, September 26, 2009
Wednesday, September 23, 2009
Growing Salary Inequality for the UC Senate faculty
This post looks at the growing spread in the UC system between the high earners and everyone else within the senate faculty ranks. Using Jeffrey Bergamini’s new salary data (http://ucpay.globl.org), I first looked at general salary trends within the UC system and found that the number of people making over $200,000 in the UC system increased by 470 between 2004 and 2006; however, during the next two years, the same group increased by 1,183. Moreover, the increase in total compensation to the top earners was $163 million between 2004 and 2006, but the increase between 2006 and 2008 was $320 million. This means that the amount of additional money going to the top earners almost doubled in just two years. In fact, the total pay for the UC system went from $7.1 billion in 2004 to $7.9 billion in 2006 to $9.5 billion in 2008.
During this time of growing salary inequality, we find a profound movement of money to the top, while lower paid workers saw their pay stagnate. Within the professorial ranks, increased inequality can be documented between fields and within particular areas. For instance, as I have previously shown (http://changinguniversities.blogspot.com/2009/08/who-are-high-earners-in-uc-system.html), medical, business, and law professors had abnormally large compensation increases between 2006 and 2008. In fact, if we compare the raises between 2004 and 2006 to the raises between 2006 and 2008, we find that salaries took off after 2006. Thus, the total compensation for full professors in the business schools went from $116 million in 2004 to $128 million in 2006, and then in 2008, the same group jumped to $176 million. In other words, the rate of increase went from 10% to about 40%.
If we now look at the professors outside of the professional schools, we find some interesting salary trends, which all point to the movement of wealth to people at the top. For example, in 2004, there was 216 full professors making more than $200,000,and in 2006, the number of high earners grew to 194, but in 2008, this same category jumped to 380. Therefore, the number of full professors making over $200,000 nearly doubled between 2006 and 2008. Meanwhile, if we look at the salaries of assistant professors during this same period, we find that the number of assistants making less than $70,00 stayed almost the same between 2004 and 2008 (577 in 2004; 553 in 2006; 558 in 2008). This statistic tells us that the salary growth for academic professors was concentrated at the top.
In fact, if we look at the number of full professors making over $250,000, we see that in 2004, there were17 people in this group, while in 2006, 35 made over $250,000, but in 2008, there were 69. The top earners between 2006 and 2008 nearly tripled, and over half of them were at UCLA. It is no wonder that in 2008, the UCLA College declared an internal budget deficit unrelated to state funding.
If we look at the salaries of associate professors, we discover that there was relatively the same number of them making below $100,000 from 2004 to 2008 (949 in 2004; 960 in 2006; 936 in 2008). Once again, this points to relatively flat salaries for everyone else except full professors at the top. It is also important to note that the numbers of faculty in each of the ranks stayed almost the same between 2004 and 2008. For instance, there was 3,112 full professors in 2004, and in 2008, there was 3,208. This statistic tells us that the increase of compensation was not caused by an increase in the number of full professors; rather, we find that the average salary in this rank went up $18,000 during this period, and the biggest increases went to the people at the very top. In comparison, the average assistant professor’s salary increased by $5,000 from 2004 and 2008, and the average associate professors salary increased by $11,000.
Perhaps the most telling statistic is the number of people in each academic professorial rank. In 2008, there was 3,208 full professors, 1,250 associate professors, and 1,140 assistant professors. In other words, more than half of the academic professors are full professors, and with the current move to freeze new hires, we should see an even greater divide between the highest paid professors and everyone else. This means that it will become more expensive to teach classes and the cost of graduate education will escalate.
During this time of growing salary inequality, we find a profound movement of money to the top, while lower paid workers saw their pay stagnate. Within the professorial ranks, increased inequality can be documented between fields and within particular areas. For instance, as I have previously shown (http://changinguniversities.blogspot.com/2009/08/who-are-high-earners-in-uc-system.html), medical, business, and law professors had abnormally large compensation increases between 2006 and 2008. In fact, if we compare the raises between 2004 and 2006 to the raises between 2006 and 2008, we find that salaries took off after 2006. Thus, the total compensation for full professors in the business schools went from $116 million in 2004 to $128 million in 2006, and then in 2008, the same group jumped to $176 million. In other words, the rate of increase went from 10% to about 40%.
If we now look at the professors outside of the professional schools, we find some interesting salary trends, which all point to the movement of wealth to people at the top. For example, in 2004, there was 216 full professors making more than $200,000,and in 2006, the number of high earners grew to 194, but in 2008, this same category jumped to 380. Therefore, the number of full professors making over $200,000 nearly doubled between 2006 and 2008. Meanwhile, if we look at the salaries of assistant professors during this same period, we find that the number of assistants making less than $70,00 stayed almost the same between 2004 and 2008 (577 in 2004; 553 in 2006; 558 in 2008). This statistic tells us that the salary growth for academic professors was concentrated at the top.
In fact, if we look at the number of full professors making over $250,000, we see that in 2004, there were17 people in this group, while in 2006, 35 made over $250,000, but in 2008, there were 69. The top earners between 2006 and 2008 nearly tripled, and over half of them were at UCLA. It is no wonder that in 2008, the UCLA College declared an internal budget deficit unrelated to state funding.
If we look at the salaries of associate professors, we discover that there was relatively the same number of them making below $100,000 from 2004 to 2008 (949 in 2004; 960 in 2006; 936 in 2008). Once again, this points to relatively flat salaries for everyone else except full professors at the top. It is also important to note that the numbers of faculty in each of the ranks stayed almost the same between 2004 and 2008. For instance, there was 3,112 full professors in 2004, and in 2008, there was 3,208. This statistic tells us that the increase of compensation was not caused by an increase in the number of full professors; rather, we find that the average salary in this rank went up $18,000 during this period, and the biggest increases went to the people at the very top. In comparison, the average assistant professor’s salary increased by $5,000 from 2004 and 2008, and the average associate professors salary increased by $11,000.
Perhaps the most telling statistic is the number of people in each academic professorial rank. In 2008, there was 3,208 full professors, 1,250 associate professors, and 1,140 assistant professors. In other words, more than half of the academic professors are full professors, and with the current move to freeze new hires, we should see an even greater divide between the highest paid professors and everyone else. This means that it will become more expensive to teach classes and the cost of graduate education will escalate.
Monday, September 21, 2009
The Real Cost of Undergraduate Education
The UC administration has announced its plan to decrease undergraduate enrollment and increase undergraduate fees 42% over a one-year period. But this strategy makes no sense for the UC system and will actually add to our budget woes. In the analysis below, I show what it really costs to educate a UC undergraduate student for a year.
My argument is that if we examine the salaries of the people teaching undergraduate courses at the UC and the average course load of UC students, we find that while UCOP claims that it costs over $20,000 to educate an undergraduate student for a year, the basic instructional cost per student is closer to $5,000. So while the state currently gives $9,650 per student and the students will next year be likely paying over $10,000, the real cost of instruction is about a quarter of the reported price.
To determine the real cost of instruction, we start with a few basic statistics: The average UC undergrad takes 45 credit hours per year, and we know that students usually take eight large courses (averaging 200 students) and two small courses (averaging 20 students) on campuses using the quarter system. We also know that tenure-line faculty teach half of the undergraduate credit hours and that lecturers and grad students teach the other half. In fact, tenure-line faculty generate 690 student credit hours per FTE, while lecturers produce 1,490 student credit hours per FTE. This statistic is very important because the current plan to reduce or eliminate lecturers would undermine the “efficiency” of the system. Keep in mind that in 2008, the average lecturer salary was $56,000, while the average tenure-line faculty member earned $106,000.
To determine the per-student cost of a small course taught by a tenure-line faculty member, we take the average salary ($106,000), divide it by the average course load (5.1), and divide this total by the number of students (20), we get $1,039, but, if we only count the part of the professor’s salary that goes to instruction (50%), the real cost is $520. If we perform this same calculation with lecturers, the average per student cost is $308. In the case of large courses holding 200 students, we can simply divide the cost of small courses by 10, and we get the per-student cost for large courses taught by tenure-line faculty as $52 and the cost for lecturers as $30. If we now take the average course load of a student who takes eight large courses and two small courses during an average year, with half of the courses taught by professors and half taught by lecturers, we get $878 (208 + 120 + 520 + 30). If we include the full cost of a professor (research + instruction), we get $1,606.
How about the cost of graduate students who teach small discussion sections accompanying the large lecture courses that undergrads take? To calculate this, we need to look at the average pay per course and the average course load and tuition remission of graduate student instructors. While we do not have exact figures here, I have been told that the cost per section at UCLA for a graduate student averages $6,000 (Please let me if this is wrong), and we know that many large classes do not have sections, and so we can only estimate that if a class of 200 has 10 sections of 20 students, the per student cost for each section is $300 (this does not include the cost of the tuition remission for graduate students). If a student takes 8 large classes during a year, and each class has a section taught by a graduate student, we have to add $2,400 to the total instructional cost, and we now get $3,278. However, none of these calculations include health benefits, which add an extra 20% to our calculations. If we include health benefits, we get $3,932 (this number is high because more than half of the lecturers are not eligible for benefits).
So why does UCOP claim that it costs over $20,000 for one year’s education of an undergraduate student? UCOP will argue that we have not accounted for the cost of classrooms, utilities, administration, libraries, and staff. Our first response is that we want to focus on just the direct instructional cost. Moreover, economies of scale operate here; it is clear that when you add a new student, you do not add a new classroom or add a new administrator. In fact, there have been very few new classrooms added in the UC system, and class sizes have recently gone up. Furthermore, it is impossible to tell what part of an administrator’s salary should go to supporting the instructional mission of the UC, and it is unclear why an undergraduate should pay for the raises of administrators and researchers. While I recognize that students and the state should pay for some part of the indirect or associated costs of UC operations, it strikes me as completely unjustifiable to have less than 25% of the undergraduate revenue go to direct instructional expenses.
What is abundantly clear is that undergraduates are subsidizing research, graduate students, and administrators, while their fees are being increased and their educational opportunities are being decreased. It is also clear that the state alone cannot be blamed for the escalating costs of student fees and tuition. The solution to the UC’s budget issues is thus to increase undergraduate enrollment, retain lecturers, and rely more on small, interactive classes that save money and enhance the quality of undergraduate education.
Sources:
The average student credit hours can be found at: https://sisds.ucdavis.edu/aboutinstruction.htm
The average course load and credit hours for senate faculty and lecturers comes from the annual “Faculty Instructional Activities” report: http://www.ucop.edu/planning/fia/documents/fia_annlrpt2007.pdf (pp. 13-14).
Average salaries for professors and lecturers:
http://ucpay.globl.org
The reason why we should only count half of the professor’s salary to calculate the instructional cost: http://socrates.berkeley.edu/~schwrtz/UndergradCost.html
For a study of the cost for graduate students: http://www.ucop.edu/sas/sfs/docs/gradsurvey_2007.pdf
For the average cost of benefits for faculty serving the core missions, see:
“The University of California 2008-09 Budget For Current Operations Summary of he Budget Request.”
My argument is that if we examine the salaries of the people teaching undergraduate courses at the UC and the average course load of UC students, we find that while UCOP claims that it costs over $20,000 to educate an undergraduate student for a year, the basic instructional cost per student is closer to $5,000. So while the state currently gives $9,650 per student and the students will next year be likely paying over $10,000, the real cost of instruction is about a quarter of the reported price.
To determine the real cost of instruction, we start with a few basic statistics: The average UC undergrad takes 45 credit hours per year, and we know that students usually take eight large courses (averaging 200 students) and two small courses (averaging 20 students) on campuses using the quarter system. We also know that tenure-line faculty teach half of the undergraduate credit hours and that lecturers and grad students teach the other half. In fact, tenure-line faculty generate 690 student credit hours per FTE, while lecturers produce 1,490 student credit hours per FTE. This statistic is very important because the current plan to reduce or eliminate lecturers would undermine the “efficiency” of the system. Keep in mind that in 2008, the average lecturer salary was $56,000, while the average tenure-line faculty member earned $106,000.
To determine the per-student cost of a small course taught by a tenure-line faculty member, we take the average salary ($106,000), divide it by the average course load (5.1), and divide this total by the number of students (20), we get $1,039, but, if we only count the part of the professor’s salary that goes to instruction (50%), the real cost is $520. If we perform this same calculation with lecturers, the average per student cost is $308. In the case of large courses holding 200 students, we can simply divide the cost of small courses by 10, and we get the per-student cost for large courses taught by tenure-line faculty as $52 and the cost for lecturers as $30. If we now take the average course load of a student who takes eight large courses and two small courses during an average year, with half of the courses taught by professors and half taught by lecturers, we get $878 (208 + 120 + 520 + 30). If we include the full cost of a professor (research + instruction), we get $1,606.
How about the cost of graduate students who teach small discussion sections accompanying the large lecture courses that undergrads take? To calculate this, we need to look at the average pay per course and the average course load and tuition remission of graduate student instructors. While we do not have exact figures here, I have been told that the cost per section at UCLA for a graduate student averages $6,000 (Please let me if this is wrong), and we know that many large classes do not have sections, and so we can only estimate that if a class of 200 has 10 sections of 20 students, the per student cost for each section is $300 (this does not include the cost of the tuition remission for graduate students). If a student takes 8 large classes during a year, and each class has a section taught by a graduate student, we have to add $2,400 to the total instructional cost, and we now get $3,278. However, none of these calculations include health benefits, which add an extra 20% to our calculations. If we include health benefits, we get $3,932 (this number is high because more than half of the lecturers are not eligible for benefits).
So why does UCOP claim that it costs over $20,000 for one year’s education of an undergraduate student? UCOP will argue that we have not accounted for the cost of classrooms, utilities, administration, libraries, and staff. Our first response is that we want to focus on just the direct instructional cost. Moreover, economies of scale operate here; it is clear that when you add a new student, you do not add a new classroom or add a new administrator. In fact, there have been very few new classrooms added in the UC system, and class sizes have recently gone up. Furthermore, it is impossible to tell what part of an administrator’s salary should go to supporting the instructional mission of the UC, and it is unclear why an undergraduate should pay for the raises of administrators and researchers. While I recognize that students and the state should pay for some part of the indirect or associated costs of UC operations, it strikes me as completely unjustifiable to have less than 25% of the undergraduate revenue go to direct instructional expenses.
What is abundantly clear is that undergraduates are subsidizing research, graduate students, and administrators, while their fees are being increased and their educational opportunities are being decreased. It is also clear that the state alone cannot be blamed for the escalating costs of student fees and tuition. The solution to the UC’s budget issues is thus to increase undergraduate enrollment, retain lecturers, and rely more on small, interactive classes that save money and enhance the quality of undergraduate education.
Sources:
The average student credit hours can be found at: https://sisds.ucdavis.edu/aboutinstruction.htm
The average course load and credit hours for senate faculty and lecturers comes from the annual “Faculty Instructional Activities” report: http://www.ucop.edu/planning/fia/documents/fia_annlrpt2007.pdf (pp. 13-14).
Average salaries for professors and lecturers:
http://ucpay.globl.org
The reason why we should only count half of the professor’s salary to calculate the instructional cost: http://socrates.berkeley.edu/~schwrtz/UndergradCost.html
For a study of the cost for graduate students: http://www.ucop.edu/sas/sfs/docs/gradsurvey_2007.pdf
For the average cost of benefits for faculty serving the core missions, see:
“The University of California 2008-09 Budget For Current Operations Summary of he Budget Request.”
Friday, September 18, 2009
First Day Message for Students
We want you to know that we are fighting against proposed changes to the UC system that would have a negative effect on students and on the quality of education.
1) We have called into question the recent increase in student fees and the possibility of an additional increase. While we do recognize that the state cut the UC budget by $812 million, we also know that the total budget is $20 billion, and there are over $50 billion in the UC investment and pension portfolios.
2) We do not think that the UC needs to reduce course offerings, increase class sizes, and eliminate teachers and classes. We believe that the UC President needs to fight for more state funding, but we also know that in the short-term, there is enough money in the system to prevent drastic reductions in educational quality.
3) To help fight for the students and the value of public higher education, we are protesting against the university’s recent move against the core principle of shared governance. Too many decisions are being imposed from above, and students and faculty have not been given their proper role in the decision-making process.
4) We plan to work with students and other groups to force the UC system to have a more transparent and fair budgetary system, and we feel that everyone suffers when faculty and staff are forced to take unpaid days off.
5) We also believe that the UC President is hurting undergraduate and graduate education in order to force the state to fund the UC at a higher level. While we support this need for better funding, we do not think that the students and the faculty should be sacrificed in this effort, and we reject all student fee increases.
Students and faculty need to become educated about how the UC system works, and what agendas are being promoted in the contemplated restructuring of the UC system. Since we are all committed to education, we need to learn about how decisions are made and who wins and who loses when funds are shifted. Please come to our rally on September 24t and show your support for students, faculty, and UC employees. We can make UC the university we want it to be. The UC does not have a budget crisis; it has a crisis in priorities. We can change these priorities if we work together.
1) We have called into question the recent increase in student fees and the possibility of an additional increase. While we do recognize that the state cut the UC budget by $812 million, we also know that the total budget is $20 billion, and there are over $50 billion in the UC investment and pension portfolios.
2) We do not think that the UC needs to reduce course offerings, increase class sizes, and eliminate teachers and classes. We believe that the UC President needs to fight for more state funding, but we also know that in the short-term, there is enough money in the system to prevent drastic reductions in educational quality.
3) To help fight for the students and the value of public higher education, we are protesting against the university’s recent move against the core principle of shared governance. Too many decisions are being imposed from above, and students and faculty have not been given their proper role in the decision-making process.
4) We plan to work with students and other groups to force the UC system to have a more transparent and fair budgetary system, and we feel that everyone suffers when faculty and staff are forced to take unpaid days off.
5) We also believe that the UC President is hurting undergraduate and graduate education in order to force the state to fund the UC at a higher level. While we support this need for better funding, we do not think that the students and the faculty should be sacrificed in this effort, and we reject all student fee increases.
Students and faculty need to become educated about how the UC system works, and what agendas are being promoted in the contemplated restructuring of the UC system. Since we are all committed to education, we need to learn about how decisions are made and who wins and who loses when funds are shifted. Please come to our rally on September 24t and show your support for students, faculty, and UC employees. We can make UC the university we want it to be. The UC does not have a budget crisis; it has a crisis in priorities. We can change these priorities if we work together.
Monday, September 14, 2009
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.
/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.
Friday, September 11, 2009
Fiscal Solutions for the UC
I have adopted these basic solutions to fix the current UC budget from AFSCME:
Reduce the Top 2% of Earners = $220 MILLION
Applying sensible reductions to the University’s top earners will free over $220 million to use for preserving essential services. The alternative—levying reductions on UC’s employees, including low-wage service workers whose families are one step from poverty—will ultimately cost more in public dollars.
Use Short-Term Borrowing as a Stop-Gap = $200 MILLION
If UC can borrow $200 million to lend to the state for continued construction, it surely can borrow $200 million to maintain essential services at campuses and medical centers. Prioritizing core services is a smart budget move that saves money by averting the liability and costs of unsafe campus conditions. UC can afford this extraordinary stop-gap measure during unprecedented times.
Utilize Medical Center Profits = $100 MILLION
UC’s five medical centers made significant profit gains in 2009. According to UCSF CEO Mark Laret, in FY 2009 that single campus “exceeded [the] outstanding level goal… with a bottom line that may exceed $100 million this year.” Other campuses report similar gains, averaging a 5.2% operating margin for the first three quarters of FY 2009 (California hospitals have averaged less than 1% over the last five years reported). If UC borrowed medical center profits above a 3% operating margin, this would free roughly $100 million for UC’s general operations.
Restructure Debt = $75 MILLION
We support the University’s efforts to restructure a portion of its bond debt service, and believe UC should continue with its plans to save $75 million through such means.
Utilize Unrestricted Investments = $50 MILLION
The University holds a massive, $8.5 billion investment portfolio, most of which is highly liquid, unrestricted funds. Although UC earmarks these funds for programs, some fraction is discretionary and designated at the will of the Regents. In FY 1993, UC and the State of California tapped into the University’s investments to fund $43 million of a shortfall in UC’s operating budget. Borrowing less than 1% of UC’s unrestricted investments would free $50 million to deal with critical operational needs in this unprecedented state budget situation.
Cut Wasteful Spending = $40 MILLION
UC must continue to cut non-essential spending—including, but not limited to, renovations of UC mansions, executive rentals of non-UC property, non-essential travel, and consultants’ contracts—before any consideration of cutting vital services. UC’s receipt of American Reinvestment and Recovery Act funds necessitates an especially judicious approach to reigning in excessive non-core spending.
Pressure must also be put on President Yudof to negotiate immediately with the governor to ensure UC funding for next year and the future. We also stand with our students and reject the possibility of the Regents approving a student fee hike of 15% for this January.
Reduce the Top 2% of Earners = $220 MILLION
Applying sensible reductions to the University’s top earners will free over $220 million to use for preserving essential services. The alternative—levying reductions on UC’s employees, including low-wage service workers whose families are one step from poverty—will ultimately cost more in public dollars.
Use Short-Term Borrowing as a Stop-Gap = $200 MILLION
If UC can borrow $200 million to lend to the state for continued construction, it surely can borrow $200 million to maintain essential services at campuses and medical centers. Prioritizing core services is a smart budget move that saves money by averting the liability and costs of unsafe campus conditions. UC can afford this extraordinary stop-gap measure during unprecedented times.
Utilize Medical Center Profits = $100 MILLION
UC’s five medical centers made significant profit gains in 2009. According to UCSF CEO Mark Laret, in FY 2009 that single campus “exceeded [the] outstanding level goal… with a bottom line that may exceed $100 million this year.” Other campuses report similar gains, averaging a 5.2% operating margin for the first three quarters of FY 2009 (California hospitals have averaged less than 1% over the last five years reported). If UC borrowed medical center profits above a 3% operating margin, this would free roughly $100 million for UC’s general operations.
Restructure Debt = $75 MILLION
We support the University’s efforts to restructure a portion of its bond debt service, and believe UC should continue with its plans to save $75 million through such means.
Utilize Unrestricted Investments = $50 MILLION
The University holds a massive, $8.5 billion investment portfolio, most of which is highly liquid, unrestricted funds. Although UC earmarks these funds for programs, some fraction is discretionary and designated at the will of the Regents. In FY 1993, UC and the State of California tapped into the University’s investments to fund $43 million of a shortfall in UC’s operating budget. Borrowing less than 1% of UC’s unrestricted investments would free $50 million to deal with critical operational needs in this unprecedented state budget situation.
Cut Wasteful Spending = $40 MILLION
UC must continue to cut non-essential spending—including, but not limited to, renovations of UC mansions, executive rentals of non-UC property, non-essential travel, and consultants’ contracts—before any consideration of cutting vital services. UC’s receipt of American Reinvestment and Recovery Act funds necessitates an especially judicious approach to reigning in excessive non-core spending.
Pressure must also be put on President Yudof to negotiate immediately with the governor to ensure UC funding for next year and the future. We also stand with our students and reject the possibility of the Regents approving a student fee hike of 15% for this January.
Tuesday, September 8, 2009
Unions, Furloughs, and UC Unity
The UC Office of the President has informed UC-AFT that Unit 18 lecturers will not be participating in the furlough plan. Contrary to some reports, our union has not refused to accept pay reductions; rather, the university decided not to use furloughs as the main way of gaining salary savings from our unit. While we were willing to have conversations about the furlough plan with UCOP, the university did not want to answer any of our most basic questions (how would the furloughs affect our workers? how much money were they trying to save by furloughing our people?). Most importantly, the university would not give us any information on past, present, and future layoffs, and so we were unable to even start a conversation with UCOP.
Making matters worse, the UC has embarked on an anti-union campaign, which includes blaming the unions for not accepting the shared sacrifices of the furloughs. In this attempt to pit non-unionized against unionized workers, the university may have overplayed its hand because we are now witnessing an unprecedented collaboration between represented and nonrepresented workers in the UC system. For instance, over 10,000 UC employees, including non-unionized staff, students, and senate faculty recently voted that they had no confidence in President Yudof's leadership. Also events are being planned for the coming months that will help to unite unions with nonrepresented professors and other staff and workers. While the university engages in a divide and conquer strategy, the students, faculty, staff, and workers are uniting.
Making matters worse, the UC has embarked on an anti-union campaign, which includes blaming the unions for not accepting the shared sacrifices of the furloughs. In this attempt to pit non-unionized against unionized workers, the university may have overplayed its hand because we are now witnessing an unprecedented collaboration between represented and nonrepresented workers in the UC system. For instance, over 10,000 UC employees, including non-unionized staff, students, and senate faculty recently voted that they had no confidence in President Yudof's leadership. Also events are being planned for the coming months that will help to unite unions with nonrepresented professors and other staff and workers. While the university engages in a divide and conquer strategy, the students, faculty, staff, and workers are uniting.
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