Tuesday, August 31, 2010

Let the Great Pension Scare Begin

Throughout the last year, I have discussed many of the ways universities are scaring faculty and workers into accepting lower salaries and benefits as their workloads increase. This great squeeze echoes the general move of our “winner-takes-all” economy; workers are being asked to do more for less as the wealthiest among us continue to increase their earnings and political power. In the case of the UC system, I have documented how an exaggerated fiscal crisis helped to usher in furloughs, layoffs, and increased fees and tuitions, and I have warned that the retiree liabilities will be used to institute a permanent state of fiscal crisis. We have now entered fully into the great pension scare.

My argument is not that UC employees should reject any increase in their contributions to the retirement plan; however, I have stressed that we need to understand the truth about the financial status of the university and the pension plan. Unfortunately, university officials cannot stop themselves from circulating half-truths as they hope to force more concessions from workers. To begin my analysis of this administrative strategy, we can look at a recent article from the Chronicle of Higher Education entitled, “As Pension Costs Rise, Public Colleges Pay the Price.”

This article opens with the usual rhetoric of panic and crisis that we find in most pieces dealing with public pensions: “Pension costs are spiraling out of control at the University of California, which, unlike most college systems, runs its own pension plan. Within two years, the 10-campus system expects to contribute $700-million per year just to keep its plan afloat—nearly as much as the cuts in state support last year that generated protests and threw the system into crisis.” The first thing to point out about this statement is that it does not distinguish between the amount the university itself has to pay and the amount it will make external grants and services contribute. Since the UC itself claims two thirds of the employer contributions will come from external sources and services, the $700 figure can be reduced to $230 million. Moreover, the university is asking the state to pay for the $230 million, and while this funding from the state does not seem likely this year, it could be arranged in the future.

We also have to question why The Chronicle sought to compare last year’s protests over the state reductions to the pension issue. It appears that they are fueling the idea that the greedy workers are making tuition costs go up because they refuse to give up their great pension deals. This common discourse of pension envy is coupled with a repression of the true cause for the university’s financial woes: “But the recession reduced the university's investment by $16-billion, or a third of the plan's value. Now, in order to keep the fund solvent, the system and its employees must contribute billions of dollars in the coming years just as the system struggles to survive deep cuts in state support. Workers will most likely be paid less over all, and campuses will need to divert.” The first thing to note about this passage is that it begins by simply blaming the loss of $16 billion on the “recession.” There is no acknowledgment here that perhaps bad investment strategies are the real cause for the pension’s underfunding. Furthermore, the article predicts that the need to fund the pension plan will inevitably result in the decrease in workers’ salaries and a diversion of university funds.

In a now repeated view, Peter Taylor, the head budget person for the UC system, argues that the university will have to spend more money on the pension than it does on instruction: “Unless it makes changes, the system is on track to spend more on retiree pensions and health care than it does on instruction by 2014, says Peter J. Taylor, the system's chief financial officer.” What Taylor does not say here is how little the university currently spends on instruction, but the rhetorical strategy is to pit the students against the faculty and workers and blame the employees for both the increase in student fees (tuition) and the decrease in instructional budgets.

To help clarify the reality of the pension situation, we should keep in mind several important facts. The first is that many of the long-term projections for the pension liability and underfunding were made during the lowest point of the global financial meltdown. In fact, after the UC pension lost $16 billion in 2008 and 2009, it gained back $10 billion in 2010. This fact is important because many of UC’s projections do not take into account these recent investment increases. Moreover, we see that even if the UC employees contribute 5% of their earnings to the pension plan, they will only be adding $400 million to the fund, while a good investment year can bring in $10 billion. Thus, the most important issue is how the UC invests its money, and how it can protect against major losses.

The simple fact of the matter is that the huge swing in investment losses and gains makes it impossible to make any long-term predictions with any accuracy, and yet current accounting requirements force the university to predict future returns, interest rates, faculty salaries, and other unpredictable elements far into the future. Given that these accounting projections are always wrong, I have suggested that the university sets up a system to negotiate every year or every year the needed employee and employer contribution rate.

Another important fact is that, currently, the university calculates the normal yearly cost of the pension plan to be $1.4 billion, and as of March 30th, 2010, we had $37 billion in the pension investment accounts. To cover the $1.4 billion cost each year, the UC needs to put in about 17% of payroll (the total covered payroll is $8 billion). If employees contribute 5% of their salaries ($400 million), and the university only pays for the state-funded workers (one third of all employees), the university needs to pay out $320 million, and if the state does not pay this $320 million, the university can either take out a bond or borrow money from its own short-term investment fund to pay some or all of the amount.

While $320 million is not a small amount, we have to remember that the UC operating budget is over $20 billion. The rhetoric of crisis thus seems to be misplaced, and what we really have to look at is how the UC invests its money, and why it is trying to scare workers into accepting lower pay and benefits for more work. We also have to pay attention to the temptation for current employees and administrators to sacrifice future workers in order to keep their own pension benefits.

The university has now entered into a giant media campaign to convince workers that the UC system faces an immediate crisis caused by retirement issues. For instance, in the Los Angeles Times article, “UC retirement funds face a shortfall of more than $20 billion, report says,” we are told that “Yudof has warned of terrible consequences if the problem is not tackled quickly. ‘If we do nothing, in four years, the University will be spending more on retirement programs each year than we do on classroom instruction.’” Once again, the public media strategy is to oppose the interests of the workers against the interests of the students.

By repeating the claim that the university now faces a $20 billion liability, which will soon balloon into a $40 billion liability, UC administrators follow the right-wing attack on public pensions. Since virtually no one understands how these long-term liabilities are calculated, the university feels that it can use this scary number to turn the people against public workers and defined benefit plans. While I am not claiming that the UC system does not face a future problem, the extreme exaggeration of the problem makes it hard to determine the right solution. We should all keep in mind that the UC is currently only spending about $240 million on retiree healthcare and $200 million on the pension plan, and so it is absurd to make it seem that the UC will be $40 billion in the hole in just three years.

By using the huge future liability number, the Post-Retirement Benefits Task Force justifies moving the minimum retirement age move from 50 to 55 and the age for receiving a full pension from 60 to 65. The plan for people hired after 2013 would also reduce pensions by the amount of an employee’s social security. This change would reduce some people’s pension allowance by more than 50%. It is important to stress that the dissenting senate faculty report rejected the use of social security to reduce the pension payout. The dissenting report also did not support the Task Force’s suggestion to to have a second tier where employees could choose to pay a lower contribution rate and receive a reduced pension.

While some of the unions have endorsed the need to increase employee and employer contributions to keep the pension well funded, they have also rejected the need to adjust the age requirements and payout calculations. In fact, UC-AFT and AFSCME have been in conversation with senate faculty members in order to push for a united front against a two-tier system. Finally, after years of negotiating, President Yudof has offered the unions the chance to have one union representative to sit on the investment advisory board. The unions have decided to forward the name of Bob Samuels to Yudof. Let’s see what he says.

Thursday, August 26, 2010

California Senate Approves Major Bill on Community College Faculty

The state senate voted in favor of the Assembly Concurrent Resolution 138 by a 23 to 11 margin on Monday August 23rd. This bill calls for community colleges to staff at least 75% of their student credit hours by full-time tenure and tenure-track faculty. Moreover, the bill affirms the principle of non-tenured part-time faculty receiving equal pay for equal work. However, all of these requirements are based on available funding and collective bargaining agreements.

It is important to stress that in the California community college system, one cannot be full-time and not be on the tenure track. Unlike the UC and CSU system, there are no full-time, non-tenure-track positions, and community college faculty who are not eligible for tenure can only work up to a 67% appointment.

The current legislation is part of the AFT FACE campaign that tries to do two seemingly opposing things: increase the number of tenure-track positions and provide equity and job security for non-tenured faculty. While UC-AFT supports this effort for community colleges, we argue that this type of policy does not work for research universities since faculty members in these institutions have distinct job descriptions.

In the context of research universities, it is hard to determine what equal pay for equal work would mean because faculty are doing very different jobs. For example, the University of California contends that the reason it pays tenured professors so much more than non-tenured lecturers is that professors are required to do research, teaching, and service, but most lecturers only teach. While it is untrue to say that lecturers do not do service and research, we do recognize that lecturers are defined by their teaching responsibilities, and this is not necessarily a bad thing.

Since lecturers have teaching as their primary mission, they become central to the undergraduate mission of the university; and yet, a major problem exists because these teachers in charge of instruction are not members of their academic senates. In fact, lecturers are often referred to as “non-senate faculty” in order to stress their exclusion from shared governance. One of the results of this denial of democratic participation is that faculty senates often make curricular decisions without consulting the people who are actually doing the teaching. To correct this problem, UC-AFT hopes that in the future, lecturers will be granted full rights to participate in their faculty senates.

As lecturers have been denied their role in university shared governance, UC-AFT has concentrated on negotiating and enforcing collective bargaining agreements that improve the job security and equity of non-tenured faculty in the UC system. We have also shown how the working conditions of lecturers directly determines the learning conditions of undergraduate and graduate students, and while we have not pushed for pay parity with senate faculty, we have gained parity in benefits and academic freedom rights. Furthermore, unlike the AFT FACE campaign, UC-AFT has not sought to push for more tenure-track lines or total pay equity for part-time faculty. Instead, we have tried to make non-tenure-track positions as secure and equitable as possible.

Last year, more than a hundred lecturers with continuing appointment were given one-year layoff notices and hundreds of other lecturers in their first six years of service faced job losses. We are happy to report that almost all of the continuing appointment lecturers have had their layoff notices rescinded, and many of the other lecturers have been rehired. To get these jobs back, we had to expend a lot of time and resources on grievances, protests, and media campaigns, and it looks like we will have to continue this defense of our jobs and undergraduate education in the coming years. While we do not think we can legislate the UC into supporting non-tenured track faculty, we do intend to continue our efforts for promote equity and job security for all faculty members.

Thursday, August 19, 2010

Oh Canada!: We have a Global Higher Ed Problem

I recently returned from the Coalition of Contingent Academic Labor meeting in Quebec City where I heard representatives from Canada, Mexico, and the United States discuss the current challenges facing higher education. It turns out that things are bad all over, and even the seemingly progressive Canadian system is being undermined by tax cuts and right-wing ideology. Not only are Canadians being asked to pay more tuition for an education that was once free, but part-time teachers are losing their rights to unionize and strike, while university budgets are being slashed. In fact, the current conservative government in Canada appears to being taking its marching orders from America’s backlash against public education, public employees, and public pensions.

Three growing shared trends that many speakers mentioned were the casualization of the labor force, the defunding of the public sector, and the privatization of public institutions. All across the globe, it appears that there is a growing desire for higher education, but the increased demand is being met by a decrease in supply, and the result of this mismatch is that public institutions are being stratified, while private corporations step in to take advantage of desperate, low-income students. Moreover, many of the private, for-profit organizations throughout the world are using the same business model to cut costs and increase profits, and this system relies on eliminating job security (tenure), increasing managerial control, and relying on the Web to deliver course content to students/consumers.

In the developed world, the same story is being repeated: due to a growing divide between the super-wealthy and everyone else, there is an increased demand by the elites to cut taxes and reduce the funding for public education. Since these public schools are losing their state funding, they feel that the only thing they can do is to copy the practices of private institutions, and a favored model is to look to corporations to fund research, while tuition is raised so schools can cater to the rich. Furthermore, while the high tuition/high aid model looks like it protects some semblance of fairness, the result of this system is the decimation of the middle class. In fact, all of the global trends point to elimination of the middle and the rise of a two-tiered hierarchy that pits the wealthy against everyone else.

The solution to this global stratification should be clear; we need to defend the middle class, and a central way to do this is to fight for public funding and to rollback tax cuts for the wealthy and corporations. However, conservatives across the world have convinced the non-elites that we can no longer afford things like public higher education, and the real enemy is the public employees with their unions, pensions, and job security. In this context, the conservative solution is to get rid of all job protections and benefits so that everyone can be put in the same situation. In this type of race to the bottom, all that public employees can do is to fight givebacks and hold onto what they have.

Yet, what would it mean if all public employees started to fight back, and instead of running the race to the bottom, they reversed course and tried to push more people to the top. This strategy would entail fighting for tax increases for the wealthy and increased state funding for public institutions. It would also mean defending pensions, healthcare benefits, and job security as essential basic rights. Perhaps this campaign for the Race to the Top will be led from below, but it needs the support from all of our major organizations. Also, we need to put pressure on our political leaders to follow a more progressive agenda and stop being afraid of the conservative backlash.

Tuesday, August 3, 2010

How the Push for Online Degrees Hides the Cause of the UC's Financial Probelms

Inside Higher Ed has a new article on Dean Edley and his promotion of online education as the solution to all of the University of California’s problems. It is clear from this piece, and Edley’s constant efforts at promoting a UC version of digital education, that the push for an online solution serves two important functions for the university’s administration: it hides the true causes for the UC’s fiscal problems, and it offers an avenue for more centralized control.

I have been writing for a year that the university has been blaming Sacramento for all of its problems because it does not want to look at its own issues. As I have shown, the central driving force behind the UC budget crisis is the loss of $23 billion of investments during the period of 2008-09. This huge loss dwarfs the state reduction of $600 million, and yet the university has never had to explain why and how it lost so much money and what it plans to do to prevent this from happening in the future.

Another major issues that is starting to get some attention is the idea that the university is losing money on its externally funded research grants. Even the Commission on the Future of the University has argued that the UC system is losing at least $300 million a year because its grants do not pay for the full cost of research. It is clear that a turn to online undergraduate education will not solve the research funding problem and will only function to obscure the investment losses.
However, one thing that the push for online education will do is to help the administration develop and control the undergraduate curriculum. As the Inside Higher Ed article states, the Berkeley Faculty Association “was particularly unnerved by the idea of graduate student-instructors being the “frontline of contact” with online students, as Edley put it. For some, that sort of talk evokes a model many for-profit institutions have used to keep payroll expenses low and administrative control high: have full-time faculty put together the syllabus, then hire less-expensive adjuncts to deliver it.” The idea here is that once the online courses are developed, the central administration can decide who teaches the courses, and the faculty senate will lose their current control over curricular decisions.

Edley’s response to the fear that the administration will take over and replace tenured faculty with adjuncts and graduate students is to argue that the online programs will generate huge profits that can be used to hire more tenured faculty, and this project offers the only hope for the economically challenged system. However, when Inside Higher Ed asked Edley and others to provide details on how the online courses would make money, they received the following response,” The university could not immediately provide the details of its financial modeling, but other documents suggest that the money would come from tuition, fees, and perhaps licenses for "premium access" to course content.” In other words, the UC has no idea how much money it will lose or gain, and it plans to use student fees and tuition to pay for the online courses.

It is interesting that the first comment on the Inside Higher Ed article comes from “Dean Dad,” an administrator who writes regularly for Inside Higher Ed: “It's increasingly clear that public higher ed won't be able to rely on the state to the extent it has in the past; that's especially true in California. As awkward as it can be to grow revenues, it beats cutting costs. The details matter, and I assume they'll evolve, but Edley is broadly right to look at ways to make the core educational mission self-sustaining.” The administrative logic here is that since states are cutting their support for higher education and because undergraduate instruction loses money, the only way to make education sustainable it to let it turn to online education as a mode of making money off of undergraduate students. Yet, as I have continued to show, undergraduate education already turns a huge profit, and these profits are used to sustain the unprofitable sectors like administration and external research.