Monday, November 29, 2010

UCLA’s Neoliberal Path

Neoliberalism is centered on the belief that free markets can regulate themselves, and so it is unnecessary to have large government programs and the taxes needed to support public education, universal healthcare, and environmental standards. Moreover, neoliberal institutions like the IMF and the World Bank believe that the best way to help a developing country is to impose austerity measures and replace the public sector with private businesses. In the case of universities, the neoliberal formula involves weaning oneself from public finances by increasing tuition, cutting unprofitable programs, and increasing the number of “self-sustaining” units. Of course, this strategy often fails in the end because it turns out that the privatized self-sustaining areas rely on public subsidies in order to remain solvent.

To see this neoliberal agenda in action, we can look at the recently announced plan to restructure UCLA. As Chancellor Gene Block has argued, the only way that the campus can overcome unstable state funding is if it reduces academic costs, increases nonresident enrollment, secures more philanthropic donations, offers more self-supporting degree programs, and expands intellectual property. Looking at each one of these five elements, we will see that not only do they represent the privatization of a public institution, but they are all destined to contribute to a reduction of financial health for the institution.

Restructuring Majors
In the case of reducing academic costs, the strategy relies on lowering the number of requirements in each major. Two of the results of this tactic called “challenge 45” is that the size of upper-division courses has increased and students have been forced to scramble to find courses outside of their majors in order to graduate on time. Moreover, one strategy to help reduce the demand for high enrollment classes is a new expanded summer program that motivates students to pay extra for classes they need. It is important to note that these summer classes are squeezed into a time period that is half the length of a regular quarter session and a third of the time of a semester course. In short, students are being told to pay more for less.

Not only are students having to pay extra to attend during the summer, but the university is also considering allowing students the option of taking an “e-section” of a high-demand course. According to a Daily Bruin article, “The students will receive lecture instruction online via Bruincast and attend a live discussion once a week.” Once again, students will be asked to accept an inferior mode of education in order to move through the system in an efficient manner, and there appears to be little attempt here to monitor the value of the educational experience or the role of faculty in determining how courses are delivered.

While the goal of these instructional changes is clearly to save money, the people putting this together admit that they have no idea how much funds these new programs will save. According to Robert Cox, manager for institutional research in the UCLA Office of Analysis and Information Management: “Everyone can agree that there are ways in which these things can lead to savings, but no one has put a ticket on it to show how much you can save . . . At the policy level, you can see where the policy would tend to take the result, but figuring out how it can fill the hole in the budget, you can’t do it; the issues are too complex.” This analysis does not make one feel very confident about the ability of UCLA to predict and manage its own budget.

Globalizing Enrollments
If we now look at the second part of the UCLA plan, the increase in nonresident students, we do see a source for revenue, but once again, this strategy does not address several academic and financial issues. For instance, someone has to ask how much money is UCLA spending on trying to recruit international students. While the cost is never discussed, we have learned from a Daily Bruin article that one way that the campus plans to double its nonresident student population is by changing the way it markets itself to the outside world, and the goals for this program are quite ambitious: “Boosting the nonresident population to about 5,000 will mean adding about 10,000 more seats to classes. It will mean more students seeking appointments in the Ashe Center at the height of flu season, more students in need of counseling or psychological services and more students in need of on-campus housing.” While I have argued that public universities like UCLA should expand enrollments in order to reduce the need for tuition increases, I have also argued that schools have to hire more faculty members and make sure that the new funds are directed towards undergraduates; however, so far at UCLA, we have seen a reduction of people teaching undergraduate courses, and so it is unclear who will teach the additional students.

In fact, UCLA now only has three lecturers who teach English as a Second Language (ESL), and yet, we are expected to accommodate a growing number of international students who need language help in order to succeed in their courses. Ironically, the ESL lecturers are currently supposed to be self-sustaining because they need to raise money through summer courses in order to support the classes they teach during the year. This unsustainable situation is yet another example of how the myth of self-sustaining units never really holds true.

Hoping on Gifts
While UCLA attempts to reduce instructional costs and increase the number of international students at the same time, it also wants to increase its endowment by having UCLA students call former students and ask for increased giving. It should be pointed out that UCLA is already the most successful public university in the country when it comes to private giving, and it thus unclear how it will be able to increase its revenue during these difficult financial times. Also, 95% of the UCLA gifts can only be used for very specific purposes, like endowed chairs and new buildings, and so they rarely contribute to the general fund of the campus. In fact, many gifts end up losing money because they do not pay for the full cost of the programs they seed and support.

While the people in charge of the endowment campaign stress that they want to convince alumni to give more because of the great value of a UCLA education, many of the current proposals to reshape the university threaten to undermine both its quality and reputation. For example, the move to enhance the number of self-sustaining units includes a major expansion in extension programs, which are often taught by non-UCLA faculty and cater to non-UCLA students. Moreover, these programs are being pitched as ways of training students to fulfill present corporate needs: “Programs would be offered according to what employers want in new hires, among other factors.” Perhaps these extension programs will bring in some more funds, but we have to ask if the university wants to define itself by what some outside company thinks it currently needs.

Privatizing the Public
Of course, UCLA is already leading the way to privatization by catering to the Anderson Business School's desire to leave behind state funding and move to a self-sufficient funding model. Although, the UCLA faculty senate has voted against this move, it is clear that the leaders of the business school are going ahead with their plans, and it appears that Chancellor Block supports this change, which will not only require increasing tuition to over $55,000 but could also result in the general UCLA campus losing needed state funding. It is also unclear what the school will do when pension costs increases dramatically in the near future.

Intellectual Property Values
Perhaps the university is hoping that cashing in on intellectual property rights will help UCLA to resolve the difficult task of increasing revenue while decreasing costs, yet, it should be stressed that it has been very difficult for schools to profit from their inventions and knowledge production. It turns out that it is very costly to do research, and many research projects never go to market. In other words, universities keep on looking outside of the classroom to find a source of income, but the fact of the matter is that education is not only what schools are supposed to do, but it is also what they do best and most cost-efficiently. This is not to say that universities should not continue to pursue ground-breaking research, but they should realize where their money comes from and how much it costs to fund expensive labs with high-tech equipment and an army of bureaucrats, lawyers, office managers, and graduate students. Currently, undergraduate students subsidize virtually everything universities do, and it is time for schools to recognize this by making sure that vital undergraduate programs are supported.

Monday, November 22, 2010

The Regents Take a Strong Stance Against Free Speech and Shared Governance

Before the UC Regents voted on another fee increase, several of them voiced their concern for the future. One Regent bemoaned the role of shared governance in blocking some of President Yudof’s efforts to save money. After arguing that the committee structure on the campuses should be “zero funded” and scrapped, Regent Island affirmed that the faculty are holding up cost-saving measures like moving classes online. He stated that due to the faculty’s resistance to change, the online initiative would be so watered-down that it would fail to generate significant revenue.

After this discouraging attack on shared governance, I received word that a police officer pulled a gun on a crowd of protesters. After reviewing the video, I asked during public comment for a full investigation of this incident, which came very close to being a new Kent State tragedy. As I have discussed with campus police in the past, they need to do a better job at preparing for protests and making sure that they only use force as a last resort. Posting a single officer at a sensitive point makes no sense and ends up putting police and the protesters at risk. Moreover, the use of a single row of bicycle racks to hold off hundreds of angry people is a poor defense and opens the door for unneeded police over-reaction.

The general hostile climate against free speech was extended inside and outside of the Regents meeting. Before the start of the meeting on Wednesday, I was told that only people on a special list would be able to enter into the meeting. When I pointed out to a campus police officer that this goes against California’s open meeting law, I was told to back off. In order to make sure that anyone from the public could line up to enter the meeting, I had to contact a staff person from the Board of Regents office who informed the officers to let the public enter the meeting.

While I do feel that the police were often put in harm’s way due to bad planning, there is no excuse for detaining and arresting people for chalking messages, and the police should not be able to simply tear down the signs of protesters. Furthermore, the use of pepper spray at the meeting appeared to be indiscriminate and counter-productive. In general, some police officers displayed a hostile and defensive attitude towards the protesters and the general public.

Since no actions have been taken to discipline the campus police who used tasers on students last year at UCLA, I believe that it necessary for us to investigate filing suit against the university for creating an environment that is hostile to free speech. If we do not counter the aggressive actions of the campus police, we will lose our ability to defend the public nature of our university.

Monday, November 15, 2010

The UC's Path to Financial Suicide

Due to three actions taken by the Regents, the University of California is headed towards a total financial meltdown. These three actions are the nearly twenty-year contribution “holiday” for the pension plan, the outsourcing of the management of the investment funds, and the pending decision to support President Yudof’s pension solution. While many people have been involved in these moves, the Regents are responsible for the fiscal health of the system.

The Problem
The Post-Employment Task Force and President Yudof have both endorsed a funding plan for the pension that will require the university to eventually spend at least $1.7 billion a year on pension costs alone. This level of employer contributions dwarfs any cut the UC system has received from the state. We must remember that when the state cut the UC budget by $670 million in 2008-10, the university turned to layoffs, furloughs, huge fee increases, enrollment reductions, and a whole host of cost cutting measures that shook the university at its foundation. Imagine if the university has to spend close to $2 billion several years in a row.

The fact that no one has questioned this path to financial suicide just means that either no one understands how the university is financed or no one wants to deal with the real problem. Instead, we get Yudof's pension proposal for saving money in thirty years by changing the retirement age for new hires. This impotent gesture may placate the bond raters and some Republican legislators, but it does not address the central problem, which is that we need to move to fully funding the normal cost of the pension program now.

The Union Coalition Criticism of the New Pension Tier
The Union Coalition (UCUC) is protesting Yudof’s plan since: 1) the new tier will hurt many staff and manual workers who will not be able to work until 65; 2) the new tier and current contribution rates have to be accepted by the unions, but the university for the most part has ignored the input of the unions representing close to half of all UC employees; 3) the new tier does not help to deal with the current problems facing UCRP; 4) the ratio of employer-to-employee contributions for the new tier is much higher than any past ratio (the ratio in the 1980s averaged 5:1, and the new ratio is almost 1:1); 5) the large pension contributions combined with the shifting of costs for retiree healthcare puts most employee groups below market value; and 6) there is no stated plan to address the decrease in total compensation.

While the unions are willing to work with the university to help fund the pension in a more effective manner, the university has refused to include the unions in the decision-making process. In fact, when the union coalition asked President Yudof to allow us to make a presentation about our concerns during the official discussion of his pension proposals at the November 18th Regents meeting, we were told that the Regents cannot have every outside group take up the time of the meetings, and so we can have our one minute during public comment time. Our response is that we represent close to half of the employees, and we are not just some outside group. Furthermore, at the start of public comments, we are always told that the Regents will not be responding to any questions posed by the speakers; this is a great example of fake democracy in action.

An Impossible Funding Plan

Instead of acknowledging and correcting all of the mistakes that the Regents have made in relation to UCRP, President Yudof gives this summary of why the pension plan is in trouble: “Costs are increasing, UC and its employees are facing increasing contribution levels, and the state has not resumed its funding to be applied to the University's pension fund.” There is no mention here of losing $16 billion in investments or the Regents’ decision to suspend contributions for 20 years; instead the blame is placed squarely on cost increases and the failure of the state to support the university. When Yudof does get to the plan to fund UCRP, this is what we are told: “Under the current Plan, total contributions to UCRP are on track to increase to above 30 percent of covered compensation in 10 years, by fiscal year (FY) 2020 . . . University contributions are assumed to be 7 percent in Plan Years beginning FY 2011 and 10 percent in FY 2012, with a two percent increase annually thereafter.” In plain English, this means that if employee contributions peek at 8% of their salary in 2013, and the university pays 12% of covered compensation in 2013, the employer contribution will move to 22% by 2018 (after 2012, the employer contribution rate increases 2% each year). However, it is highly unlikely that the university will be able to require all grants, medical services, and core functions to pay 22% of salary in 2018, and so we are left asking, why didn’t the university simply bite the bullet and move immediately by requiring the employees to pay 5% and the employers 12% to fund the full normal cost and therefore reduce the need to pay so much in the future. Moreover, if the university intends to borrow money from itself to pay down the liability, it could do this right away if it fully funded the normal cost with higher contribution rates.

The reason why the university did not want to move to full funding of the normal cost right off the bat is that it knew that it could not get the medical centers and the research grants to pay their full share, and it was afraid of letting the state off the hook for its part. However, by not putting in 12% from all sources now, it will have to put in at least 22% later. Meanwhile, the grants and the medical services are not paying their fair share, and the administration is alienating the unions who represent close to half of all of the employees in the pension plan. Instead of working with the unions to move to full funding, the administration has removed most represented employees from the process and has pushed for a new pension tier that is supposed to save $8.4 billion over a 25-year period, which turns out to be $336 million a year. However, the university has also promised faculty and unrepresented staff that these savings will go to pay for salary increases to cover increased employee contributions and benefit reductions. In other words, the new tier will save nothing and do nothing to solve the immediate problem.

The way that Yudof’s proposal attempts to address the current funding of UCRP is through borrowing and debt restructuring: “Based on the suggestions of the Finance Team, the President recommends that The Regents delegate authority to the President to fully fund the UCRP ARC as quickly as practical by paying UCRP “modified” ARC (Normal Cost plus interest only on the UAAL) from 2011 until 2018 and using other University resources to make up the gap between Normal Cost and modified ARC, including borrowing from the Short Term Investment Pool (STIP) and restructuring of University debt using STIP interest.” This policy is full of loopholes because it calls to fully fund the normal cost “as quickly as practical,” which is legalese for “whenever we want to do it.” Furthermore, the idea of funding UCRP by “using other University resources” means that the President will be given the power to raid any part of the university including student fees and departmental budgets.

Why We All Should be Concerned
If you are not worried about the university having to come up with 22% of covered compensation to fund UCRP, imagine if your department or program would have to take a 22% reduction in its budget every year. Just as departments are assessed a 3% tax to fund retiree healthcare, it is likely that each department will be taxed 20% for UCRP each year. In fact, UCLA has already moved to a decentralized budget system that forces individual departments to pay for all benefit costs.

The only solution is to bring all of the stakeholders to the table, including the unions, and figure out a rational and doable plan to fund the pension and maintain the university without increasing student fees at a high rate or closing down departments or even campuses. By ramping up employee and employer contributions now and eliminating any new tier, the university can put itself on a more stable financial ground, but it will take the agreement of all parties. Furthermore, the Regents have to be held accountable for their failure to protect the financial interests of the university.

Wednesday, November 3, 2010

UC-AFT Election Analysis

The most positive aspect of the 2010 election is that Meg Whitman did not win and proposition 25 passed, which means that a simple majority of the state legislature can now pass a budget. In the past, we have had a good relationship with Jerry Brown, and he will most likely support higher education in a more robust way.

Another great win was Das Williams for state assembly out of Santa Barbara. Das has been a big supporter of the students and the faculty at UCSB. In fact, UC-AFT was an early promoter of his candidacy, and we hope to work with him closely in shaping his educational policies.

On the national front, things look pretty bad, and we should expect a period of profound infighting and a budgetary stalemate. It looks like the country is following California’s recent past because the minority party will be able to block all legislation and call for tax cuts and the de-funding of public programs. In terms of higher education, we should expect a move to cut student loans and grants. It is also likely that the House will try to reduce the funding of health and science research. President Obama will either compromise and adopt a conservative agenda, or he will promote a more progressive agenda and let the Republicans vote down popular programs. Let’s hope he picks the latter.