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.”
Monday, September 21, 2009
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.
Monday, August 31, 2009
Yudof and the Divided University
When UC President Mark Yudof was asked during a press conference why the UC can lend $200 million to the state but has to cut the salaries of its own employees, he gave a very telling response. He said that the university will be making money by lending cash to the state, but if it just paid salaries, the money would be gone. In other words, from his perspective, an activity that does not generate a profit is a waste of funds. So we must ask, how does instruction fit into this profit-driven framework?
Recent actions have made it clear that if instructional programs cannot show themselves to be profitable, they will be downsized or eliminated. For instance, at UCLA, we have been told that writing and language courses may need to be moved to either summer, extension, or online because they do not generate their own revenue. Of course, these programs do teach a large number of students at a relatively low cost since they rely mostly on less expensive non-tenured faculty for the majority of their courses. Yet, since required courses are not tied directly to external grants or auxiliary services, the teaching-heavy programs have to go. One idea from management is to wring some revenue out of these courses by requiring students to take them but offering the courses only in the summer—thus gathering more student fees for summer session. Moreover, like the extension programs, summer session is not only a revenue generating sector, but it also is allowed to hire faculty without having to worry about expenses like salary increases or benefits.
This move to push students to the privatized sectors of the university mirrors the idea that the revenue-generating faculty should not be part of the furlough system. For instance, faculty and researchers funded out of external grants will not be getting a pay cut, and the most highly paid faculty in the UC system, the medical professors, will be excluded from the furlough/salary reduction program. What is being set up here is a divided university, where one part receives special support because it brings in more money, while the other part is reduced and furloughed because it does not generate its own revenue. In this incredible splitting of higher education, instruction is cast as a waste of time and money.
Yet, this notion that the teaching-heavy programs in the humanities and social sciences do not generate revenue is a myth. In fact, the high-enrollment, low-cost courses in the humanities generate a huge profit that often gets siphoned off by the supposedly profit-making sectors. Large general education and introductory courses taught through departments in the humanities teach many students from the sciences and other fields outside of the humanities. Furthermore, required writing and foreign language courses generate student credit hours for the whole university, but these programs are usually funded entirely out of the humanities’ budget. While these courses in the humanities may not be tied to external grants and other profit-making sectors, they do produce a large percentage of student credit hours, and thus they bring in money through student fees and state funding. Courses in the humanities also accomplish the core mission of educating undergraduate students. From Yudof’s perspective, however, it is not enough to just teach students; programs and faculty have to show that they are profit-making entrepreneurs.
The university, therefore, is at a crossroads: it has to decide whether it still wants to fund undergraduate education, or shift as much money as possible into profit-generating activities. Of course, this is a false choice, since what is really going on is that the state and the students are subsidizing the profitable sectors. What we really need is a transparent and fair budgetary system that is coupled with a clear commitment to balancing instruction and research. We also need to rededicate ourselves to the idea that we are all part of a single system and we must all share in the profits and the costs of being part of this educational community. One solution would be a simple tax on all programs and units to be used to support the core missions of the university. Another needed reform would be to fund shared programs and required courses, like writing, foreign languages, and general education, through the chancellor’s office. If we do not make these changes now, all non-profitable programs will be placed in the position of UCLA, which is considering suspending all undergraduate requirements.
Bob Samuels
Recent actions have made it clear that if instructional programs cannot show themselves to be profitable, they will be downsized or eliminated. For instance, at UCLA, we have been told that writing and language courses may need to be moved to either summer, extension, or online because they do not generate their own revenue. Of course, these programs do teach a large number of students at a relatively low cost since they rely mostly on less expensive non-tenured faculty for the majority of their courses. Yet, since required courses are not tied directly to external grants or auxiliary services, the teaching-heavy programs have to go. One idea from management is to wring some revenue out of these courses by requiring students to take them but offering the courses only in the summer—thus gathering more student fees for summer session. Moreover, like the extension programs, summer session is not only a revenue generating sector, but it also is allowed to hire faculty without having to worry about expenses like salary increases or benefits.
This move to push students to the privatized sectors of the university mirrors the idea that the revenue-generating faculty should not be part of the furlough system. For instance, faculty and researchers funded out of external grants will not be getting a pay cut, and the most highly paid faculty in the UC system, the medical professors, will be excluded from the furlough/salary reduction program. What is being set up here is a divided university, where one part receives special support because it brings in more money, while the other part is reduced and furloughed because it does not generate its own revenue. In this incredible splitting of higher education, instruction is cast as a waste of time and money.
Yet, this notion that the teaching-heavy programs in the humanities and social sciences do not generate revenue is a myth. In fact, the high-enrollment, low-cost courses in the humanities generate a huge profit that often gets siphoned off by the supposedly profit-making sectors. Large general education and introductory courses taught through departments in the humanities teach many students from the sciences and other fields outside of the humanities. Furthermore, required writing and foreign language courses generate student credit hours for the whole university, but these programs are usually funded entirely out of the humanities’ budget. While these courses in the humanities may not be tied to external grants and other profit-making sectors, they do produce a large percentage of student credit hours, and thus they bring in money through student fees and state funding. Courses in the humanities also accomplish the core mission of educating undergraduate students. From Yudof’s perspective, however, it is not enough to just teach students; programs and faculty have to show that they are profit-making entrepreneurs.
The university, therefore, is at a crossroads: it has to decide whether it still wants to fund undergraduate education, or shift as much money as possible into profit-generating activities. Of course, this is a false choice, since what is really going on is that the state and the students are subsidizing the profitable sectors. What we really need is a transparent and fair budgetary system that is coupled with a clear commitment to balancing instruction and research. We also need to rededicate ourselves to the idea that we are all part of a single system and we must all share in the profits and the costs of being part of this educational community. One solution would be a simple tax on all programs and units to be used to support the core missions of the university. Another needed reform would be to fund shared programs and required courses, like writing, foreign languages, and general education, through the chancellor’s office. If we do not make these changes now, all non-profitable programs will be placed in the position of UCLA, which is considering suspending all undergraduate requirements.
Bob Samuels
Monday, August 24, 2009
Mark Yudof and the Measure of Worth
In recent weeks, University of California President Mark Yudof has been questioned for handing out executive raises, while most other employees in the UC system will have their salaries decreased. Yudof’s main response to this criticism is to state that the university needs to retain its best people, and if the UC does not offer its top administrators competitive pay, they will take better offers. This defense then represents several hidden assumptions: 1) only high level administrators are worthy of retention efforts; 2) the vast majority of employees are not as valuable as the top executives; 3) everyone should sacrifice except for the highest paid employees; 4) the highest paid employees have no loyalty to the UC system and are always on the look out for a better deal; and 5) the UC is being held hostage to people who are constantly threatening to leave.
If we look deeper into these hidden assumptions, we see how the university has followed Wall Street’s lead, and that no matter how badly top executives perform or how badly the financial institution is doing, the highest earners will be rewarded with increased compensation (see below for a list of recent increases). Moreover, since all the other workers in the UC system are actually getting pay cuts, it must mean that the pay for the wealthiest is being subsidized by everyone else. The UC’s compensation structure then reflects the general movement of the U.S. economy: the rich get richer, the poor get poorer, and the middle-class gets left with nothing. However, this economic system is not the result of some inevitable set of laws; instead, each economic structure is determined by priorities and choices.
In his short time at UC, Yudof has made it clear that his priority is to support the “top people,” but who exactly are these leaders, and are they really worthy of their compensation? To answer this question, let us first look at Yudof himself. Since one of his main tasks is to make sure the university remains financially able to perform its core mission, how is he doing on this task? For example, has he done a good job working with the state to ensure that the UC budget remains intact? As far as I can tell, he has completely failed on this account, and while he has criticized the state for reducing the university’s funding, it seems that he has done little to prevent this budget loss. After all, he unveiled his “fiscal emergency” and furlough plan months before the state budget was resolved, and this move showed that the UC had accepted the cut before it was enacted. Furthermore, there has been no mention of him trying to make a deal with the governor or some plan about future funding. In fact, Yudof is already going around the state telling people that the budget will be worse next year. So on his interactions with the state, I would give him an F.
Now let’s look at the UC’s general finances, and here things appear to be more mixed. In terms of the overall revenue brought in by the university, this year appears to be a winner because the total operating budget has gone up. Thus, even though Yudof has declared a fiscal emergency, the university as a whole is in relative good shape and external sources for funding have gone up. However, his leadership must be called into question on this front because he does not seem to understand how the UC operating budget works. For example, he first tried to reduce the pay of employees funded out of external grants, and then he said, the university could not do this. Moreover, he started out the furlough plan by announcing that all pay would be reduced, but he later reversed course, and said that for many top earners, only some of the pay would be reduced. He also has claimed that the furlough plan would save $180 million, but in reality the number is closer to $600 million. When he was confronted with this discrepancy, he simply said that most of the savings would be returned to the units. In other words, the salary savings plan is actually a salary redistribution plan, and no one knows how this money will be allocated.
Perhaps Yudof’s biggest problem area in relation to UC’s internal budget is the way he constantly repeats that certain funds are legally restricted. Although it has been pointed out that on the university’s own audited financial forms, 70% of the UC revenue is unrestricted, Yudof has said that it would be illegal for the university to use money from external sources in order to help supplement the loss of state funds. After all, who is paying for all of the executive raises? It turns out that most external grants that are awarded to the university require the payment of indirect costs to the school, and this money goes to very general things like central administration, general utility costs, staff, and facilities. There is therefore no direct relation between the specific costs of a particular grant and the specific expenses of the university. For example, if a professor gets a $100,000 grant to develop a laser technology from the federal government, an additional $50,000 is then given to the university to pay for overhead, there is no law requiring that most of that $50,000 is spent on anything directly associated to the project; instead a general rate is applied to the grant and money gets redistributed in a very mysterious way. In fact, all of the grant money goes to the Office of the President, and UCOP skims off a certain amount before it is sent back to the campuses. Therefore, while it looks like the money coming in from external grants is dedicated to very specific projects, much of it is very flexible. Yudof then is not telling the truth when he says that this money is all restricted by law.
This same question of restricted funds relates to all of the revenue-generating sectors of the UC system. For instance, the medical centers clear hundreds of millions of dollars of profit each year, but Yudof claims that this money cannot be used to make up for the loss of general funds. However, this is exactly what the UC did in 1993, and there is no law preventing the university to do it again. In fact, Yudof’s furlough plan is reducing the salaries of many of the people employed in the medical field, so it appears to be highly contradictory for him to insist that they cannot do it. It is also strange that these medical centers have declared that they have no financial relation to the university, but they use the university’s name and pension plan to attract workers and patients. These centers also hide behind the university to maintain their non-profit status, and this brings us to the question of what they do with their annual profits. It seems that in order to remain not-for-profit, the medical centers have to funnel most of their extra money back into pay and construction, and this is one reason why the compensation for the medical faculty is so high. Furthermore, due to their wealth, which translates into power in the UC system, the medical professors and administrators have successfully petitioned Yudof to not cut their extra compensation.
The medical centers combined with extension, summer programs, and housing and parking make up over 40% of the UC operating budget, and all of these sectors profit from the UC name and often share faculty, buildings, and administration with the general campus. There is thus no reason why these revenue-generating units cannot come up with funds to make up for the loss of state support. There is also no reason why the employees in these units should not have participated in the general furlough plan, and it seems that the only reason they have been spared is that the university considers money-making centers to be worthy of protection, but activities like teaching students must be cut.
The next biggest area of contention is the endowment, which does have some restrictions placed on it, but many of these restrictions are vague and the non vague ones usually direct the money to fund aspects of the general fund. For instance, many gifts are dedicated to funding financial aid, undergraduate education, or specific departments. Moreover, it seems strange that Yudof says he cannot spend this endowment money because it is restricted, but the university can invest it and lose it.
This question of investments brings us to the final part of the UC budget, which shows Yudof at his worse. It is important to note that at the same time, Yudof was claiming that the state budget reduction of $812 would cause a fiscal emergency, the UC lost $23 billion in its investment funds. While we cannot blame Yudof for losing this money, we can blame him for not dealing with these losses or even mentioning them in public. Instead, he used the state reduction to focus all attention on an external enemy as he deflected attention away from the real source of UC’s problems, which is the handling of its own money. While many institutions lost a lot of money during the global financial meltdown, UC’s pension and endowment investments have been underperforming ever since their management began to be outsourced in 2000. By hiring external money managers, the UC not only increased the cost of doing business, but it also ended up investing in highly risky financial instruments. The UC, under the leadership of regent chair and investment banker Richard Blum, also picked the worse time to transfer money from relatively stable bonds to real estate, and due in part to this change in its investment strategies, the regents and the president have gambled away the future financial health of the university.
Since the UC lost so much money in its pension fund, it will be forced to require substantial employee and employer contributions. Fundamentally, the increases in employee contributions will represent a permanent pay cut for the workers, while the need for the university to fund the pension plan will create a permanent fiscal crisis for the university unless something major is done on this front. Unfortunately, Yudof has not talked about the UC’s pension losses, and so no one knows about the true fiscal problem facing the university. What Yudof and others have also failed to discuss is the fact that by constantly giving the “market worthy” people higher salaries and special retirement deals, the pension problem only gets worse.
The solutions to the UC’s financial difficulties will have to do with reining in compensation, sharing revenue between units, establishing budgetary transparency, expanding the number of mid-level earners (so they can pay into the pension plan), and re-establishing education as a priority. Since Yudof has not shown himself to be interested in any of these tasks, I say to him: You are not worthy.
Bob Samuels, UC-AFT
For a list of Executive Deals Approved of during the Fiscal Emergency, see
http://www.upte.org/about/press/2009-07-23.pdf
If we look deeper into these hidden assumptions, we see how the university has followed Wall Street’s lead, and that no matter how badly top executives perform or how badly the financial institution is doing, the highest earners will be rewarded with increased compensation (see below for a list of recent increases). Moreover, since all the other workers in the UC system are actually getting pay cuts, it must mean that the pay for the wealthiest is being subsidized by everyone else. The UC’s compensation structure then reflects the general movement of the U.S. economy: the rich get richer, the poor get poorer, and the middle-class gets left with nothing. However, this economic system is not the result of some inevitable set of laws; instead, each economic structure is determined by priorities and choices.
In his short time at UC, Yudof has made it clear that his priority is to support the “top people,” but who exactly are these leaders, and are they really worthy of their compensation? To answer this question, let us first look at Yudof himself. Since one of his main tasks is to make sure the university remains financially able to perform its core mission, how is he doing on this task? For example, has he done a good job working with the state to ensure that the UC budget remains intact? As far as I can tell, he has completely failed on this account, and while he has criticized the state for reducing the university’s funding, it seems that he has done little to prevent this budget loss. After all, he unveiled his “fiscal emergency” and furlough plan months before the state budget was resolved, and this move showed that the UC had accepted the cut before it was enacted. Furthermore, there has been no mention of him trying to make a deal with the governor or some plan about future funding. In fact, Yudof is already going around the state telling people that the budget will be worse next year. So on his interactions with the state, I would give him an F.
Now let’s look at the UC’s general finances, and here things appear to be more mixed. In terms of the overall revenue brought in by the university, this year appears to be a winner because the total operating budget has gone up. Thus, even though Yudof has declared a fiscal emergency, the university as a whole is in relative good shape and external sources for funding have gone up. However, his leadership must be called into question on this front because he does not seem to understand how the UC operating budget works. For example, he first tried to reduce the pay of employees funded out of external grants, and then he said, the university could not do this. Moreover, he started out the furlough plan by announcing that all pay would be reduced, but he later reversed course, and said that for many top earners, only some of the pay would be reduced. He also has claimed that the furlough plan would save $180 million, but in reality the number is closer to $600 million. When he was confronted with this discrepancy, he simply said that most of the savings would be returned to the units. In other words, the salary savings plan is actually a salary redistribution plan, and no one knows how this money will be allocated.
Perhaps Yudof’s biggest problem area in relation to UC’s internal budget is the way he constantly repeats that certain funds are legally restricted. Although it has been pointed out that on the university’s own audited financial forms, 70% of the UC revenue is unrestricted, Yudof has said that it would be illegal for the university to use money from external sources in order to help supplement the loss of state funds. After all, who is paying for all of the executive raises? It turns out that most external grants that are awarded to the university require the payment of indirect costs to the school, and this money goes to very general things like central administration, general utility costs, staff, and facilities. There is therefore no direct relation between the specific costs of a particular grant and the specific expenses of the university. For example, if a professor gets a $100,000 grant to develop a laser technology from the federal government, an additional $50,000 is then given to the university to pay for overhead, there is no law requiring that most of that $50,000 is spent on anything directly associated to the project; instead a general rate is applied to the grant and money gets redistributed in a very mysterious way. In fact, all of the grant money goes to the Office of the President, and UCOP skims off a certain amount before it is sent back to the campuses. Therefore, while it looks like the money coming in from external grants is dedicated to very specific projects, much of it is very flexible. Yudof then is not telling the truth when he says that this money is all restricted by law.
This same question of restricted funds relates to all of the revenue-generating sectors of the UC system. For instance, the medical centers clear hundreds of millions of dollars of profit each year, but Yudof claims that this money cannot be used to make up for the loss of general funds. However, this is exactly what the UC did in 1993, and there is no law preventing the university to do it again. In fact, Yudof’s furlough plan is reducing the salaries of many of the people employed in the medical field, so it appears to be highly contradictory for him to insist that they cannot do it. It is also strange that these medical centers have declared that they have no financial relation to the university, but they use the university’s name and pension plan to attract workers and patients. These centers also hide behind the university to maintain their non-profit status, and this brings us to the question of what they do with their annual profits. It seems that in order to remain not-for-profit, the medical centers have to funnel most of their extra money back into pay and construction, and this is one reason why the compensation for the medical faculty is so high. Furthermore, due to their wealth, which translates into power in the UC system, the medical professors and administrators have successfully petitioned Yudof to not cut their extra compensation.
The medical centers combined with extension, summer programs, and housing and parking make up over 40% of the UC operating budget, and all of these sectors profit from the UC name and often share faculty, buildings, and administration with the general campus. There is thus no reason why these revenue-generating units cannot come up with funds to make up for the loss of state support. There is also no reason why the employees in these units should not have participated in the general furlough plan, and it seems that the only reason they have been spared is that the university considers money-making centers to be worthy of protection, but activities like teaching students must be cut.
The next biggest area of contention is the endowment, which does have some restrictions placed on it, but many of these restrictions are vague and the non vague ones usually direct the money to fund aspects of the general fund. For instance, many gifts are dedicated to funding financial aid, undergraduate education, or specific departments. Moreover, it seems strange that Yudof says he cannot spend this endowment money because it is restricted, but the university can invest it and lose it.
This question of investments brings us to the final part of the UC budget, which shows Yudof at his worse. It is important to note that at the same time, Yudof was claiming that the state budget reduction of $812 would cause a fiscal emergency, the UC lost $23 billion in its investment funds. While we cannot blame Yudof for losing this money, we can blame him for not dealing with these losses or even mentioning them in public. Instead, he used the state reduction to focus all attention on an external enemy as he deflected attention away from the real source of UC’s problems, which is the handling of its own money. While many institutions lost a lot of money during the global financial meltdown, UC’s pension and endowment investments have been underperforming ever since their management began to be outsourced in 2000. By hiring external money managers, the UC not only increased the cost of doing business, but it also ended up investing in highly risky financial instruments. The UC, under the leadership of regent chair and investment banker Richard Blum, also picked the worse time to transfer money from relatively stable bonds to real estate, and due in part to this change in its investment strategies, the regents and the president have gambled away the future financial health of the university.
Since the UC lost so much money in its pension fund, it will be forced to require substantial employee and employer contributions. Fundamentally, the increases in employee contributions will represent a permanent pay cut for the workers, while the need for the university to fund the pension plan will create a permanent fiscal crisis for the university unless something major is done on this front. Unfortunately, Yudof has not talked about the UC’s pension losses, and so no one knows about the true fiscal problem facing the university. What Yudof and others have also failed to discuss is the fact that by constantly giving the “market worthy” people higher salaries and special retirement deals, the pension problem only gets worse.
The solutions to the UC’s financial difficulties will have to do with reining in compensation, sharing revenue between units, establishing budgetary transparency, expanding the number of mid-level earners (so they can pay into the pension plan), and re-establishing education as a priority. Since Yudof has not shown himself to be interested in any of these tasks, I say to him: You are not worthy.
Bob Samuels, UC-AFT
For a list of Executive Deals Approved of during the Fiscal Emergency, see
http://www.upte.org/about/press/2009-07-23.pdf
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