Sandy Baringer, the UC-AFT staffer for Riverside has gone to Wisconsin to support the protests against union bashing and public employees. Here is her report from the frontlines:
“I'm reporting from the teachers' computer lounge at Madison Area Technical College, one block from the Wisconsin Capitol building, where thousands of teachers and public workers are rallying peacefully in the streets, in February in a cold climate, for 6 days going on 7: excuse the caps; I am being emphatic here.
First thing. NO ONE is trying to block the people's access to their Capitol - unlike the Orange County District Attorney attempting to indict UCI students for FELONY CRIMINAL CONSPIRACY for occupying one of their university buildings, and unlike certain UC administrators who direct their campus law enforcement personnel to block student access to university buildings. There are bedrolls around the rotunda, camping chairs, shared food, music, people with laptops. Law enforcement crowd control is very respectul and professional: one door is the designated entrance, and other doors are exit-only, which keeps the population inside with the parameters of fire safety. Signs are allowed inside, but no sticks. A very creative and invigorating collection of signs are taped to the inside walls around the rotunda. Many windows in the Capitol have large signs posted supporting the protest. The Tea Partiers seem to have disappeared. There was snow yesterday, and children of protesters are using posters to sled down the north side of the Capitol lawn. There was a 1 1/2 hour speaker lineup at noon, utilizing a very excellent outdoor sound system under a tarp, plugged into the Capitol building electrical outlets. There will be a lineup of a half dozen musicians with acoustic guitars at the 5pm rally, headlined by Tom Morello, formerly of Rage Against the Machine.
Second thing. Even though it is THIRTY DEGREES OUTSIDE NOT COUNTING WIND CHILL, there are still THOUSANDS of people here. I cannot estimate its size because it is larger than any UC rally I have ever attended, including the UCLA rally in November 2009, even though the ENTIRE STATE of Wisconsin has a population of approximately 5.7 million people (Los Angeles County has 9.5 million).
Third thing. These protesters are not all college students. Approximately a third to a half of them have gray hair. Judging from the union affiliations on the signs people are holding, approximately half of them are teachers, and they are not afraid to holler and act undignified. MARCH 2 is coming up a week from this Wednesday - that's 9 days from now. I hope our faculty will be outside where they can be SEEN and HEARD.”
Tuesday, February 22, 2011
Tuesday, February 15, 2011
Understanding the History and Structure of the UC Budget
Virtually every representation of the UC budget is either misguided or misinformed because people do not understand the history and structure of this complicated funding system. The first thing to stress is that as the state has reduced its commitment to the university, the system has sought multiple sources of revenue, which, in turn, have expanded the missions of the campuses. On a most basic level, the reduction of state funding has resulted in an increase in tuition and a growing emphasis on externally funded research and auxiliaries like housing, dining, parking, extension, summer, and medical services. Thus, when the administration states that student fees are now threatening to surpass state funding, one can read this as either indicating a loss of state funding or as an increase in non-state funding, like tuition.
One of the central problems with this system is that it is impossible to have any type of budget transparency because money moves in and out of different systems. For instance, the state pays the salary of a research professor, but then the professor gets a grant that buys him out of his teaching duties. At this point, the external research budget becomes co-mingled with the state-funded instructional budget, and so the clear line between state-funded and non-state-funded positions breaks down.
It is also important to stress that no one can say if research grants make or lose money because each grant is supposed to pay indirect costs to support administration, equipment, staff, facilities, libraries, and maintenance. While President Yudof likes to say that a grant to research laser technologies cannot fund a professor in the English department, what he does not say is that money from the English department and the laser grant do get mixed together to pay his salary. In other words, administrators are paid out of multiple sources, and this means that it is impossible to trace all of the money or to see if a particular grant is paying its fair share. Furthermore, while we know that some other schools do charge a higher indirect cost for grants, we do not know where this money goes and how it is spent.
What we do know is that money coming in from students and the state to support instruction and departmental research far exceeds the amount of money the campuses spend on these activities. Therefore, undergraduates are subsidizing something, but, it is hard to say exactly what. For example, we have recently discovered that most NCAA athletic departments in the country lose money, and UC Berkeley has been using general funds to subsidize its athletic program for years. We also know that parking on some campuses brings in much more money than it spends (see here for proof). However, all of these profits are hard to trace because UC is a non-profit institution that has to hide its extra revenue.
As I have pointed out in the past, the main way that the UC conceals its unrestricted funds is by declaring a multi-billion dollar retiree healthcare liability, while only paying a couple of hundred million dollars a year to cover these costs. Yet, UC is doing nothing wrong here because it is required by law to declare this liability; however, it does hide money by not telling its employees the real reason why its unrestricted funds are so low.
The UC also pools much of its operating cash and funds from diverse sources in order to invest the money together to receive higher rates of return. These pooled assets allow the university to get better bond ratings and thus lower interest rates for borrowing. Once again, while this structure may make fiscal sense, it creates budgetary opacity.
This short budget primer tells us certain important facts: 1) no one knows where the money is going or how it is being spent; 2) if someone tells you that they know how the university spends its money, they are misrepresenting the facts; 3) since money flows in and out of the different revenue streams, there is no such thing as a self-sustaining unit; 4) some parts of the system are covertly subsidizing other parts; and 5), it is untrue to state that a decrease in state funds means that state-funded positions have to be reduced. Everything in the budget is determined by priorities, and it our role to change these priorities.
One of the central problems with this system is that it is impossible to have any type of budget transparency because money moves in and out of different systems. For instance, the state pays the salary of a research professor, but then the professor gets a grant that buys him out of his teaching duties. At this point, the external research budget becomes co-mingled with the state-funded instructional budget, and so the clear line between state-funded and non-state-funded positions breaks down.
It is also important to stress that no one can say if research grants make or lose money because each grant is supposed to pay indirect costs to support administration, equipment, staff, facilities, libraries, and maintenance. While President Yudof likes to say that a grant to research laser technologies cannot fund a professor in the English department, what he does not say is that money from the English department and the laser grant do get mixed together to pay his salary. In other words, administrators are paid out of multiple sources, and this means that it is impossible to trace all of the money or to see if a particular grant is paying its fair share. Furthermore, while we know that some other schools do charge a higher indirect cost for grants, we do not know where this money goes and how it is spent.
What we do know is that money coming in from students and the state to support instruction and departmental research far exceeds the amount of money the campuses spend on these activities. Therefore, undergraduates are subsidizing something, but, it is hard to say exactly what. For example, we have recently discovered that most NCAA athletic departments in the country lose money, and UC Berkeley has been using general funds to subsidize its athletic program for years. We also know that parking on some campuses brings in much more money than it spends (see here for proof). However, all of these profits are hard to trace because UC is a non-profit institution that has to hide its extra revenue.
As I have pointed out in the past, the main way that the UC conceals its unrestricted funds is by declaring a multi-billion dollar retiree healthcare liability, while only paying a couple of hundred million dollars a year to cover these costs. Yet, UC is doing nothing wrong here because it is required by law to declare this liability; however, it does hide money by not telling its employees the real reason why its unrestricted funds are so low.
The UC also pools much of its operating cash and funds from diverse sources in order to invest the money together to receive higher rates of return. These pooled assets allow the university to get better bond ratings and thus lower interest rates for borrowing. Once again, while this structure may make fiscal sense, it creates budgetary opacity.
This short budget primer tells us certain important facts: 1) no one knows where the money is going or how it is being spent; 2) if someone tells you that they know how the university spends its money, they are misrepresenting the facts; 3) since money flows in and out of the different revenue streams, there is no such thing as a self-sustaining unit; 4) some parts of the system are covertly subsidizing other parts; and 5), it is untrue to state that a decrease in state funds means that state-funded positions have to be reduced. Everything in the budget is determined by priorities, and it our role to change these priorities.
Thursday, February 3, 2011
A Growth Model for the UC
While a recent Los Angeles Times editorial argued that the solution to the University of California’s budget problems is to reduce enrollments, this suggestion would not only limit access when it is most needed, but it would also hurt the funding of the entire system. Currently, undergraduate tuition is the only stable source of funding for the UC system, and the revenue generated by in-state and nonresident students subsidizes research, administration, and most other UC activities. In fact, the university receives on average $23,000 from each undergraduate student (this includes state and student revenue) but only spends $8,000 on direct instructional costs. In other words, the university will generate more income if it enrolls more students.
By increasing the number of international students and maintaining the level of resident enrollees, the UC could bring in hundreds of millions of dollars, while it supports the goals of access, affordability, and excellence. This growth model would require hiring more assistant professors and lecturers, and for people who worry about undermining the research mission, it should be stressed that the more income generated by tuition, the more we can support research.
Some have argued that the system does not have enough classrooms or facilities, but this is a false excuse. If the universities expand their hours of operations and have more evening courses, more students can be accommodated. Also, housing and dining are self-supporting and often produce profits so they can handle an influx of students, and let’s not forget that there are plenty of empty houses and buildings around our campuses.
A key to this growth model would be a better balance between teaching and research, and this could be accomplished in two cost efficient ways. The first step is to avoid the costly move to online education and to provide more opportunities for faculty members to teach undergraduate courses in their areas of specialization. The UCLA English Department has already moved in this direction. Another move would be to replace large courses with smaller seminars that allow for more student-faculty interaction. While this change looks like it would cost more money, it is often cheaper to have smaller classes due to the added cost of sections attached to large lecture classes.
If the UC can increase its instructional quality, while bringing in more revenue, it can become a national leader in how to save our research universities. All of the other options on the table call for a massive reduction of enrollments, layoffs, decreased opportunity, and financial self-destruction. We can have improved access, affordability, and quality, if we make undergraduate education an essential priority.
By increasing the number of international students and maintaining the level of resident enrollees, the UC could bring in hundreds of millions of dollars, while it supports the goals of access, affordability, and excellence. This growth model would require hiring more assistant professors and lecturers, and for people who worry about undermining the research mission, it should be stressed that the more income generated by tuition, the more we can support research.
Some have argued that the system does not have enough classrooms or facilities, but this is a false excuse. If the universities expand their hours of operations and have more evening courses, more students can be accommodated. Also, housing and dining are self-supporting and often produce profits so they can handle an influx of students, and let’s not forget that there are plenty of empty houses and buildings around our campuses.
A key to this growth model would be a better balance between teaching and research, and this could be accomplished in two cost efficient ways. The first step is to avoid the costly move to online education and to provide more opportunities for faculty members to teach undergraduate courses in their areas of specialization. The UCLA English Department has already moved in this direction. Another move would be to replace large courses with smaller seminars that allow for more student-faculty interaction. While this change looks like it would cost more money, it is often cheaper to have smaller classes due to the added cost of sections attached to large lecture classes.
If the UC can increase its instructional quality, while bringing in more revenue, it can become a national leader in how to save our research universities. All of the other options on the table call for a massive reduction of enrollments, layoffs, decreased opportunity, and financial self-destruction. We can have improved access, affordability, and quality, if we make undergraduate education an essential priority.
Friday, January 28, 2011
The State of the State: Fighting Budget Cuts One Day at a Time
For the last several days, I have been in Oakland and Sacramento trying to work out a deal to limit the state budget cuts to the UC system. I testified at the Assembly hearing and met with the Legislative Analyst for Higher Ed and Governor Brown’s point person for the universities. So I will begin with what I know for sure: I know nothing for sure. There is a flurry of activity, and no one knows what Brown is going to end up doing. He is asking for a lot of feedback from a lot of people, but each conversation is framed with the idea that things are going to be bad, and they might get even worse.
While the governor’s initial budget proposal calls for unallocated cuts of $500 million to the UC system, many legislators believe they should make targeted cuts. To help the legislature in this process, I have worked with AFSCME to propose a deal where the state would only reduce the UC by $250 million in exchange for the UC cutting the salaries and perks of the highest compensated administrators. We have also supported the position that there should be no additional fee hikes or enrollment cuts. In fact, I believe I have convinced several key people that the worst thing the UC could do is to cut undergraduate admissions. I have shown that last year, the UC brought in $23,000 per undergraduate in fees and state funds, but only spent $8,000 in direct instructional costs. It would thus be financial suicide to reduce undergrad enrollments since undergraduates subsidize research, graduate education, student services, and administration.
Yes it would be great if we were in a position to advocate for no cuts right now, but there are going to be reductions, and so we should try to make sure that they do not hurt the core mission of the university.
While the governor’s initial budget proposal calls for unallocated cuts of $500 million to the UC system, many legislators believe they should make targeted cuts. To help the legislature in this process, I have worked with AFSCME to propose a deal where the state would only reduce the UC by $250 million in exchange for the UC cutting the salaries and perks of the highest compensated administrators. We have also supported the position that there should be no additional fee hikes or enrollment cuts. In fact, I believe I have convinced several key people that the worst thing the UC could do is to cut undergraduate admissions. I have shown that last year, the UC brought in $23,000 per undergraduate in fees and state funds, but only spent $8,000 in direct instructional costs. It would thus be financial suicide to reduce undergrad enrollments since undergraduates subsidize research, graduate education, student services, and administration.
Yes it would be great if we were in a position to advocate for no cuts right now, but there are going to be reductions, and so we should try to make sure that they do not hurt the core mission of the university.
Wednesday, January 19, 2011
Fighting for Funding and Administrative Reductions
Next week, I will be going with several union leaders to speak to state legislators regarding the UC budget. We will propose that the state limits Governor Brown’s funding cuts if the UC promises to reduce its administrative costs by $500 million. Our strategy is to help restore funding and to protect vital services without having to resort to furloughs, layoffs, and tuition increases.
Here are the administrative savings AFSCME and UC-AFT will present to state legislators:
1. Eliminate $530 million in Management Inefficiencies.
Since 2004, UC’s management has grown twice as fast as non-management employees. In fact, $1.6 billion in cash compensation went to management in 2009. Thus, adjusting UC’s system-wide management ratio from 7:1 to 10:1 would save over $530 million annually. Also, in addition to cash compensation, UC’s senior managers are compensated through a number of supplemental health, welfare, and retirement benefits. Many of the senior managers who receive these benefits are paid through state funds, causing this benefit to include state funding.
2. Eliminating the Senior Management Supplemental Benefit Program would result in $2.5 million in savings annually. UC puts 5% of about 200 highly paid executives’ annual pay into retirement savings accounts. These funds are available to executives after they retire, in addition to UC’s standard retirement benefits. The cost of this supplemental benefit is about $2.5 million per year. One UC Task Force recommended that this program be eliminated and that “other compensation solutions should be developed and adopted” for senior managers.
3. Eliminating the 415(m) Restoration Plan would save $20 million each year after 2020. This plan mostly benefits long-service, high-income faculty and senior managers by supplementing their annual retirement income with additional income beyond the $195,000 pension limit established by the Internal Revenue Code.
These reductions would be very popular with the public and the legislature, and they could force the administration to change its priorities.
Here are the administrative savings AFSCME and UC-AFT will present to state legislators:
1. Eliminate $530 million in Management Inefficiencies.
Since 2004, UC’s management has grown twice as fast as non-management employees. In fact, $1.6 billion in cash compensation went to management in 2009. Thus, adjusting UC’s system-wide management ratio from 7:1 to 10:1 would save over $530 million annually. Also, in addition to cash compensation, UC’s senior managers are compensated through a number of supplemental health, welfare, and retirement benefits. Many of the senior managers who receive these benefits are paid through state funds, causing this benefit to include state funding.
2. Eliminating the Senior Management Supplemental Benefit Program would result in $2.5 million in savings annually. UC puts 5% of about 200 highly paid executives’ annual pay into retirement savings accounts. These funds are available to executives after they retire, in addition to UC’s standard retirement benefits. The cost of this supplemental benefit is about $2.5 million per year. One UC Task Force recommended that this program be eliminated and that “other compensation solutions should be developed and adopted” for senior managers.
3. Eliminating the 415(m) Restoration Plan would save $20 million each year after 2020. This plan mostly benefits long-service, high-income faculty and senior managers by supplementing their annual retirement income with additional income beyond the $195,000 pension limit established by the Internal Revenue Code.
These reductions would be very popular with the public and the legislature, and they could force the administration to change its priorities.
Thursday, January 13, 2011
A Plan to Reduce the UC Budget
Since Gov. Brown is saying that he wants to meet with union and student leaders to discuss how to reduce the UC budget, I have put together a comprehensive proposal to save vital services, while absorbing the latest round of budget cuts:
1. Reduce senior management group by 20%. Just as academic programs are often reduced by a certain percentage, the Office of the President should get the same type of reduction. This process will force the administration to decide who is valuable in their own ranks, and it could save $20 million. If the same process is extended to the campuses, it could save $200 million.
2. Institute a UC tax on all auxiliaries of 10% to go to the general fund; this will bring in $1 billion each year. (Some of this money could be used to fund the pension plan)
3. Reduce the number of grants that do not bring in at least 50% in indirect cost recoveries. The total savings here should be $200 million. The university also plans to bring in another $300 million by renegotiating the federal and state indirect cost rate to match its competitors.
4. Cap administrative salaries, raises, and supplemental retirement perks. This will reduce future costs and help motivate some overpaid administrators to leave. (cost: priceless).
5. Prevent athletic subsidies and force campuses to reduce new construction projects related to athletics. This could save $100 million a year.
While we still need to push for more state funding, these proposals are based on the recognition that the profit centers of the university need to share their extra funds, and we also need a forced reduction of administrative costs.
1. Reduce senior management group by 20%. Just as academic programs are often reduced by a certain percentage, the Office of the President should get the same type of reduction. This process will force the administration to decide who is valuable in their own ranks, and it could save $20 million. If the same process is extended to the campuses, it could save $200 million.
2. Institute a UC tax on all auxiliaries of 10% to go to the general fund; this will bring in $1 billion each year. (Some of this money could be used to fund the pension plan)
3. Reduce the number of grants that do not bring in at least 50% in indirect cost recoveries. The total savings here should be $200 million. The university also plans to bring in another $300 million by renegotiating the federal and state indirect cost rate to match its competitors.
4. Cap administrative salaries, raises, and supplemental retirement perks. This will reduce future costs and help motivate some overpaid administrators to leave. (cost: priceless).
5. Prevent athletic subsidies and force campuses to reduce new construction projects related to athletics. This could save $100 million a year.
While we still need to push for more state funding, these proposals are based on the recognition that the profit centers of the university need to share their extra funds, and we also need a forced reduction of administrative costs.
Monday, January 10, 2011
Brown Asks UC Students and Unions to Help Cut the UC Budget by $500 Million
The new California governor, Jerry Brown, has just announced a reduction of the UC and CSU budgets by $500 million each for 2011-12, and this time, the cuts will not be replaced by any federal recovery money. While the UC system will probably still show a net increase in revenue, the state cuts will most likely result in another round of layoffs, fee increases, and other austerity measures.
However, there is a big new wrinkle in this process: Brown is asking students and union representatives to help make reductions to the UC budget. Here is the relevant passage from his budget proposal: “A decrease of $500 million in 2011‐12 to reflect necessary funding reductions to help resolve the budget deficit. These reductions are intended to minimize fee and enrollment impacts on students by targeting actions that lower the costs of instruction and administration. The Administration will work with the Office of the President and the Regents, as well as stakeholders (including representatives of students and employees), to determine the specific mix of measures that can best accomplish these objectives.” In other words, for the first time, a governor will try to control the UC budget and attempt to cut unneeded expenses like administrative salaries and athletic subsidies.
Part of this new process was brought on by the attempt of 36 of the highest paid administrators to receive a higher pension. Brown, who has never been a big fan of UC elitism, is going to try to circumvent the university’s autonomous status by tying general funds to specific budget reductions. These moves will also coincide with the state audit of the UC budget, and so we should expect a very defensive posture coming from the Regents and the Office of the President. All stakeholders should start to position themselves to influence this process in a positive way.
However, there is a big new wrinkle in this process: Brown is asking students and union representatives to help make reductions to the UC budget. Here is the relevant passage from his budget proposal: “A decrease of $500 million in 2011‐12 to reflect necessary funding reductions to help resolve the budget deficit. These reductions are intended to minimize fee and enrollment impacts on students by targeting actions that lower the costs of instruction and administration. The Administration will work with the Office of the President and the Regents, as well as stakeholders (including representatives of students and employees), to determine the specific mix of measures that can best accomplish these objectives.” In other words, for the first time, a governor will try to control the UC budget and attempt to cut unneeded expenses like administrative salaries and athletic subsidies.
Part of this new process was brought on by the attempt of 36 of the highest paid administrators to receive a higher pension. Brown, who has never been a big fan of UC elitism, is going to try to circumvent the university’s autonomous status by tying general funds to specific budget reductions. These moves will also coincide with the state audit of the UC budget, and so we should expect a very defensive posture coming from the Regents and the Office of the President. All stakeholders should start to position themselves to influence this process in a positive way.
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