At the same time that UC President Mark Yudof declared a fiscal emergency this summer, the UC was reviewed for a new set of bonds by Moodys, and the bond raters told a very different story than the one the Office of the President was presenting to the public and its own employees. According to recent reports from Moodys, the university generates billions of dollars of profits and has billions of dollars of funds that it can use for any purpose. Here are some of the highlights from recent bond reports, which detail UC’s fiscal health:
1. “Excess of $4 billion of net patient revenue at its five academic medical centers”; [net revenues equals profits]
2. “Healthy and highly consistent operating performance, with operating cash flow in excess of $2 billion driven by a highly diversified revenue stream with no single revenue source exceeding 26% of total revenues”;
3.” Sizeable balance sheet that remains highly liquid, with $5.9 billion of unrestricted financial resources and active treasury management monitoring a short-term investment pool approaching $8 billion in recent years”; [a total of $14 billion that can be used for any purpose]
4. “UC's financial resources have grown from approximately $11 billion in FY2002 to over $15.5 billion in FY2006. Expendable financial resources have grown from less than $8 billion to over $13 billion over the same time period”. [more total revenue and more unrestricted funds]
5. “Resource growth has partially been driven by fundraising success across the campuses. The University reports total private giving in FY2006 approached $1.3 billion with over $10 billion raised in the last decade”. [the endowment funds allows for borrowing and flexible funds]
6. “With expendable financial resources covering pro-forma debt by 1.4 times, and debt service consuming only 3.6% of operating expenses, we believe the University retains significant additional debt capacity”. [UC can borrow more money at a low cost]
It is clear that the medical facilities generate a huge profit that can be shared with the other units. It is also evident that the UC has billions of dollars of unrestricted funds that can be used to deal with the current state budget crisis. Moreover, the UC is able to borrow money at a very low interest rate because it has so much unrestricted funds in its multiple revenue streams. In other words, everything Yudof and the Regents have said about the dire state of the UC’s finances is simply untrue.
Wednesday, November 25, 2009
Monday, November 23, 2009
A Regents Meeting Recap
I want to congratulate all the unions, workers, and students pulling off a great protest under difficult conditions. We had over 2,000 protesters at UCLA, and there were some great actions. Here are a few highlights:
Hundreds of people stopped traffic at one of the main intersections in L.A. and then marched up through the campus.
Over a thousand people participated in a boisterous rally outside the regents meeting (the rally got international coverage). Even though the police tasered and hit several students and workers, we kept coming back for more.
A very surreal moment happened during the public comments period. After extending their bathroom break for an additional thirty minutes, the regents cut off public comments, while several people were still waiting to speak. This is after months of planning and negotiating, and several hours of waiting patiently. When our group at the meeting started to yell, "Let them Speak," not only did the regents declare their own meeting an "unlawful assembly," but they brought up police with guns into their own meeting to arrest the people who wanted to speak.
Another surreal moment occurred earlier on when several of us had to listen to the regents congratulate each other about how great they are and what a great historic day this was because they were agreeing to fund a new hospital project. The self-praising lasted several minutes, but when a mother of two students was later addressing the regents, not only were they not paying attention to her, but they cut her off, while she was delivering a heartbreaking story.
After the vote on the fee increases, the students surrounded the building and locked arms refusing to let the regents leave the building. A tense standoff lasted for several hours, and hundreds of students and workers joined the human chain. On the other side of the building, people were sitting and lying on the ground to prevent anyone from driving out of the building. When they finally brought Yudof out, they had to use tasers in order to clear a way. What message does this send, when you have to use weapons on your own students?
While most of the police did a good job, there were a couple who acted badly, and they should be investigated and disciplined. We will consider asking for a formal investigation into the conduct of the police. The main problem is that some of them took a very hostile stance by sticking guns in students' and workers' faces without any provocation. There are videos on the web showing how the police tasered and beat several students, and this information will not be ignored.
Another group of students occupied a building for a day, and then left peacefully, and hundreds of students participated in a flash mob by pretending to die outside of the regents meeting (this event made for some powerful photos).
We also had an all night camp out and dance party on Wed. night, which highlighted the building of a growing movement.
I did several radio and television interviews, and the press were very surprised to learn how the UC treats its workers. I think this was a historic event for our coalition, but this is not the end: it is only the beginning.
Here are some of the interviews:
Democracy Now!
CNN
Uprising
Hundreds of people stopped traffic at one of the main intersections in L.A. and then marched up through the campus.
Over a thousand people participated in a boisterous rally outside the regents meeting (the rally got international coverage). Even though the police tasered and hit several students and workers, we kept coming back for more.
A very surreal moment happened during the public comments period. After extending their bathroom break for an additional thirty minutes, the regents cut off public comments, while several people were still waiting to speak. This is after months of planning and negotiating, and several hours of waiting patiently. When our group at the meeting started to yell, "Let them Speak," not only did the regents declare their own meeting an "unlawful assembly," but they brought up police with guns into their own meeting to arrest the people who wanted to speak.
Another surreal moment occurred earlier on when several of us had to listen to the regents congratulate each other about how great they are and what a great historic day this was because they were agreeing to fund a new hospital project. The self-praising lasted several minutes, but when a mother of two students was later addressing the regents, not only were they not paying attention to her, but they cut her off, while she was delivering a heartbreaking story.
After the vote on the fee increases, the students surrounded the building and locked arms refusing to let the regents leave the building. A tense standoff lasted for several hours, and hundreds of students and workers joined the human chain. On the other side of the building, people were sitting and lying on the ground to prevent anyone from driving out of the building. When they finally brought Yudof out, they had to use tasers in order to clear a way. What message does this send, when you have to use weapons on your own students?
While most of the police did a good job, there were a couple who acted badly, and they should be investigated and disciplined. We will consider asking for a formal investigation into the conduct of the police. The main problem is that some of them took a very hostile stance by sticking guns in students' and workers' faces without any provocation. There are videos on the web showing how the police tasered and beat several students, and this information will not be ignored.
Another group of students occupied a building for a day, and then left peacefully, and hundreds of students participated in a flash mob by pretending to die outside of the regents meeting (this event made for some powerful photos).
We also had an all night camp out and dance party on Wed. night, which highlighted the building of a growing movement.
I did several radio and television interviews, and the press were very surprised to learn how the UC treats its workers. I think this was a historic event for our coalition, but this is not the end: it is only the beginning.
Here are some of the interviews:
Democracy Now!
CNN
Uprising
Sunday, November 15, 2009
Why We Must Resist Student Fee Increases
The main reasons why new student fee increases should be rejected is not only will these increases price out many lower- and middle-class students, but more importantly, there is no way of knowing if the money generated by these fees will be used for instructional purposes. In fact, every thing we have heard recently tells us that student fees will not find their way back into the classroom.
As Bob Meister has shown, one reason why the UC administration wants to raise fees is that they have promised to do this in order to lower interest rates for construction bonds. While this move to use student money to build new buildings could be justified if these new buildings would help serve the educational mission of undergraduates, it turns out that most of these planned construction projects have nothing to do with undergraduate instruction (for a list of these projects, click here and scroll to bottom of the main article).
Perhaps more troubling is the recent discovery that student fees from one campus are often used to subsidize activities on the other campuses, and that campuses with professional schools end up getting most of the money. This means that undergraduates are subsidizing graduate students, and undergraduate student fees are being directed away from their intended destination. In fact, I have previously shown that most of the money generated from student fees and state funds never finds its way into the classroom, and the result is that classes get larger, and their are fewer courses in which students can enroll. Furthermore, as the UC has been raising student fees, it has been laying off the lecturers who teach most of the required courses. The university has also been eliminating many sections taught by graduate students and has increased the class size of many of the remaining sections.
Students are therefore being asked to pay more for less, while their fees are used for non-instructional purposes. If the UCs were a publicly traded corporation, it might make sense to raise fees in order to lower interest rates and cut labor costs, but the UC is a public institution of higher education: Its main function is to provide high quality instruction and research for Californians. Please come to the Regents Meeting at UCLA on November 17-19th to defend undergraduates against the move to increase the costs and lower the quality of public higher education.
As Bob Meister has shown, one reason why the UC administration wants to raise fees is that they have promised to do this in order to lower interest rates for construction bonds. While this move to use student money to build new buildings could be justified if these new buildings would help serve the educational mission of undergraduates, it turns out that most of these planned construction projects have nothing to do with undergraduate instruction (for a list of these projects, click here and scroll to bottom of the main article).
Perhaps more troubling is the recent discovery that student fees from one campus are often used to subsidize activities on the other campuses, and that campuses with professional schools end up getting most of the money. This means that undergraduates are subsidizing graduate students, and undergraduate student fees are being directed away from their intended destination. In fact, I have previously shown that most of the money generated from student fees and state funds never finds its way into the classroom, and the result is that classes get larger, and their are fewer courses in which students can enroll. Furthermore, as the UC has been raising student fees, it has been laying off the lecturers who teach most of the required courses. The university has also been eliminating many sections taught by graduate students and has increased the class size of many of the remaining sections.
Students are therefore being asked to pay more for less, while their fees are used for non-instructional purposes. If the UCs were a publicly traded corporation, it might make sense to raise fees in order to lower interest rates and cut labor costs, but the UC is a public institution of higher education: Its main function is to provide high quality instruction and research for Californians. Please come to the Regents Meeting at UCLA on November 17-19th to defend undergraduates against the move to increase the costs and lower the quality of public higher education.
How the Regents Sold the University Down the River
On Sept 17 2008, the Regents Investment Advisory Group met to discuss the UC’s investment strategies in light of the ongoing global financial meltdown. (The notes of the meeting can be found here). The decisions made at this meeting point to a series of questionable judgments, which may have caused serious damage to the university’s fiscal health and a loss of over $23 billion in its investment and pension portfolios. While the regents and the Office of the President would like us to believe that everyone lost money during the great financial meltdown, and so we should not blame management for the loss of billions of dollars, a closer look shows that the regents’ own financial interests could have motivated them to push the UC to raise their stakes in the riskiest investments that were already going bad.
During the early part of the meeting, we find the following entry in the minutes: “President Yudof noted that UC has investments in mortgage-backed instruments. He asked if there has been any investigation into the likelihood of default. He cited the magnitude of the investment and the potential risk of not being able to mark to market.” Yudof here was wisely asking about the UC’s investments in toxic assets and the inability to place a value on these risky investments. The response he got should scare all of us, “As the market turmoil expanded, the non-agency securities became less expensive, and in December, the University bought a fairly significant amount.” In other words, just when things were really going down hill for mortgage-backed securities, the UC increased its investment. While the UC investors thought they saw a bargain, what they were really investing in was a group of assets that they may never be able to sell.
While we do not know how much UC has invested in these toxic assets, we do get some indication, in the following section of the notes: “In response to a question asked by President Yudof, Mr. Wedding stated that the University has about $1.4 billion invested in mortgage-backed securities, of which $0.6 billion is within the UCRP, 40 percent to 45 percent of the total mortgage-backed portfolio.” While $1.4 billion only accounts for a small part of the UCs investment losses, we later read that the investors do not know how much money they have in other types of derivatives and that they cannot value their own assets: “Since May, that market has become very illiquid . . .The University cannot obtain reliable daily or monthly pricing from its pricing providers on many of these securities . . . The majority of them, 95 percent, are still valued AAA, as they were when purchased, but it is difficult to determine a market price . . .The University’s opinion is that it should hold this position rather than liquidate, and that this position will work out over a one-and-a-half to two-year period.” Once again, the UC made a decision to hold onto a large group of investments that it could not value, and even though the bond raters were still giving the mortgage-backed securities high ratings, it was clear that the assets were tied to defaulting loans, and no one could really market these securities.
Instead of putting its money into more stable and safe investments, the UC decided to take advantage of the market instability, and raise its stake in high-risk assets:
“Chief Investment Officer Berggren informed the Committee that this revised policy would result in much higher allocations to both private equity and real estate in the future. . . The recommendation is for an increase in the long-term target for private equity and real estate consistent with the present commitments and with commitments planned for the next few years.” Here we find UC following the failed Yale model of switching university investments from relatively stable bonds and stocks to more volatile investments in securities and real estate.
The question, then, is why did the UC continue to invest in real estate and mortgage-backed securities when it was clear that these areas were seeing the highest level of losses and instability. The answer to this crucial question appears to be that so many of the regents have huge stakes in real estate and financial securities. For example, Richard Blum, who is a major real estate investor, made the following argument at a later investment meeting (2/24/09): “Chairman Blum expressed concern that the University might become too risk-averse. He recalled that, over the last 60 to 70 years, equity and real estate have provided good returns. The current scenario was an event that occurs once in a century. He cautioned that the University’s investment profile might become so conservative that it would prevent the University from achieving its investment goals and taking necessary action when the market begins to recover.” It is clear here that Blum was pushing the regents to investment in his own industry and to continue to take on high-risk investments.
Since the regents are stacked with business people with huge investments in real estate and financial securities, it should be clear that they should not be the one’s managing the UC’s fiscal health. There are simply too many potential conflicts of interest to allow these investors to steer the UC’s investments. As a first step in changing how the regents are chosen, there should be an independent investigation into the UC’s recent investment decisions.
During the early part of the meeting, we find the following entry in the minutes: “President Yudof noted that UC has investments in mortgage-backed instruments. He asked if there has been any investigation into the likelihood of default. He cited the magnitude of the investment and the potential risk of not being able to mark to market.” Yudof here was wisely asking about the UC’s investments in toxic assets and the inability to place a value on these risky investments. The response he got should scare all of us, “As the market turmoil expanded, the non-agency securities became less expensive, and in December, the University bought a fairly significant amount.” In other words, just when things were really going down hill for mortgage-backed securities, the UC increased its investment. While the UC investors thought they saw a bargain, what they were really investing in was a group of assets that they may never be able to sell.
While we do not know how much UC has invested in these toxic assets, we do get some indication, in the following section of the notes: “In response to a question asked by President Yudof, Mr. Wedding stated that the University has about $1.4 billion invested in mortgage-backed securities, of which $0.6 billion is within the UCRP, 40 percent to 45 percent of the total mortgage-backed portfolio.” While $1.4 billion only accounts for a small part of the UCs investment losses, we later read that the investors do not know how much money they have in other types of derivatives and that they cannot value their own assets: “Since May, that market has become very illiquid . . .The University cannot obtain reliable daily or monthly pricing from its pricing providers on many of these securities . . . The majority of them, 95 percent, are still valued AAA, as they were when purchased, but it is difficult to determine a market price . . .The University’s opinion is that it should hold this position rather than liquidate, and that this position will work out over a one-and-a-half to two-year period.” Once again, the UC made a decision to hold onto a large group of investments that it could not value, and even though the bond raters were still giving the mortgage-backed securities high ratings, it was clear that the assets were tied to defaulting loans, and no one could really market these securities.
Instead of putting its money into more stable and safe investments, the UC decided to take advantage of the market instability, and raise its stake in high-risk assets:
“Chief Investment Officer Berggren informed the Committee that this revised policy would result in much higher allocations to both private equity and real estate in the future. . . The recommendation is for an increase in the long-term target for private equity and real estate consistent with the present commitments and with commitments planned for the next few years.” Here we find UC following the failed Yale model of switching university investments from relatively stable bonds and stocks to more volatile investments in securities and real estate.
The question, then, is why did the UC continue to invest in real estate and mortgage-backed securities when it was clear that these areas were seeing the highest level of losses and instability. The answer to this crucial question appears to be that so many of the regents have huge stakes in real estate and financial securities. For example, Richard Blum, who is a major real estate investor, made the following argument at a later investment meeting (2/24/09): “Chairman Blum expressed concern that the University might become too risk-averse. He recalled that, over the last 60 to 70 years, equity and real estate have provided good returns. The current scenario was an event that occurs once in a century. He cautioned that the University’s investment profile might become so conservative that it would prevent the University from achieving its investment goals and taking necessary action when the market begins to recover.” It is clear here that Blum was pushing the regents to investment in his own industry and to continue to take on high-risk investments.
Since the regents are stacked with business people with huge investments in real estate and financial securities, it should be clear that they should not be the one’s managing the UC’s fiscal health. There are simply too many potential conflicts of interest to allow these investors to steer the UC’s investments. As a first step in changing how the regents are chosen, there should be an independent investigation into the UC’s recent investment decisions.
Tuesday, November 10, 2009
A Plan to Protect the University of California
I would like to suggest here a concrete plan to defend high quality public education for the University of California.
The first step is to build coalitions around a set of specific demands. This strategy is necessary in order to unite diverse interest groups within the UC system, and in fact, unions, students, and faculty have already done a good job centering our demands around five basic issues: furloughs, layoffs, budgetary transparency, alternative budget solutions, and shared governance.
By saying no to furloughs for people making less than $40,000, we have united around a very modest and realizable goal. Moreover, this demand shows our commitment to economic justice and a basic sense of fairness.
Linked to the demand to limit the furloughs, and to stop all furloughs by July 1 2010, is the need to halt the layoffs on each campus. The unions have been working on this demand, but it will take a united front to stop the elimination of jobs throughout the UC system. Students need to realize that when the university gets rid of lecturers, courses are eliminated and class sizes expand. Furthermore, faculty, need to know that without lecturers and teaching assistants, professors will not have time to do research, and the quality of education will go down. It is also important to stress that when workers and staff lose their jobs, everyone loses.
Of course, the UC administration will argue that layoffs and furloughs are necessary to maintain the quality of the university, but without budget transparency, we have no way of knowing if the money saved by furloughs and layoffs will actually go to protect things like undergraduate instruction and graduate research. Right now, it seems that students are being asked to pay more for less, while workers and faculty are being asked to do more for less. Furthermore, decisions are being imposed from above, and we are seeing a serious lack of shared governance.
The reason that we have to insist on shared governance and budget transparency, then, is to make sure that decisions are not being made in secret, which will result in the privatization of the university. And privatization, means not only the raising of student fees to such an extent that the university becomes indistinguishable from private universities, but more fundamentally, privatization says that education is no longer considered a free, public good and that knowledge is no longer the free pursuit of knowledge. Privatization also means that decisions are made in private, and private gain becomes the over-arching goal.
One way to fight all of these forms of privatization is to insist on the alterntaive budget solutions that the unions have presented to the administration. These solutions start with a very basic human concept: sharing. Not only should the profit-making units share with the less profit-oriented sectors, but the highest earners should share some of their wealth with the lowest earners. Moreover, if positions have to be eliminated, it should not only be the lowest paid workers who lose their jobs.
A growing number of UC workers, faculty, and students believe that the UC does not have a fiscal crisis; rather it has a crisis of priorities, and we can work together to change these priorities. We need to use the regents meeting at UCLA on November 17-19 to present our demands to the general public and to rally around our shared interests.
The next step after the regents meeting is to go back to our respective campuses and to make sure that our shared demands are accepted. Following some recent success, we need to put pressure on the chancellors on each campus, and this may take the form of sit-ins and other modes of civil disobedience. By working with students, we can force the local leaders to make local changes, which can lead to more system-wide changes. For example, the chancellors can stop layoffs and provide budgetary transparency that enables shared governance. The chancellors can also demand an end to furloughs and service cuts.
The chancellors have to be accountable to the students and faculty, and we need to work together to make them accept our demands. We need to fight for the university we want. Please come to UCLA on the 18th and 19th, and let your voices be heard.
The first step is to build coalitions around a set of specific demands. This strategy is necessary in order to unite diverse interest groups within the UC system, and in fact, unions, students, and faculty have already done a good job centering our demands around five basic issues: furloughs, layoffs, budgetary transparency, alternative budget solutions, and shared governance.
By saying no to furloughs for people making less than $40,000, we have united around a very modest and realizable goal. Moreover, this demand shows our commitment to economic justice and a basic sense of fairness.
Linked to the demand to limit the furloughs, and to stop all furloughs by July 1 2010, is the need to halt the layoffs on each campus. The unions have been working on this demand, but it will take a united front to stop the elimination of jobs throughout the UC system. Students need to realize that when the university gets rid of lecturers, courses are eliminated and class sizes expand. Furthermore, faculty, need to know that without lecturers and teaching assistants, professors will not have time to do research, and the quality of education will go down. It is also important to stress that when workers and staff lose their jobs, everyone loses.
Of course, the UC administration will argue that layoffs and furloughs are necessary to maintain the quality of the university, but without budget transparency, we have no way of knowing if the money saved by furloughs and layoffs will actually go to protect things like undergraduate instruction and graduate research. Right now, it seems that students are being asked to pay more for less, while workers and faculty are being asked to do more for less. Furthermore, decisions are being imposed from above, and we are seeing a serious lack of shared governance.
The reason that we have to insist on shared governance and budget transparency, then, is to make sure that decisions are not being made in secret, which will result in the privatization of the university. And privatization, means not only the raising of student fees to such an extent that the university becomes indistinguishable from private universities, but more fundamentally, privatization says that education is no longer considered a free, public good and that knowledge is no longer the free pursuit of knowledge. Privatization also means that decisions are made in private, and private gain becomes the over-arching goal.
One way to fight all of these forms of privatization is to insist on the alterntaive budget solutions that the unions have presented to the administration. These solutions start with a very basic human concept: sharing. Not only should the profit-making units share with the less profit-oriented sectors, but the highest earners should share some of their wealth with the lowest earners. Moreover, if positions have to be eliminated, it should not only be the lowest paid workers who lose their jobs.
A growing number of UC workers, faculty, and students believe that the UC does not have a fiscal crisis; rather it has a crisis of priorities, and we can work together to change these priorities. We need to use the regents meeting at UCLA on November 17-19 to present our demands to the general public and to rally around our shared interests.
The next step after the regents meeting is to go back to our respective campuses and to make sure that our shared demands are accepted. Following some recent success, we need to put pressure on the chancellors on each campus, and this may take the form of sit-ins and other modes of civil disobedience. By working with students, we can force the local leaders to make local changes, which can lead to more system-wide changes. For example, the chancellors can stop layoffs and provide budgetary transparency that enables shared governance. The chancellors can also demand an end to furloughs and service cuts.
The chancellors have to be accountable to the students and faculty, and we need to work together to make them accept our demands. We need to fight for the university we want. Please come to UCLA on the 18th and 19th, and let your voices be heard.
Thursday, November 5, 2009
UC's Attack on the Middle Class
While most people think that the biggest cause for the future reduction of a diverse student body at UC is the rapid increase of student fees, other factors may play a much bigger role. One of the main reasons why we will be seeing a decrease in both underrepresented minorities and Californians at UC in the future is that there is a plan to reduce the total number of enrolled students. At the same time, several campuses are planning to increase the number of high-paying out-of-state and international students, and this means there will be even less space for in-state students.
However, the biggest driving force behind the coming loss of diversity is the use of SAT scores to determine admissions decisions. As Peter Sacks points out in his Book Tearing Down the Gates, studies show that SAT scores do not predict the success a student will have in college; rather SAT scores predict the average wealth of the parents of the incoming student. Since campuses in the UC system are now motivated to rely more on endowments, they have a strong incentive to accept more wealthy students who will give more money in the present and the future. Universities know that the best way to build an endowment is to make SAT scores the central force in determining admissions. While UC now has a comprehensive admission policy, several campuses still base most of their admission decisions on test scores, which also helps to maintain high ratings in the U.S. News & World Report ranking system.
Nationally, many universities have now replaced need-based financial aid with merit-based aid in order to compete for the highest scoring students. The result is that wealthy students are being subsidized by middle-class students. In UC’s case, middle-class students subsidize lower-class students through a system that raises fees for everyone, and then gives a third of the money back for financial aid to the students whose parents make less than a combined $70,000. It is these same middle-class families that have seen their investments wiped out and their home values plunge. This is the true war on the middle-class: we are now seeing middle-class students dropping out of college because their parents cannot afford the tuition increases. Meanwhile, the middle-class students who do remain in the UC system face huge student loans with high interest rates.
However, the biggest driving force behind the coming loss of diversity is the use of SAT scores to determine admissions decisions. As Peter Sacks points out in his Book Tearing Down the Gates, studies show that SAT scores do not predict the success a student will have in college; rather SAT scores predict the average wealth of the parents of the incoming student. Since campuses in the UC system are now motivated to rely more on endowments, they have a strong incentive to accept more wealthy students who will give more money in the present and the future. Universities know that the best way to build an endowment is to make SAT scores the central force in determining admissions. While UC now has a comprehensive admission policy, several campuses still base most of their admission decisions on test scores, which also helps to maintain high ratings in the U.S. News & World Report ranking system.
Nationally, many universities have now replaced need-based financial aid with merit-based aid in order to compete for the highest scoring students. The result is that wealthy students are being subsidized by middle-class students. In UC’s case, middle-class students subsidize lower-class students through a system that raises fees for everyone, and then gives a third of the money back for financial aid to the students whose parents make less than a combined $70,000. It is these same middle-class families that have seen their investments wiped out and their home values plunge. This is the true war on the middle-class: we are now seeing middle-class students dropping out of college because their parents cannot afford the tuition increases. Meanwhile, the middle-class students who do remain in the UC system face huge student loans with high interest rates.
Sunday, November 1, 2009
Several Regents Support Cutting Taxes, Reducing State Funding for the UC system, and Privatizing Higher Ed
In a recent article on the UC regents, “Beyond UC vs. Sacramento: It’s Relationships That Matter,” Hillary Violet Lehr shows that the people who are supposed to be fighting for the financial health of our university have been working to help defund higher education. Not only have many of the regents funded Republican candidates that have voted against all revenue enhancing measures, but several of the regents have pushed to lower taxes during the recent budget crisis. It is important to stress that Republican governors have appointed most of the UC regents, and several of these regents have been working behind the scenes to reduce the university’s reliance on state funds. In fact, the current Regent Chair, Russel Gould, helped Schwarzenegger in 2004 to negotiate the recent compact between the state and the UC system.
In her article, Lehr discovered that, “New Regent Makarechian spearheaded a Republican strategy group and his elite real estate company gave over $100,000 to Schwarzenegger, and Regent Zettel gave thousands of dollars to the Lincoln Club’s efforts to reduce state taxes.” In other words, the fox is guarding the hen house, and while Yudof and the regents argue in public that Sacramento is the problem, the truth is that some of them are working secretly to cut the state funding of the university and block any new initiatives that would generate additional funds for the system.
Not only are several regents against any new taxes to fund public institutions, but they are actively working to privatize higher education. For instance, regent Blum is a major stake-holder in a company called Career Education Corporation. This organization invests in for-profit colleges and has recently been sued several times for providing sub-prime loans to students at institutions that do not provide the services they advertise. It turns out that the median graduation rate at proprietary schools is 38%, and many students end up without a degree, while accumulating huge student loans with interest rates in the double digits. Moreover, a new law passed by congress uses governmental funds to guarantee these loans, and since over 70% of these loans go into default, taxpayers are left paying the bill, while profiteers like Richard Blum, turn a hefty profit.
Of course, Blum is no longer the head regent, but his replacement may be even worse. As Chris Newfield wrote on his blog, “The ‘UC Commission on the Future’ is headed by Regent Gould, a partisan Republican who, as Senior Vice-President, helped drive Wachovia Bank from one of the nation’s largest banks holding millions in student loans into bankruptcy because of toxic sub-prime home mortgages and credit default swaps.” While Blum’s company funds for-profit schools, Gould helped to supply high-interest, high-default student loans. Gould and Blum thus have a long history of profiting off of student loans and seem to have no qualms about raising student fees to increase their own profits.
It should be obvious that we need a different system for appointing the regents. We must fight to have faculty, staff, and students make up the majority of the regents so that the people protecting the financial health of the institution actually support the notion of high quality public education.
In her article, Lehr discovered that, “New Regent Makarechian spearheaded a Republican strategy group and his elite real estate company gave over $100,000 to Schwarzenegger, and Regent Zettel gave thousands of dollars to the Lincoln Club’s efforts to reduce state taxes.” In other words, the fox is guarding the hen house, and while Yudof and the regents argue in public that Sacramento is the problem, the truth is that some of them are working secretly to cut the state funding of the university and block any new initiatives that would generate additional funds for the system.
Not only are several regents against any new taxes to fund public institutions, but they are actively working to privatize higher education. For instance, regent Blum is a major stake-holder in a company called Career Education Corporation. This organization invests in for-profit colleges and has recently been sued several times for providing sub-prime loans to students at institutions that do not provide the services they advertise. It turns out that the median graduation rate at proprietary schools is 38%, and many students end up without a degree, while accumulating huge student loans with interest rates in the double digits. Moreover, a new law passed by congress uses governmental funds to guarantee these loans, and since over 70% of these loans go into default, taxpayers are left paying the bill, while profiteers like Richard Blum, turn a hefty profit.
Of course, Blum is no longer the head regent, but his replacement may be even worse. As Chris Newfield wrote on his blog, “The ‘UC Commission on the Future’ is headed by Regent Gould, a partisan Republican who, as Senior Vice-President, helped drive Wachovia Bank from one of the nation’s largest banks holding millions in student loans into bankruptcy because of toxic sub-prime home mortgages and credit default swaps.” While Blum’s company funds for-profit schools, Gould helped to supply high-interest, high-default student loans. Gould and Blum thus have a long history of profiting off of student loans and seem to have no qualms about raising student fees to increase their own profits.
It should be obvious that we need a different system for appointing the regents. We must fight to have faculty, staff, and students make up the majority of the regents so that the people protecting the financial health of the institution actually support the notion of high quality public education.
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