If you want to know the truth about the University of California’s finances, there is no better document than the recently released (11/19/2009) Moody’s bond rating for the UC system. First of all, it must be pointed out that this report was released on the same day that the Regents voted to increase student fees 32%, and as the UC Santa Cruz Professor Bob Meister has shown, there is a direct connection between increased fees and decreased interest rates for construction projects. Simply put, the bond raters gave UC a high bond rating-which translates into a low interest rate--because the raters like seeing that the UC has a large pool of unrestricted funds and the system is willing to keep raising fees on its students. Moody’s way of signaling this need to increase student fees and other revenue streams is presented in the following passage: “We expect that combinations of tuition and other revenue increases, expense controls and other operating efficiency initiatives will allow the University to sustain healthy operating performance. Over the long-term, we expect direct funding from the State to continue shrinking as a share of operating revenues, and for the University to leverage its strong market presence in education, patient care and research to provide for revenue growth.” In other words, we should expect the decrease in state funding to be replaced by increases in student fees, diverse revenue streams, and cost-cutting measures.
While the bond raters do realize that unstable funding from the state could limit the UC’s access to unrestricted funds, they highlight the high level of available cash: “The University does face some liquidity pressure due to State funding delays and the potential for more serious disruption to State cash flow. However, with over $6.9 billion in the short-term investment pool and $1.4 billion in the total return investment pool (at the end of FY2009) compared with $2.6 billion of state appropriations in FY2009, the University can likely weather any potential period of disruption in state funding.” Thus, even though the UC claims that it is broke, and it has to resort to drastic cost-cutting measures, the university has access to $8.3 billion in its investment accounts (this is not including its pension fund).
Moody’s points out that the university also has a high level of debt, but most of the servicing is paid for by the state ( and as Professor Meister has shown the student fees serve as collateral): “Although the debt service on the University's State Public Works Board Bonds (SPWBB) have been and are expected to continue to be paid by appropriations from the State, due to the legal obligation of the bonds being supported by an "available funds" pledge of the University, we do not expect the rating on these bonds to fall to levels near the State's other public works board bonds.” Student fees represent a major part of the “available funds” that the UC has pledged as collateral.
In its description of the UC’s fiscal strengths, Moody’s stresses the high level of medical profits and research grants: “The University of California is one of the premier higher education systems in the world, serving over 220,000 students, conducting over $3.7 billion of research annually, and generating in excess of $5 billion of net patient revenue at its five academic medical centers.” We should point out that “net revenue” means profit that could be used for any purpose; however, the UC has decided to funnel much of this money into medical faculty and administrative compensation packages as well as future construction projects. Thus, while UC President Mark Yudof constantly claims that UC does not have access to unrestricted funds, the bond raters tell a different story: “Sizeable balance sheet that remains highly liquid, with $3.5 billion of unrestricted financial resources ($5.9 billion excluding post-retirement health liabilities) and active treasury management monitoring a short-term investment pool approaching $7 billion.” In other words, the UC has at its disposal $12.9 billion, but on its balance sheet, it looks that the UC has less money because a new federal law requires all institutions to account for their future post-retirement health costs. Thus, even though the UC is not actually spending $2.4 billion this year for healthcare for retirees, it has to declare its total liability for all present and future employees. One of the effects of this accounting rule is that the UC can hide billions of dollars of profits.
Supporting the rapid revenue expansion of the university is an equally rapid augmentation of debt: “The University as a whole faces significant capital needs that are likely to result in rising borrowing levels; debt outstanding has grown from $8.3 billion in FY2006 to nearly $13 billion in FY2009 and including new borrowings since the end of the fiscal year, a 56% increase.” Like a hedge fund, UC uses its diverse revenue streams to lower its interest rate in order to borrow more money. What remains to be understood is why the university must continue to take on so much debt as it enhances its profits.
Not only is the UC increasing its revenue through medical profits and higher student fees, but it also augmenting its external research funding : “The UC system collectively represents a vital part of the nation's research infrastructure, as evidenced by its status as the largest university recipient of federal R&D spending in the country. Total grants and contract revenue in FY2009 exceeded $4.5 billion, with research expenditures exceeding $3.7 billion. Grant and contract revenue has grown consistently in recent years, and given the University's prominent research position we expect it to benefit from a spike in federal research funding provided by the federal stimulus bill.” Not only did the UC receive over $716 million in direct aid from the feds for its educational mission, but the UC is currently experiencing a record year in external grant funds, much of it coming in the form of federal stimulus money. In this mode of corporate welfare, professors and facilties supported by the state, student dollars, and federal grants are used to generate huge profits that are then siphoned into unrestricted pools of cash, which later can be redistributed to pay for the growing costs of high-earning administrators, staff, and star faculty.
As I have previously shown , the expansion of the top earners in the UC system has been supported by the combination of increased student fees and the diversification of revenue streams. In 2008, there were over 3,600 people in the system that made over $200,000, and the total compensation for the people earning above 200K increased 80% in just two years (from $640 million to $1 billion). Although Moody’s does not touch on the topic of compensation in its report, it does reveal how the UC produces and hides its profits: “We expect the University to sustain favorable operating performance across the System, driven by highly diversified revenues and a focus on operational efficiencies. UC had generated an average operating margin exceeding 4% through FY2007. Beginning in FY2008, the University was required to report expenses associated with its post-retirement healthcare benefit plans leading to rising operating deficits based on Moody's approach to calculating public university operating margins. In FY2008, the margin was negative 3.1% with the deficit rising to 6.1% in FY2009. Operating cash flow margin, adjusting for the non-cash portion of the post-retirement health expenses, was 11% and 9% respectively.” The translation of this statement is that while on the books it looks like the UC is losing money, once we exclude the retiree healthcare accounting requirement, the UC has been averaging a 10% profit margin. I would add that in 2008, the top 2% of the UC earners made 10% of the total compensation.
With this clean bill of fiscal health, we see why the UC does not have a budget crisis, and how it has used the general economic downturn as an excuse to funnel money into the profit-making sectors, which results in the increased compensation of a small minority of workers at the expense of everyone else. We also see here why the UC wants to increase student fees in order to take on more debt so it can continue to expand and grow. The combination of increased profits and augmented debt turns the UC into a giant hedge fund that reduces the pay for the majority of the employees as it pushes money to the top. I am sorry to say it, but more state money will not fix this problem.
Tuesday, December 8, 2009
Sunday, November 29, 2009
Why the Regents and Yudof Want Us to Blame the State, and Why We Must Resist
There are two main narratives battling to define the current crisis at the University of California. President Yudof and the Regents want everyone to blame all of the UC’s problems on the state. According to this narrative, the simple issue is that the state has defunded higher education, and due to a $1.2 billion cut to the UC, all the campuses can do is raise fees, cut courses, layoff workers, increase class size, furlough faculty, and demand that the state increases its funding by $913 million.
The counter narrative, articulated mostly by the unions and the students, is that the UC just had a record year of revenue, and the system does not have to raise fees or cut services. Instead, the counter discourse argues that the profit-making units should share their profits, and money earmarked for instruction should actually be used for educational purposes. While we do also insist that full state funding should be restored, we recognize that most of the state reductions were made up by federal recovery money ($716 million) and fee increases and cost saving measures that have already been undertaken.
Many faculty members have sided with the administration because it is much easier to blame the state for all of the UC’s problems. By blaming the state and the anti-tax Republicans, we have a clear enemy and an easy narrative: we are all good, and they are all bad. Moreover, by placing the onus of responsibility on the state, we do not have to look at our own internal problems. As I have argued, Yudof wants us to keep our eyes on the state, so we do not look at how the Regents have mishandled the UC’s investments and pension plan.
If the faculty continue to buy Yudof’s narrative, there will be no way of fighting the continual increase in administrative costs and the further privatization of the university. Yudof’s latest gambit is to ask the state, which he knows is facing a $21 billion deficit, to increase the UC’s funding by $913 million. Everyone knows that the state cannot provide this money, and so when the state does not meet Yudof’s request, he will feel justified to make another round of fee increases and budget cuts.
Without budget transparency and shared governance, the people at the top of the UC system can continue to manipulate statistics and scare faculty into accepting their narrative. In this version of the shock doctrine, a fake crisis motivates people to give power to a centralized authority and to privatize a public good, while wages are decreased and profits are kept by a small group of power elites. It is time for the UC faculty to stand up and resist Yudof’s latest power play.
The counter narrative, articulated mostly by the unions and the students, is that the UC just had a record year of revenue, and the system does not have to raise fees or cut services. Instead, the counter discourse argues that the profit-making units should share their profits, and money earmarked for instruction should actually be used for educational purposes. While we do also insist that full state funding should be restored, we recognize that most of the state reductions were made up by federal recovery money ($716 million) and fee increases and cost saving measures that have already been undertaken.
Many faculty members have sided with the administration because it is much easier to blame the state for all of the UC’s problems. By blaming the state and the anti-tax Republicans, we have a clear enemy and an easy narrative: we are all good, and they are all bad. Moreover, by placing the onus of responsibility on the state, we do not have to look at our own internal problems. As I have argued, Yudof wants us to keep our eyes on the state, so we do not look at how the Regents have mishandled the UC’s investments and pension plan.
If the faculty continue to buy Yudof’s narrative, there will be no way of fighting the continual increase in administrative costs and the further privatization of the university. Yudof’s latest gambit is to ask the state, which he knows is facing a $21 billion deficit, to increase the UC’s funding by $913 million. Everyone knows that the state cannot provide this money, and so when the state does not meet Yudof’s request, he will feel justified to make another round of fee increases and budget cuts.
Without budget transparency and shared governance, the people at the top of the UC system can continue to manipulate statistics and scare faculty into accepting their narrative. In this version of the shock doctrine, a fake crisis motivates people to give power to a centralized authority and to privatize a public good, while wages are decreased and profits are kept by a small group of power elites. It is time for the UC faculty to stand up and resist Yudof’s latest power play.
Where the Money Goes in the UC System: Revisiting the Compensation Scandal
In 2006, a series of stories broke in the media documenting how the University of California regents were granting lavish compensation packages to top administrators, and many of the perks going along with the high salaries were not reported. After several articles in the San Francisco Chronicle and a legislative hearing, it was discovered that the regents were constantly breaking their own rules in order to give people hidden compensation. According to one Chronicle article, “University auditors told the UC Board of Regents they had found that 143 exceptions to the university's compensation policies had been made to give extra pay or benefits to 113 senior managers.” However, this discovery of secret deals and broken rules was only he tip of the iceberg. It turns out that for years, the university was hiding from the public its compensations deals by only reporting some of the money that top executives and employees were getting. Thus, even though the UC is a public institution, it failed to fully disclose many of its decisions and policies.
In 2006, a state audit of the UC found hundreds of examples of misspent public funds and secret deals for top administrators. Here are some highlights from The San Francisco Chronicle’s reporting on the auditor’s findings:
-- Thirty-nine people getting extra vacation.
-- Fourteen senior managers receiving honoraria from the university -- $200 to $13,000 -- despite a policy against it.
-- Fourteen senior managers receiving incentive payments in violation of UC policy or not approved by the regents. Some are continuing awards of up to 15 percent of base salary.
-- Thirteen housing-related payments that violated policies;
-- Six sabbaticals granted to employees who didn't qualify for them or who were paid more than policy allowed.
-- Eleven stipends that either were not approved or were extended without approval.
-- Eleven cases of extra severance pay promised.
One of the things to note about all of these examples is that they concern secret deals of extra compensation; in other words, none of this money was listed in the public records of the employee’s salary.
To see how corrupt and wasteful a university can be, it is helpful to look at several other costly forms of secret spending that draw money away from vital instructional activities as they raise the compensation of the wealthiest employees:
The audit revealed that one executive who was paid well to move within California was Mitchell Creem, associate vice chancellor and CFO of medical sciences at UCLA. Creem received a $150,000 relocation allowance and 11 weeks of temporary housing -- well beyond the limit of 30 days. The regents were never told.
In another case, Thomas Jackiewicz, associate vice chancellor in the UC San Diego medical school, received a $40,000 "relocation incentive" even though he lived within California, which violates policy and was not approved by the regents. He also was promised a severance package that exceeded university limits.
These examples show what happens when the administrative class takes over a university, and they are able to reward each other without any level of public scrutiny.
In one of the most shocking findings of the auditor’s report, we find the following statement: “The University of California said it struck at least 700 separation agreements with employees over the past five years -- worth about $23 million.” This finding really got my attention, and so I looked for details for these costly separations, and I found these revelations:
When UC Berkeley Associate Athletic Director Mark Stephens was passed over for a promotion at Cal last year, the university promised to keep him on the payroll, giving him $183,000 over three years while letting him take a full-time job somewhere else.
Two years ago, UC Davis agreed to give a medical professor, Dr. Casey Daggett, $150,000 in exchange for his resignation and a promise to drop all his legal claims against the university.
In 2002, the UC Berkeley athletic department forced administrator Kevin Reneau to step down but agreed to keep him on the payroll for 2 1/2 years at $86,000 per year so he could reach retirement age and his family could qualify for health care benefits.
The Chronicle reported the university's settlement pact with former UC Davis Vice Chancellor Celeste Rose. Under that agreement, UC Davis agreed to give Rose $50,000 and keep her on the payroll for another two years, at $205,000 a year -- without requiring her to do any work -- in exchange for her promise to drop any claims of race or gender discrimination against the university.
Dr. Daggett, an assistant professor of clinical surgery at UC Davis, was promised $150,000 in exchange for his resignation and the release of any legal claims, according to a settlement agreement UC reached with him in March 2004. UC also agreed to drop any claims against him, the agreement said.
These are just a few examples of the hundreds of cases of secret wasteful spending, and they tell us that when a university says it has no money to pay for things like teachers and smaller classes, the reason for the institution’s lack of money may be due to the fact that it has become taken over by a class of administrative employees who are bent on turning public institutions into their own private piggy banks.
In 2006, a state audit of the UC found hundreds of examples of misspent public funds and secret deals for top administrators. Here are some highlights from The San Francisco Chronicle’s reporting on the auditor’s findings:
-- Thirty-nine people getting extra vacation.
-- Fourteen senior managers receiving honoraria from the university -- $200 to $13,000 -- despite a policy against it.
-- Fourteen senior managers receiving incentive payments in violation of UC policy or not approved by the regents. Some are continuing awards of up to 15 percent of base salary.
-- Thirteen housing-related payments that violated policies;
-- Six sabbaticals granted to employees who didn't qualify for them or who were paid more than policy allowed.
-- Eleven stipends that either were not approved or were extended without approval.
-- Eleven cases of extra severance pay promised.
One of the things to note about all of these examples is that they concern secret deals of extra compensation; in other words, none of this money was listed in the public records of the employee’s salary.
To see how corrupt and wasteful a university can be, it is helpful to look at several other costly forms of secret spending that draw money away from vital instructional activities as they raise the compensation of the wealthiest employees:
The audit revealed that one executive who was paid well to move within California was Mitchell Creem, associate vice chancellor and CFO of medical sciences at UCLA. Creem received a $150,000 relocation allowance and 11 weeks of temporary housing -- well beyond the limit of 30 days. The regents were never told.
In another case, Thomas Jackiewicz, associate vice chancellor in the UC San Diego medical school, received a $40,000 "relocation incentive" even though he lived within California, which violates policy and was not approved by the regents. He also was promised a severance package that exceeded university limits.
These examples show what happens when the administrative class takes over a university, and they are able to reward each other without any level of public scrutiny.
In one of the most shocking findings of the auditor’s report, we find the following statement: “The University of California said it struck at least 700 separation agreements with employees over the past five years -- worth about $23 million.” This finding really got my attention, and so I looked for details for these costly separations, and I found these revelations:
When UC Berkeley Associate Athletic Director Mark Stephens was passed over for a promotion at Cal last year, the university promised to keep him on the payroll, giving him $183,000 over three years while letting him take a full-time job somewhere else.
Two years ago, UC Davis agreed to give a medical professor, Dr. Casey Daggett, $150,000 in exchange for his resignation and a promise to drop all his legal claims against the university.
In 2002, the UC Berkeley athletic department forced administrator Kevin Reneau to step down but agreed to keep him on the payroll for 2 1/2 years at $86,000 per year so he could reach retirement age and his family could qualify for health care benefits.
The Chronicle reported the university's settlement pact with former UC Davis Vice Chancellor Celeste Rose. Under that agreement, UC Davis agreed to give Rose $50,000 and keep her on the payroll for another two years, at $205,000 a year -- without requiring her to do any work -- in exchange for her promise to drop any claims of race or gender discrimination against the university.
Dr. Daggett, an assistant professor of clinical surgery at UC Davis, was promised $150,000 in exchange for his resignation and the release of any legal claims, according to a settlement agreement UC reached with him in March 2004. UC also agreed to drop any claims against him, the agreement said.
These are just a few examples of the hundreds of cases of secret wasteful spending, and they tell us that when a university says it has no money to pay for things like teachers and smaller classes, the reason for the institution’s lack of money may be due to the fact that it has become taken over by a class of administrative employees who are bent on turning public institutions into their own private piggy banks.
Using Student Fees to Pay for Losing Teams
While most people think that university athletic departments make money, it turns out that most of them lose money, and many lose large sums that result in using student tuition dollars to subsidize insolvent athletic departments. According to the recently released Knight Commission Report on NCAA sports, “the vast majority of athletics programs reap far less money from external sources than they need to function. Virtually all universities subsidize athletics departments through general fund allocations, student fees, and state appropriations, and the NCAA estimates in a given year that only 20 to 30 athletics programs actually generate enough external revenue to cover operating expenses. Institutional subsidies to athletics can exceed $11 million, according to data provided by the NCAA.”
Not only are these athletic departments losing money, but their expenses continue to spiral out of control: “In 2009, the National Collegiate Athletic Association published a report that found median operating spending for athletics increased 43 percent between 2004 and 2008, but median revenue generated by athletics programs grew only 33 percent over the same time period (Fulks, 2008). In another telltale spending reality a few years earlier, the NCAA reported in 2005 that athletic expenses rose as much as four times faster than overall institutional spending between 2001 and 2003 (Orszag & Orszag, 2005).” What is shocking about this study is that universities are raising tuition at record rates, and part of the reason is to bail out these athletic programs that are too big to fail.
According to the Knight Commission, the expenses breakdown in the following way:
Salaries and benefits, especially coaches’ salaries (32 percent of total expenses);
Tuition-driven grants-in-aid—or sports scholarships (16 percent);
Facilities maintenance and rental (14 percent);
Team travel, recruiting and equipment and supplies (12 percent combined);
Fund-raising costs, guaranteed payments to opponents, game-day expenses, medical costs, conducting sports camps and other miscellaneous costs (12 percent).
The irony of baling out sports programs, while tuition increases and educational quality decreases was recently brought to a head at Cal Berkeley when it was discovered that the university had been for years using millions of dollars to subsidize the athletic department. The San Francisco Chronicle has reported the following: “This year, UC Berkeley's Department of Intercollegiate Athletics - whose football team is in the Bowl Subdivision - is projected to run a deficit of nearly $6 million, rising to $6.4 million next year. To make ends meet, Chancellor Robert Birgeneau expects to lend the athletes more than $12 million by the end of next year.” Not only is Cal lending the athletic department millions of dollars as it raises student fees, cuts classes, layoffs teachers, and reduces in-state enrollment, but it in 2007, UCB forgave the program over $31 million in debt.
In response to this crisis, the UCB senate voted to stop subsidizing athletics, and it is time for all campuses to do the same. Moreover, we need each school to come clean and tell us how much they are spending and who is paying for the bill. People like to blame the state for all of UC’s problems, but this is one that is completely self-generated.
Not only are these athletic departments losing money, but their expenses continue to spiral out of control: “In 2009, the National Collegiate Athletic Association published a report that found median operating spending for athletics increased 43 percent between 2004 and 2008, but median revenue generated by athletics programs grew only 33 percent over the same time period (Fulks, 2008). In another telltale spending reality a few years earlier, the NCAA reported in 2005 that athletic expenses rose as much as four times faster than overall institutional spending between 2001 and 2003 (Orszag & Orszag, 2005).” What is shocking about this study is that universities are raising tuition at record rates, and part of the reason is to bail out these athletic programs that are too big to fail.
According to the Knight Commission, the expenses breakdown in the following way:
Salaries and benefits, especially coaches’ salaries (32 percent of total expenses);
Tuition-driven grants-in-aid—or sports scholarships (16 percent);
Facilities maintenance and rental (14 percent);
Team travel, recruiting and equipment and supplies (12 percent combined);
Fund-raising costs, guaranteed payments to opponents, game-day expenses, medical costs, conducting sports camps and other miscellaneous costs (12 percent).
The irony of baling out sports programs, while tuition increases and educational quality decreases was recently brought to a head at Cal Berkeley when it was discovered that the university had been for years using millions of dollars to subsidize the athletic department. The San Francisco Chronicle has reported the following: “This year, UC Berkeley's Department of Intercollegiate Athletics - whose football team is in the Bowl Subdivision - is projected to run a deficit of nearly $6 million, rising to $6.4 million next year. To make ends meet, Chancellor Robert Birgeneau expects to lend the athletes more than $12 million by the end of next year.” Not only is Cal lending the athletic department millions of dollars as it raises student fees, cuts classes, layoffs teachers, and reduces in-state enrollment, but it in 2007, UCB forgave the program over $31 million in debt.
In response to this crisis, the UCB senate voted to stop subsidizing athletics, and it is time for all campuses to do the same. Moreover, we need each school to come clean and tell us how much they are spending and who is paying for the bill. People like to blame the state for all of UC’s problems, but this is one that is completely self-generated.
UC’s Gender Trouble
In analyzing the salaries of UC employees, I found that in 2008, out of the top one hundred earners, only 11 were women. This low level of female top earners shows why the university’s claims of being a progressive employer often ring hollow. In fact, if we look at specific job categories in the UC system, we find similar trends. For instance, in the field of medical faculty, only 3 women make it to the top one hundred earners. Likewise, only three females are listed in the top 25 highest paid athletic coaches, even though the UCs are required to have gender equality in athletic teams.
In the case of academic deans, 8 of the top 50 highest earners were female, and this statistic is crucial because deans often make important decisions regarding hiring and compensation. Meanwhile, one of the nine campus chancellors were women in 2008.
If we now look at academic titles, we find that 15 of the top 100 paid law professors were women, while in the case of high earning business school professors, only 8 women were in the top 100. Likewise, only 8 of the top 100 paid non-professional school professors were women in 2008. I find this final statistic to be quite surprising since there are many women now teaching in higher education, and many fields are highly committed to gender equality. While some may say that women have only recently entered into many fields, it still appears that the University of California has a serious gender issue when it comes to pay and promotion.
In the case of academic deans, 8 of the top 50 highest earners were female, and this statistic is crucial because deans often make important decisions regarding hiring and compensation. Meanwhile, one of the nine campus chancellors were women in 2008.
If we now look at academic titles, we find that 15 of the top 100 paid law professors were women, while in the case of high earning business school professors, only 8 women were in the top 100. Likewise, only 8 of the top 100 paid non-professional school professors were women in 2008. I find this final statistic to be quite surprising since there are many women now teaching in higher education, and many fields are highly committed to gender equality. While some may say that women have only recently entered into many fields, it still appears that the University of California has a serious gender issue when it comes to pay and promotion.
Friday, November 27, 2009
Proof that We Do Not Have to Raise Fees or Cut Programs
At the last regents meeting, President Yudof said that the state reduced UC’s funding by $1.2 billion during the last two years. It turns out that this figure hides the federal stimulus funds of $716 million and the 2009 state restoration of $164 million. This kind of false representation really upsets the state legislators who are trying to do what they can for the UC system. In fact, I interviewed two top California legislators last year, and they both said the same thing, which is how can the UC expect to get more money from the state, when all it does is attack the state in the media. These legislators are running for office and to have Yudof blame them for all of UC's problems does not help them.
For instance, Yudof has been going around saying that the state decided to stop funding the UC pension plan in 1990. The truth is that the regents voted to suspend contributions because the plan was over-funded, and now we are paying the price. One reason then why the state funding has stayed flat is that the UC told them to stop funding the pension plan, and now the UC is demanding that the state pay for the employer's contribution.
The UC stated on several occasions that their state funding was down in 2009 by several hundred million dollars, but if you download the UC’s latest financial statements and go to page 52, you will see that most of the revenue areas are up, especially funding from the state. 2009 was a record year in revenue, but Yudof called it a crisis and raised fees and cut programs.
Yudof has also been saying that the state support per student has been cut in half since 1990. This is not true; if you take the state appropriations for each year and divide it by the total number of students, you find that state support per student has gone up since 1990. Looking at the actual numbers (the sources are listed at the end of this post) we find that the per student state funding in 1990 was $13,690 (there were 156,000 students and the state gave the UC $2,135,733,000). In 2008-2009, the per student funding was $14,707 (221,00 students and the state funding was 3.2 billion).
I asked Patrick Lenz, the VP of budget about what formula of inflation the UC uses to determine the state’s student funding. He said he did now know, which I find concerning. I know that there is a higher education index that is twice the rate of inflation - this might be what UC is using. Almost every time Yudof speaks, he gives a different rate. Yudof also claims that the UC is over-enrolled by 11,000 students, but I can find no basis for this claim. In fact, UC has cut enrollment 2,300 students this year, and they plan to do the same next year.
For 2010, Yudof is claiming a $600 million cut, but there was also another part of the stimulus money ($76 million) that they never talk about. Also, UC reduced its enrollment by 2,3000 students in 2009, yet it claims that the state needs to fund an additional 11,000 enrollments. Meanwhile, the UC calculates that the enrollment reductions saves $32 million each year, and that the furlough has already saved $185 million and the restructuring of debt has saved $75 million. UCOP also calculates that the previous 2009 fee increase will bring in an additional $56 million, and the 32% increase will bring in $215 million. In other words, they have already made up for their loss of state funding, and this does not include savings due to layoffs and job reductions. The current target is to reduce instructional costs by $400 million, and in fact they have already saved over $100 million.
Our biggest fear is that they will continue to raise fees and cut instructional programs, while increasing the number and cost of administration. Another fear is that they will convince the UC students and faculty that all of the problems are due to the state. While we believe the state needs to restore full funding, it is absurd to blame the state for everything.
Please write a comment if you need more information or if you think some information is incorrect.
You can determine the total state funding for UC by combining these:
http://192.234.213.2/sections/econ_fiscal/Historical_Expenditures_Pivot.xls
http://www.cpec.ca.gov/completereports/2004reports/04-20/21.PDF
http://www.cpec.ca.gov/FiscalData/FundingTable.ASP
Enrollment data:
2000 to 2008 here: http://www.universityofcalifornia.edu/accountability/index.php?in=6.2&source=uw
1964 to 2006 here: http://budget.ucop.edu/enroll/actfte.pdf
2009 projections are here: http://repository.ucop.edu/cgi/viewcontent.cgi?article=1000&context=enrllmt_lrp_reports
For instance, Yudof has been going around saying that the state decided to stop funding the UC pension plan in 1990. The truth is that the regents voted to suspend contributions because the plan was over-funded, and now we are paying the price. One reason then why the state funding has stayed flat is that the UC told them to stop funding the pension plan, and now the UC is demanding that the state pay for the employer's contribution.
The UC stated on several occasions that their state funding was down in 2009 by several hundred million dollars, but if you download the UC’s latest financial statements and go to page 52, you will see that most of the revenue areas are up, especially funding from the state. 2009 was a record year in revenue, but Yudof called it a crisis and raised fees and cut programs.
Yudof has also been saying that the state support per student has been cut in half since 1990. This is not true; if you take the state appropriations for each year and divide it by the total number of students, you find that state support per student has gone up since 1990. Looking at the actual numbers (the sources are listed at the end of this post) we find that the per student state funding in 1990 was $13,690 (there were 156,000 students and the state gave the UC $2,135,733,000). In 2008-2009, the per student funding was $14,707 (221,00 students and the state funding was 3.2 billion).
I asked Patrick Lenz, the VP of budget about what formula of inflation the UC uses to determine the state’s student funding. He said he did now know, which I find concerning. I know that there is a higher education index that is twice the rate of inflation - this might be what UC is using. Almost every time Yudof speaks, he gives a different rate. Yudof also claims that the UC is over-enrolled by 11,000 students, but I can find no basis for this claim. In fact, UC has cut enrollment 2,300 students this year, and they plan to do the same next year.
For 2010, Yudof is claiming a $600 million cut, but there was also another part of the stimulus money ($76 million) that they never talk about. Also, UC reduced its enrollment by 2,3000 students in 2009, yet it claims that the state needs to fund an additional 11,000 enrollments. Meanwhile, the UC calculates that the enrollment reductions saves $32 million each year, and that the furlough has already saved $185 million and the restructuring of debt has saved $75 million. UCOP also calculates that the previous 2009 fee increase will bring in an additional $56 million, and the 32% increase will bring in $215 million. In other words, they have already made up for their loss of state funding, and this does not include savings due to layoffs and job reductions. The current target is to reduce instructional costs by $400 million, and in fact they have already saved over $100 million.
Our biggest fear is that they will continue to raise fees and cut instructional programs, while increasing the number and cost of administration. Another fear is that they will convince the UC students and faculty that all of the problems are due to the state. While we believe the state needs to restore full funding, it is absurd to blame the state for everything.
Please write a comment if you need more information or if you think some information is incorrect.
You can determine the total state funding for UC by combining these:
http://192.234.213.2/sections/econ_fiscal/Historical_Expenditures_Pivot.xls
http://www.cpec.ca.gov/completereports/2004reports/04-20/21.PDF
http://www.cpec.ca.gov/FiscalData/FundingTable.ASP
Enrollment data:
2000 to 2008 here: http://www.universityofcalifornia.edu/accountability/index.php?in=6.2&source=uw
1964 to 2006 here: http://budget.ucop.edu/enroll/actfte.pdf
2009 projections are here: http://repository.ucop.edu/cgi/viewcontent.cgi?article=1000&context=enrllmt_lrp_reports
More On Executive Growth
In a series of studies on administrative growth, Charles Schwartz has discovered some important facts that explain why and how administrators reproduce like rabbits. The first finding concerns the growth in the number of administrators in the UC system: “Administrative growth is not unique to UC, but the rate of growth is higher at UC than most public or private universities. In 2006, in public universities across the country, 49% of the professional full-time employees, excluding the medical school, were faculty members. At UC that percentage was about 25% . . . In 1997, there were almost 2 faculty to every Executive and Senior Manager; by 2007 the numbers are nearly the same for both groups, while the Middle Manager group steadily grows higher.” The finding here is that the growth rate of administration in the UC system is way above average; moreover, administrators are increasing at a much higher rate than the number of faculty in the UC system.
The next major finding concerns the question of how much this exessive growth in the administrative ranks costs and who pays for it: “Execs and Managers receive additions to their regular pay called above or non-base-pay, but because of the high growth of admin. FTE, there are no unfilled FTE and merit slots to fund above-base-pay. Funding comes largely from Core Funds (student tuition and fees, state appropriations). . . Auditors reported that UC paid $11.3M in Above-Base-Pay Additions to Regular Pay in 2004-05, with about $9M coming from core funds and $2.3M from federal and other grants and contracts, endowments, and auxiliary operations (CA State Auditor Report 2006-103).” In other words, student fees and state funds are paying for the increased compensation and growing number of UC administrators. This means that part of the push to raise student fees and eliminate jobs and courses comes from the need to pay the growing army of administrators.
Schwartz has also examine the cost and rate of administrative growth on particular campuses: “UCLA has the smallest increase in overall employment (3%) and also the smallest increase in student enrollment (17%); yet its administration has increased significantly (about 50%) with a wastage that we estimate costs $54 million per year, second only to Berkeley.” As Schwartz shows, at UCLA and Berkeley, the increase in administration is far outpacing the increase in students and the increase in all other categories of employment. In other words, we can assume that student fees and state funds are going into administration instead of instruction.
In Schwartz’s study of the rate of administrative growth in the period of 1996-2006, we find that the biggest increase came in the following job titles: “Computer Programming & Analysis – from 2,084 to 4,325 for an increase of 108% and Administrative, Budget/Personnel Analysis from 4,692 to 10,793 for an increase of 130%.”
Schwartz explains this growing group of middle-management bureaucrats by arguing that, “these positions (F20) seem to be the top level of support staff for the University’s administrative officials. Bureaucratic accretion is the name given to the process whereby administrators proliferate themselves and expand their dominions. The growth rate of this F20 group is huge, comparable to that of the Management group. . . administrators and executives tend to make work for each other, and that because executives prefer to have subordinates rather than rivals, they create and perpetuate bureaucracies in which power is defined by the number of subordinates.” According to this theory, the growth in administrators can be explained by the desire of managers to have more subordinates and fewer rivals.
To calculate how much this administrative bloat costs the university, Schwartz compared the average increase in positions for all employees and then determined the cost for abnormal rate of increase for administrators, and he found that the total extra cost is close to $600 million per year. If we want to help UC find alternative budget solutions, the place to start is here: we need to rein in the costs of excessive administrative and bureaucratic growth.
The next major finding concerns the question of how much this exessive growth in the administrative ranks costs and who pays for it: “Execs and Managers receive additions to their regular pay called above or non-base-pay, but because of the high growth of admin. FTE, there are no unfilled FTE and merit slots to fund above-base-pay. Funding comes largely from Core Funds (student tuition and fees, state appropriations). . . Auditors reported that UC paid $11.3M in Above-Base-Pay Additions to Regular Pay in 2004-05, with about $9M coming from core funds and $2.3M from federal and other grants and contracts, endowments, and auxiliary operations (CA State Auditor Report 2006-103).” In other words, student fees and state funds are paying for the increased compensation and growing number of UC administrators. This means that part of the push to raise student fees and eliminate jobs and courses comes from the need to pay the growing army of administrators.
Schwartz has also examine the cost and rate of administrative growth on particular campuses: “UCLA has the smallest increase in overall employment (3%) and also the smallest increase in student enrollment (17%); yet its administration has increased significantly (about 50%) with a wastage that we estimate costs $54 million per year, second only to Berkeley.” As Schwartz shows, at UCLA and Berkeley, the increase in administration is far outpacing the increase in students and the increase in all other categories of employment. In other words, we can assume that student fees and state funds are going into administration instead of instruction.
In Schwartz’s study of the rate of administrative growth in the period of 1996-2006, we find that the biggest increase came in the following job titles: “Computer Programming & Analysis – from 2,084 to 4,325 for an increase of 108% and Administrative, Budget/Personnel Analysis from 4,692 to 10,793 for an increase of 130%.”
Schwartz explains this growing group of middle-management bureaucrats by arguing that, “these positions (F20) seem to be the top level of support staff for the University’s administrative officials. Bureaucratic accretion is the name given to the process whereby administrators proliferate themselves and expand their dominions. The growth rate of this F20 group is huge, comparable to that of the Management group. . . administrators and executives tend to make work for each other, and that because executives prefer to have subordinates rather than rivals, they create and perpetuate bureaucracies in which power is defined by the number of subordinates.” According to this theory, the growth in administrators can be explained by the desire of managers to have more subordinates and fewer rivals.
To calculate how much this administrative bloat costs the university, Schwartz compared the average increase in positions for all employees and then determined the cost for abnormal rate of increase for administrators, and he found that the total extra cost is close to $600 million per year. If we want to help UC find alternative budget solutions, the place to start is here: we need to rein in the costs of excessive administrative and bureaucratic growth.
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