Future of UC System in Hands of “Committe of Two”

Ironically, in the midst of Sunshine Week, designed to create more open government and freedom of information, the “Committee of Two” considering the financial situation of the UC system – Gov. Jerry Brown and University of California President Janet Napolitano – are not forthcoming in revealing details about their negotiations. Despite protests to the contrary, this may be a necessary thing.

Yesterday at the UC Regents’ meeting in San Francisco, both Brown and Napolitano did a two-step around whatever progress is being made in their talks about the proposed tuition increase. Napolitano and the Regents supported tuition increases if the university system did not get more money from the state. Brown refused to be bullied.

Now the two are working on a plan that will try to re-set some university finances without raising tuition or dramatically increasing the state’s contribution. Not an easy task, but they claim they are making progress.

That doesn’t stop critics from demanding the negotiations be more open. As one student was quoted in the Sacramento Bee, “We need a committee that not just represents a committee of two, but a committee of 240,000,” referring to the number of students in the system.

University business

Are private talks setting government plans ever the way to go? Historians have suggested that, if the United States Constitution was cobbled together in open meetings the document would be much different and, they suggest, not better.

Tackling tuition hikes is not the same as constitution writing. However, to continue the broad analogy, what comes out of these private meetings may set a course of change for the way the university does business, just as the long ago constitution-writers went beyond their original assignment of fixing the Articles of Confederation.

I know – a little bit of a grandiose comparison.  But it is quite possible the UC system might look and feel quite different if the negotiators come to an agreement and any proposed changes are approved after debate. Online courses, larger teaching loads for professors and a shorter time to graduation all may alter the university experience as we have come to know it over the last few decades.

Whatever the Committee of Two comes up with would have to withstand vigorous public debate. There is no guarantee any Committee of Two proposal will pass the test. I served on a half-dozen state commissions over the years and few commission recommendations were turned into state policy.

Pensions

One big issue that is affecting all government-related organizations is employee pensions and health costs. When the issue of raising tuition first surfaced, the university’s financial division pointed to pension costs as one of the culprits. That issue must also be part of the negotiations, along with rising retiree health care costs.

We will see if the Committee of Two can come up with any solutions on the pension/health care front that succeed and maybe set the course for reform in this area for other government entities.

One suspects big changes are coming to the UC system. Getting the ball rolling is happening in private.

This piece was originally publish by CalWatchdog.com

The real reason behind proposed tuition hike at UC

Claiming impossible budget pressures, University of California president Janet Napolitano late last month proposed a tuition increase of up to 5 percent a year for the next five years. A divided university board of regents approved Napolitano’s plan by a vote of 14-to-seven. But Napolitano says the new tuition hikes could be avoided if the state legislature allocates another $100 million in funding to the university in the coming fiscal year. In some states, the former Homeland Security secretary’s demands would be considered extortion. Not in California. UC students and Golden State taxpayers will end up paying the price.

If Napolitano’s plan stands, UC tuition will eventually reach $15,564 a year, not including room, board, and other fees. That’s double the cost from just a decade ago. In inflation-adjusted dollars, UC tuition hasincreased three-fold since 1992. The university has come a long way since its 1960 master plan, which affirmed California’s “long-time commitment to the principle of tuition-free education to residents of the state.”

Napolitano’s proposal met stiff resistance from Governor Jerry Brown, who said at the November 19 board meeting that the university needs to look at cutting existing expenses before demanding more taxpayer dollars. He wants a special commission to convene in early 2015 to look at such cost-saving alternatives as online classes, three-year graduation programs, and course credit for work and military experience. Brown serves as a voting ex-officio member of the regents, along with Lieutenant Governor Gavin Newsom, Superintendent of Public Instruction Tom Torlakson, and assembly speaker Toni Atkins. All are liberal Democrats and all voted against Napolitano’s plan. What does it say when even California’s typically profligate Democratic leaders want the university to boost savings rather than tuition?

The politics here are straightforward. In 2012, Brown campaigned for Proposition 30, an ostensibly temporary income- and sales-tax increase that voters approved in large part because of the governor’s veiled threats to slash education programs. The University of California pulled out all the stops to help the governor pass the measure, warning students that tuition could go up as much as 20 percent in a single year without the tax hike. At the same time, Brown agreed to boost the state’s contribution to the university’s budget by 20 percent in exchange for a four-year tuition freeze. But the university would like a larger slice of Prop. 30 revenues—hence the current tuition fight.

Napolitano says her $27 billion budget will allow her to expand course offerings and enroll 5,000 additional students across UC’s ten campuses. But the real driving force behind the tuition hike is the university’s woefully underfunded pension system, which currently serves 56,000 retired employees. It’s a generous system, despite some reductions the university made for new hires in recent years. An Associated Press analysisfound 2,129 retired UC employees collect pensions of more than $100,000 a year; 57 receive more than $200,000; and three receive more than $300,000.

The trouble is UC’s pension system is only 75 percent funded. Why? Because a budget crisis 24 years ago led California’s legislature to end taxpayers’ contributions to the UC pension fund. It was an easy decision to make in the early 1990s, when the university’s finances were still in good shape. But as the Sacramento Bee notes, the regents also “decided to stop making payments on behalf of the university and subsequently relieved employees from having to make contributions as well.” This continued for 20 years. Only during the Great Recession, when university officials found themselves in a deep fiscal hole, did they decide to ramp up pension contributions.

The UC pension fund remains awash in red ink. According to a new reportby Californians for Common Sense, over the past five years “the annual amounts required to fund [UC’s] retirement plans have more than doubled from $1.4 billion to $3.7 billion. The UC system has already borrowed $2.7 billion to help pay down its pension debt.” What’s more, the regents haven’t addressed UC’s unfunded health-care liabilities. As Californians for Common Sense points out: “The university’s retiree healthcare contributions are expected to more than double over the next decade, growing from $363 million in 2014 to $805 million in 2024.” University officials argue that such liabilities are not vested, meaning they can be cut at any time. That may be true, but the university has neither the interest nor the will to take such a dramatic course right now.

Failing to rein in retirees’ pension and health-care benefits only foists more long-term debt onto students. In a November 14 letter to undergraduates, university officials tried to sound a reassuring note: “[I]f tuition does increase, financial aid resources are expected to increase, too.” In reality, easy student financial aid is what drives university profligacy. Look no further than the construction of lavish new dormitories, the massive expansion of campus bureaucracies, and the millions of dollars expended on what City Journal’s Heather Mac Donald rightly describes as “mindless diversity programs.” And contrary to complaints from Napolitano and other university boosters about the state’s “disinvestment” in higher education, taxpayers between 2008 and 2012 contributed an additional $400 million to the CalGrant program, which helps students offset those rising tuition costs. So it’s easy for the university to spend money in the belief that students and taxpayers will keep footing the bill.

That belief won’t hold true forever. Universities are facing unexpected market pressures. As Ohio University economists Richard Vedder and Christopher Denhart argued in the Wall Street Journal, many universities—not just the University of California—face declining demand given students’ growing debt loads and diminished job prospects. That, combined with low-cost online offerings, could lead to some “creative destruction” in higher education. With all the new competition, Vedder and Denhart write, “Excessive spending on administrative staffs, professorial tenure, and other expensive accoutrements must be put on the chopping block.”

Napolitano appears unready and unwilling to hear such sobering advice. But given the pushback by UC students and top elected officials, the bloated University of California system might have to consider those options sooner rather than later.

This article was originally published by City Journal.

Higher UC tuition hikes — for what purpose?

Last week, on a post-election panel presented by Capitol Weekly, I raised the issue of potential tax increases being contemplated by public unions and other groups in the next election and said that one of the reasons more revenue was sought was to cover pension obligations.

A union representative on the panel scoffed that pensions were “yesterday’s news.”

Actually, pensions were that day’s news if you read accounts about the University of California’s request that tuition be raised by 5 percent a year for a five year period.

The chief reason for the tuition increase appears to be retirement costs.

According to the Sacramento Bee,  U.C. Chief Financial Officer Nathan Brostrom cited retirement costs in explaining the need for tuition hikes. This is how the Bee put it: “Brostrom emphasized that UC feels it is not getting what was promised to the university with the Proposition 30 tax hikes, which increased revenues by 8 percent, and that it could avoid raising tuition if the state helped fund its retiree costs.” (My emphasis.)

How can you read that without concluding that the money is for retirement costs?

Squeezing

Like other government budgets, pension costs are squeezing the college budgets like a boa constrictor. When pro-tax advocates talk about the need for more money to pay for services, we should ask for a list of how that money will be spent and how much will be used to offset pension costs.

Higher education costs do seem out of control, rising 100 percent in the last decade. The debt burden on student loans is unconscionable and should be dealt with, starting with an examination of student loan interest rates.

What are the other costs driving up costs of higher education?

Before tuition is raised, the Regents should audit the system to see what is driving the cost.

But let’s not hide from pensions’ sizable role in any budget debate.

That is not yesterday’s news. It is today’s news and tomorrow’s news until some reforms come to be.

This article was originally published on CalWatchdog.com

Higher Ed Tuition Hikes for What Purpose?

Last week, on a post-election panel presented by Capitol Weekly, I raised the issue of potential tax increases being contemplated by public unions and other groups in the next election and said that one of the reasons more revenue was sought was to cover pension obligations.

A union representative on the panel scoffed that pensions were “yesterday’s news.”

Actually, pensions were that day’s news if you read accounts about the University of California’s request that tuition be raised by 5 percent a year for a five year period.

The chief reason for the tuition increase appears to be retirement costs.

According to the Sacramento Bee, UC Chief Financial Officer Nathan Brostrom cited retirement costs in explaining the need for tuition hikes. This is how the Bee put it: “Brostrom emphasized that UC feels it is not getting what was promised to the university with the Proposition 30 tax hikes, which increased revenues by 8 percent, and that it could avoid raising tuition if the state helped fund its retiree costs.” (My emphasis.)

How can you read that without concluding that the money is for retirement costs?

Like other government budgets, pension costs are squeezing the college budgets like a boa constrictor. When pro-tax advocates talk about the need for more money to pay for services, we should ask for a list of how that money will be spent and how much will be used to offset pension costs.

Higher education costs do seem out of control, rising 100-percent in the last decade. The debt burden on student loans is unconscionable and should be dealt with, starting with an examination of student loan interest rates.

What are the other costs driving up costs of higher education?

Before tuition is raised the Regents should audit the system to see what is driving the cost.

But, let’s not hide from pension’s sizable role in any budget debate.

That is not yesterday’s news. It is today’s news and tomorrow’s news until some reforms come to be.

This article originally appeared on Fox and Hounds Daily