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.

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.

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.

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.

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:

Enrollment data:
2000 to 2008 here:
1964 to 2006 here:
2009 projections are here:

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.

Wednesday, November 25, 2009

UC's Fiscal Health

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.

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!



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.

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.

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.

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.

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.