Thursday, December 15, 2011

Report from Sacramento: Refund California and Support Peaceful Protests

The state hearing on student protests in the UC and UCSC system produced one tangible result: the promise of a follow-up hearing. Legislators were also given an earful from students who very effectively tied the question of police violence to the state’s failure to fund higher ed. Moreover, the state heard loud and clear that the governor’s tax initiative fails to support higher education and makes workers and middle-class families pay more during a time when they are making less.

One of the most interesting moments occurred after a CSU representative blamed outside agitators for the “mob” violence at the most recent CSU trustees meeting. Charlie Eaton from the UAW set the record straight and told the legislators that the CSU has just lied. Eaton stressed that three of the arrested students were from the CSUs and the other student was a UC student, and all charges were dropped after news video clearly showed a police broke the door window with his own baton.

Eaton also stated that the students are part of the Refund California movement, which is trying to make bankers and millionaires pay to restore funding for higher education. Furthermore, he stressed that the UC regents and CSU trustees are almost all members of the 1% who are failing to protect California’s master plan. The legislators then asked the student panel what should be done about the regents.

Several of us pointed out that there will only be more protests, and the recent protest rules handed down from UCR will only make things worse. We later leaned that the UCR Chancellor reversed course, and he decided to take back the new restrictions on demonstrations. This reversal is another sign that the UC and CSU administrations are now playing defense, and they are feeling quite vulnerable.

While the members of the Refund California are pushing for the CFT Millionaire’s tax, we may also want to consider the new initiative to tax oil extraction to fund higher education. It is clear that now is the time to push for a progressive agenda for California.

Thursday, December 8, 2011

Progressives Take on The Governor over Taxes

While Governor Jerry Brown’s recently proposed tax initiative does seek to provide $6 billion in new revenue for the state, it is being challenged by three other initiatives, but only one is truly progressive. The California Federation of Teachers has formed a coalition with several other groups, including the Courage Campaign, to push for a tax on millionaires to fund K-higher education. Although some fear that competing initiatives may result in all of them losing at the ballot, we are hoping that everyone will eventually rally behind the CFT proposal, which is the only one that has a good chance at passing.

One of the problems with Brown’s initiative is that it combines a tax on people earning more than $250,000 with a sales tax increase of .5%. This combination means that struggling lower- and middle-class workers will end up paying more for a tax that might not help fund higher education. Moreover, the Governor’s initiative may not be approved by the Attorney General because it fails to pass the test of being a “single purpose” initiative. In fact, one of the hidden aspects of Brown’s proposal is that it moves the responsibility to house certain prisoners from the state to local governments.

The other main tax initiatives are also not progressive, and they have a lower chance of passing. To work through this problem of competing tax proposals, the CFT is pushing for a shared poll that would see what Californian voters would actually support. So far, a coalition of UC unions and students groups is supporting the CFT proposal, but the governor and Democratic members in the legislature are still pushing for a non-progressive solution. The next few months thus will be crucial for all of us to rally around the CFT proposal to make sure that higher education gets funded in a fair and equitable manner.

Monday, November 28, 2011

Open Letter to President Yudof

Dear President Yudof,
A year ago, I told the regents that they needed to investigate recent incidents of police pepper spraying, tasering, and beating students. I said that we cannot have a real dialogue if students, faculty and workers are afraid that their actions will result in bodily harm. However, President Yudof, you and the Regents stood by the police and did nothing.

The same day I addressed the Regents, a police officer pulled a gun on several students. Once again, I urged the university to investigate and punish dangerous police actions, and still nothing was done. It has taken a viral video of police violence at UC Davis for the university to take this issue seriously.

While all of the attention is now on UC Davis, there needs to be an investigation of the broader culture of police hostility towards students, workers, and faculty. I believe this culture of violence starts at the top, and it is the Regents and the President who must be responsible for the safety on all of our campuses. When violent actions by the police continue to go unpunished, the administration sends the message that these acts are tolerated. What we need to do is to simply disarm the police on our campuses, which would follow the model of most private universities in America and most public universities around the world.

Bob Samuels, President, UC-AFT

Sunday, November 20, 2011

Police Violence: The New Normal in America

Recent actions by police at Occupy encampments and student protests shows what happens when state violence goes unpunished. The new normal in America is that the police feel justified to inflict pain on nonviolent protesters, and the roots of this change have to be connected to the redefinition of torture as enhanced interrogation. Moreover, the Obama administration's decision not to hold any members of the Bush's torture regime responsible has set the stage for the use of police violence without fear of retaliation.

While we are not used to thinking of the U.S. as a police state, every day sees a new move in that direction. It is now commonplace for police to show up at peaceful protests dressed in full riot gear ready to baton, pepper spray, and intimidate citizens employing their constitutional rights of free speech and free assembly. Of course, the ruling class, including President Obama, has been silent on this issue.

Just as torture has been renamed enhanced interrogation, so has nonviolent resistance been redefined as violence. These actions can only result in a de-legitimization of politics as we descend into a police state. However, the protesters know that the only way to get their message to the masses is to allow for the police to inflict pain because in our media, if it bleeds, it leads. The end result is, as Chris Hedges has argued, all of our "liberal" institutions (the media, the Democratic party, the universities) lose their legitimacy.

A new generation of Americans has now grown up in this police-media-political context, and even though young people are used to communicating on the disembodied Web, they are putting their bodies on the line to make our country wake up. The failure of the political class to respond in any rational way only pours fuel on the fire, and while it may be too soon to talk about a second American revolution, the current dynamic is generating major social unrest. We camp, they beat us, and we return.

All out to Davis!

Tuesday, November 15, 2011

Occupy California, Refund Higher Education, and the Question of Violence (Plus Schedule of Events)

On November 15th, faculty and students at UC Berkeley will hold a one-day strike and will attempt to re-establish an Occupy Cal encampment. This action is supported by thousands of students and faculty members throughout the UC system and around the world. One of the reasons for this demonstration is to protest the excessive use of police force that has been used against students and faculty members. People will also be protesting the last-minute cancellation of the UC Regents meeting.

While students, employees, and faculty members have asked educational leaders to sign a pledge to join us in our call to re-fund higher education in California by making the banks and wealthiest 1% pay, the regents have responded by hiding from the public. So the new plan is to track down the higher ed leaders on November 16th when Southern California protesters will converge at the CSU trustees meeting in Long Beach, and Northern California protesters will rally and march in the San Francisco financial district, starting at noon at Justin Herman Plaza. We will once again demand that the UC Regents and CSU trustees sign our pledge, and we will invite them to then join us as we continue the march to the state building in San Francisco. Once there, we will demand that government officials also support our pledge, and we will have a people’s regents meeting.

Setting the Stage
When the UC announced that it had canceled the Regents meeting, it stated that, “they had received information indicating that rogue elements intent on violence and confrontation with UC public safety officers were planning to attach themselves to peaceful demonstrations expected to occur at the meeting.” While the UC did not reveal the sources for these threats, it is important to ask, how does the university define violence?

According to a UC police officer, the university is using the following definition of violence, “"the individuals who linked arms and actively resisted, that in itself is an act of violence...I understand that many students may not think that, but linking arms in a human chain when ordered to step aside is not a nonviolent protest." Someone needs to call Gandhi and Martin Luther King to tell them that the whole history of non-violent resistance has been rewritten.

It is of course outrageous for any public university to declare that students and workers can be beaten with batons if they engage in the dangerous act of linking arms, and it is especially absurd for this claim to be made at UC Berkeley, which stands for the birth of the Free Speech movement. If people are no longer able to protest nonviolently, then they may be forced to use other means. (I am not endorsing here the use of violence; rather, I am arguing that the police have to allow for nonviolent resistance)

By shutting down the Regents meeting, the university has also sent the message that the university is not only being privatized on a financial basis, but it is also being privatized on a bureaucratic basis. The regents are now telling the people of California that public matters have to be discussed in private, and the public is no longer invited to witness the dismantling of the “world’s greatest public university.”

Following the day of activities on the 16th, attention will turn to the one-day strikes at CSU East Bay and CSU Dominguez Hills. Ultimately, what is at stake is the future of public higher education in California and around the world. As the refund higher education movement couples with the Occupy Wall Street movement, a new level of organization and energy will emerge.


10 – 10:30am: free busses leave from Telegraph and Bancroft on Berkeley
11:30am – Noon: gather for a free lunch.
Noon rally at Justin Herman Plaza in collaboration with Occupy SF, 3
blocks from the Embarcadero BART station
1:00pm: March through the Financial District to make the banks pay for
the financial crisis they created
4:00pm: People's Assembly for Public Education at the State Building
to call on Gov Brown to make the banks pay public education, 455
Golden Gate Ave San Fransisco
3:00pm early bus returns to UC Berkeley
6:00pm remaining buses return to UC Berkeley

8am-5pm: All day Open University activities (teach-outs, workshops,
public readings, installations, etc.) at Sproul Plaza and surrounding
Noon: Mass convergence at Sproul Hall and formal inauguration of
day-long Open University.
Noon – 2pm: Teach-outs in Sproul Plaza.
2pm: Rally against police violence and other, related forms of
violence, including dispossession, privatization, and debt.
2:30pm: March to Berkeley High and Berkeley City College.
5pm: General Assembly at Sproul Plaza.

Monday, November 14, 2011

The Master Plan In Reverse

Bob Meister from UCSC has written an excellent article on the financialization of the university and the death of the Master Plan. Meister’s research shows that as tuition in the UC system continues to grow and in-state students are replaced with nonresident students, Californian students who in the past would have gone to the UCs or the CSUs are now going to community colleges. However, since the community colleges have also experienced budget cuts and enrollment reductions, a lot of the students who used to go to the community colleges are now going to the for-profit colleges, like the University of Phoenix.

One of the results of this system is that low-income, minority students are being forced to pay high-tuition at low-performing for-profit institutions. In turn, these schools, which often have a graduation rate of under 10%, suck up over a billion dollars in Pell Grants a year as students take out high-interest subprime student loans. Moreover, since these loans are usually guaranteed by the federal government, and they cannot be erased through bankruptcy, there are a safe bet for financial speculators.

In this Reversed Master Plan, the defunding of each system results in higher tuition levels coupled with larger student debts and lower degree production. Not only will students have to work twenty years to pay off their student loans, but they will be unable to pay taxes or to contribute to economic growth. Instead of universities and colleges creating social mobility and reducing economic inequality, they are generating higher levels of inequity. To help change this dangerous path, please come to the UC Regents meeting or the CSU trustees meeting on November 16th and call for a new economic and educational model. You can also sign here a petition to protest police violence during the UC Berkeley demonstrations on November 9th.

Friday, November 11, 2011

UC and the 99%

My last few posts have documented the growing wage inequality in the UC system. Like the rest of America, the university is structured by a divide between the people at the top and everyone else. This type of income disparity has motivated the Occupy movement to call for a fairer system, and we are now seeing a series of protests at the UC campuses, which will culminate in a large action at the next UC regents meeting on November 16th.

Already our actions are having an effect. In fact, the LA Times reports that due to the fight back against President Yudof's planned tuition increases, the system has backed off of its plan to increase tuition again for now. Currently, we have to turn our attention to getting the state to raise taxes on the wealthy so that state funding for higher education can be restored.

As the important book, The Spirit Level, reveals, income inequality not only undermines the productivity of an economy, but it helps to generate a host of social problems. According to global statistics, the developed countries with the highest levels of income inequality, also have the lowest levels of social trust, and the highest levels of crime, infant mortality, heart disease, and illiteracy. Even the rich people in unequal societies suffer from increased anxiety due to their constant drive to increase their wealth.

On the other hand, in countries where there is a lower disparity of income, like the Scandinavian nations, people report a higher rate of happiness and health. As The Spirit Level reveals, when people feel that their society is not divided between winners and losers, they support social programs and promote education and subsidized healthcare. However, when wealth inequality grows, social welfare programs are not protected because people do not feel that they are living in a just society.

In the case of the UC system, the growth in the number of high-earning administrators and medical faculty undermines any sense of a shared purpose. Moreover, as medical incomes increase, the cost of healthcare in California also increases. We can also anticipate that as UC moves to a new compensation system for faculty, we will see even more wealth disparity and a reduced sense of social trust. Likewise as income becomes concentrated at the top in California, we witness a decreased desire to support social welfare programs and higher education. In short, wealth inequality is the driving force behind most of our social and economic problems.

Monday, November 7, 2011

Wage Disparities in the Professorial Ranks

In a previous post, I presented data on wage inequality in the UC system amongst different types of high-earning employees; what I would like to do now is to discuss inequities in the professorial ranks (these statistics do not include medical, law, or business professors).

One way of approaching this data is to first look at the average salaries for assistant, associate, and full professors. For instance, in 2010, there were 3,246 full professors, and their average total compensation was $139,633. Meanwhile, during the same time period, we find 1,322 associate professors with an average gross pay of $117,527, and 984 assistant professors with an average total pay of $76,949.

While the system-wide average gross pay for all academic professors was $116,665 in 2010, if we look at this average on the different campuses, we find the following: UCLA - $137,683; Berkeley - $127,607; San Diego - $118,480; Santa Barbara - $115,349; Davis - $101,903; Riverside - $98,107; Irvine - $107,462; Merced - $88,229; and Santa Cruz - $99,797. Excluding Merced, we see that the difference between the average academic professor salaries at UCLA and Riverside is $39,576 or 34%.

Also, looking historically, we know that in 2004, there were 216 full professors making more than $200,000, and in 2006, the number of high earners dropped to 194, but in 2008, this same category jumped to 380, and in 2010, it went down slightly to 372. Therefore, the number of full professors making over $200,000 nearly doubled between 2006 and 2008 and has since stabilized. Meanwhile, if we look at the salaries of assistant professors during this same period, we find that the number of assistants making less than $70,00 stayed almost the same between 2004 and 2008: there were 577 assistant professors making less than $70,000 in 2004; 553 in 2006; 558 in 2008; and 401 in 2010. These statistics tells us that the salary growth for academic professors was concentrated at the top during the period of 2006 and 2008.

It would be interesting to look at the salary disparities in the different disciplines, but this information is not available. Over all, it appears that the biggest wage disparities occur between the campuses with the highest number of graduate students (UCLA, UCB, UCSD), and the ones with the highest percentage of undergraduates (UCR, UCM, UCSC).

Tuesday, November 1, 2011

New UC Salary Data: 2010 was a Good Year for Higher Earners

New UC salary data is now available at Jeffrey Bergamini’s compensation database, and it reveals that in 2010, there were 4,237 UC employees making more than $200,000 for a total gross pay of $1.26 billion and a base pay of $744 million. This means that for the over 200k club, more than 40% of their pay came from extra pay; moreover, the over $200,000 earners raked in 12% of the gross pay for the whole system ($9.3 billion), while they represented under 3% of the regular employees and less than 1% of the total number of employees (including student workers).

If we compare 2010 to 2008 and 2006, we find that in 2006, there were 2,464 employees making over $200K with a total gross pay of $680 million, while in 2008, there were 3,643 high earners with a total gross salary of $1 billion. In other words, during the UC’s “fiscal crisis,” we have seen a continual increase of employees entering into the over-200K club.

To further investigate who makes up this class of high earners, we can break down these employees into six major categories: administrators, medical faculty, athletic coaches, business school professors, academic professors (excluding business and law professors), and law professors. These six categories accounted for over 95% of the revenue of the over $200,000 club in 2010.

Starting with the medical faculty, we find that in 2010, there were 2,772 medical faculty making over $200,000 for a total gross pay of $867.4 million. This means that in the period of 2008 to 2010, the medical faculty in the over 200k range increased their numbers by 476, while their total gross pay went up $187.4 million. It is clear that the medical centers are an economic powerhouse that drive inequality in the UC system.

The second biggest group in the over-200k club is the administrators. In 2010, we find 351 bureaucrats making a total of $102 million, while in 2008, there were 397 administrators in the over 200k club making a total of $109 million. In other words, due to the downsizing of the Office of the President, there are now fewer administrators in the over-$200,000 club, but their average pay is higher.

The next biggest group of high earners are the academic professors outside of law, medicine, and business. In 2010, there were 397 professors making over $200,000 for a collective gross pay of $93 million. If we compare these figures to 20008, we discover that this group has been reduced by 18 people, and their collective pay has gone down by $3.6 million.

In the case of the business school faculty, in 2008, there were 372 faculty making more than $200,000 for a collective gross pay of $93 million, while in 2010, 439 high-earning professors had a collective gross pay of $115 million. This statistics show that while the number of general campus, high-earning professors has been decreased, the medical and business professors making over $200,000 has continued to increase.

In the case of law professors, we find that in 2008, there were 85 making over $200,000 for a collective pay of $21 million, and in 2010, this same group consisted of 96 professors making a collective gross pay of $25 million. So we once again, we see a trend of increasing the number of high-earning professors in the professional schools, while the nonprofessional school professors are reduced.

The final group is the athletic coaches; in 2008, there were 24 coaches making over $2000,000 for a collective payout of $12.8 million, and in 2010, this same group has 35 employees at a collective gross pay of $16 million. In other words, the athletic departments continue to do well in bad times.

These statistics show that as the university continues to rely increasingly on undergraduate tuition to fund the system, more of the pay is going to people working outside of undergraduate education. Moreover, since the UC is the third biggest employer in California, we can see how the wage disparities in the UC system contribute to the growing wage inequality in the state.

Thursday, October 27, 2011

Yudof’s Salary Plan: What does it Really Mean?

In August, President Yudof announced a plan for merit increases for non-represented staff making less than $200,000 and for faculty who have been deemed meritorious. The initial idea was to reward people who have not gotten raises during the last few years. Yudof also wants to give the campuses the ability to stop other universities from stealing UC faculty; however, this plan is full of unanswered questions.

Coupled with the new merit-based 3% salary increase, we find a new policy that will allow faculty to use grant money and other external sources of income to increase their base salaries. A good discussion of this plan can be found at Remaking the University, but it is important to stress that in reality, there are four main ways that people in the UC get increased compensation: across the board salary increases, merit pay, special compensation pools, and negotiated compensation. During the last few years, some represented employees have gotten salary increases, while many other employees have continued to receive merit increases. Furthermore, the medical centers and other units have developed their own special compensation pools, while non-represented faculty and administrators have continued to get renegotiated compensation deals.

In fact, except for across the board salary increases, most of the compensation increases are handled on the campuses on an ad hoc basis, and it does not look like this system is changing. Moreover, in the current move to let the campuses keep all of their revenue, it is unclear what Yudof’s salary plan means. Is the Office of the President going to distribute state funds to the campuses in a special merit pool, or is the idea to simply instruct the campuses to allow staff and faculty to compete for a share of their local revenue?

If we look at the facts on the ground, we discover that professors and administrators often get their compensation increases through private negotiations. As the past Academic Council Chair Dan Simmons wrote a few years back in his study, “The Death of the UC Salary Scales,": "At least one campus has provided off-scale salaries to 100 percent of its new faculty appointments. Some campuses are utilizing devices to broadly provide off-scale enhancements to faculty in order to regularize the salary inversions that result from hiring new faculty with off-scale salaries exceeding the compensation of full professors. One or more campuses utilize a shadow salary scale to reflect market level compensation.” In other words, many--if not most--of the non-represented faculty do not get their raises through merit reviews or movements up the salary scale; instead, increases are negotiated through private deals between professors and administrators. In fact, Simmons pointed out that 85% of the professors are being paid off of the official salary scale.

As Simmons argued, the current system has many flaws: “The evolution of a system that compensates faculty who are newly appointed, or who threaten to leave and are retained with off-scale salary increments, replaces the historic peer reviewed compensation system with a system that is individually negotiated with campus administrators who have the discretion to grant or deny a salary increment. A step IV professor in one place is no longer on the same playing field as a step IV professor in another place, perhaps as close as across the hall in the same department. Indeed, the step IV professor might discover that his or her new colleague recently hired as an assistant professor is earning a higher salary.” Not only are some new faculty getting higher pay than faculty members who have been teaching for several years, but the off-scale system circumvents the merit review and peer review process. It also creates collusion between individual faculty members and administrators.

As I have pointed out before, the end result of the current system is incredible inequality within the professorial ranks, with some faculty members getting $40,000 raises and some getting nothing. While we have been told that the faculty senates have been working on this problem, there is no evidence that a new system and culture has been implemented. In fact, the Office of the President has been pushing a market-based system that Simmons previously critiqued in the following way: “The market approach to setting individual salaries says several things to a faculty member who has loyally done his or her job and progressed through the salary ranks on a regular basis. First, you are a fool for not having sought to move elsewhere with a higher salary in order to negotiate an off-scale at home. Not only are you a fool, your work must be worth less than the person across the hall newly hired with an off-scale that is higher. Second, the first thing you should do is look for an appointment at another university. The position might be more attractive in any event than working in a place that does not appreciate your efforts. Third, the University must be more interested in bringing in new superstars with expensive start up packages than maintaining the loyalty of its current faculty base.” Thus, in order to compete with private universities for professors and administrators, the university is forced to renegotiate salaries in a secretive and individualized manner. In this system, certain people are deemed market worthy, while others see their wages stagnate.

By arguing in his letter that the new pool of money should be used to recruit and retain faculty who are being “courted by competing institutions,” Yudof is signaling to the campuses that they should continue to negotiate secret deals with their stars and potential stars. While some may prosper from this system, many will actually see their compensation go down as they pay more for healthcare and pension. However, since everyone wants to be a star, no one will rock the boat, and the majority will suffer. Like our national economy, wealth inequality grows because the majority of people think they will profit from a system that screws them.

Thursday, October 20, 2011

UC Announces New Pension Rates

At the next UC Regents meeting, the Office of the President will ask the Regents to endorse new pension contribution rates. According to this proposal, starting in July 2013, current employees will pay 6.5% of their salary into UCRS, and the UC will put in 12%. For people hired on or after July 1 2013, they will pay 7%, while the UC will pay 12%. Of course, these changes will have to be negotiated for represented employees.

One interesting aspect of this is that the university has decided to contribute 12% for the people in both the new and old plan. This means that while people in the new plan will receive a reduced benefit, the university does not have an immediate incentive to fire current workers and replace them with new hires, which often happens when a new pension tier requires a lower employer contribution. However, over time, the people in the new system will cost the university less.

Ultimately, new hires will be paying more and getting less, and this inequality will help to reduce the university’s long-term liability. Moreover, for the next three years, much of the increased contributions from employees may be matched with new salary increases, and so the university will not increase its revenue from these changes. In fact, the move to a 12% employer contribution coupled with a 3% salary increase this year and a possible additional 3% next year will mean that the UC will see its compensation costs increase by 11% in the next two years (the UC currently contributes 5% to the pension plan). The long-term plan is to increase the employer contribution by 1% each year until they reach 16%.

Once the UC starts paying 16% of covered compensation, it will cost the university over $1 billion a year to fund the normal cost of the pension plan. Furthermore, the UC still has to deal with escalating retiree healthcare costs and the fact that the state still does not contribute to the pension plan. I predict that the university will seek savings by continuing to shift more of the cost for healthcare and retiree healthcare to the employees. Without a significant change to recent healthcare legislation, workers inside and outside of the university will continue to see their total compensation decrease.

Monday, October 10, 2011

UC-AFT Goes to Wall Street: OCCUPY and Demand

I am going to the Occupy Wall Street protests this weekend, and I hope to circulate a list of demands that a wide variety of groups and individuals can endorse. Here is my list of what many of us want:

1. A federal works program to employ 10 million people in construction, community service, education, and green technology

2. Allow all underwater homeowners to refinance mortgages based on current home values.

3. Prosecute bankers and investors involved in fraudulent loans and related derivatives.

4. Prosecute people who authorized or committed torture.

5. A federal investment in green technologies and research.

6. A community service program so college students can forgive their loans.

7. The end to police intimidation of protesters.

8. A tax system that makes the wealthy pay their fair share and a tax for financial transactions.

9. A commitment to fight climate change.

10. A withdrawal from Afghanistan and Iraq.

11. A freeze of healthcare premiums.

12. Protect Social Security, Medicare, and Medicaid.

13. Support the right to unionize.

14. A new campaign finance reform.

While the media complains that the amorphous protests have no single theme, it may be possible to organize around a set of common demands. I will report back on my return.

Wednesday, October 5, 2011

From Obama to Vanity Fair: Telling the Wrong Story

A recent Vanity Fair article, “ California and Bust,” by Michael Lewis attempts to blame the difficult financial status of many states and municipalities on the costs of public pensions. The following passage is either the result of bad editing or ideological bias: “A prison guard who started his career at the age of 45 could retire after five years with a pension that very nearly equaled his former salary.” As a commenter writes in response to this claim, “What formula is Mr. Lewis using to arrive at this statement? The 3% @50 formula is the top formula used in California and if a Guard made 150,000.00 a year as the base salary used in calculating the pension it would work out as: 150,000 x 3% x 5 years = 22,500.00 annual pension. Please. This is far from the "very nearly equaled his former salary".” Of course this correction is buried in the comments section, and will not be seen by anyone who reads the article in print.

While Lewis’ article appears to be a balanced, neutral expose on our fiscal crisis, it spends virtually no time discussing how pensions were devastated by the crash of the stock market in 2008-09 and how states and local governments have been undermined by the loss of tax revenue related to the collapse of the housing bubble and the crash of the markets. Like so many other stories discussing our economic situation, there is no attempt to explain how illegal mortgages coupled with dangerous financial derivatives resulted in the loss of millions of jobs and trillions of dollars of wealth.

Since the President and other leaders have failed to explain to the American people how our economy has been ravaged by financial speculation, people now believe that the cause of our problems are pensions, benefits, public employees, and unions. Moreover, due to the fact that the President did not make the culprits of our financial woes pay for their misdeeds, he helped to fuel the displacement of blame onto victims of the financial collapse.

Like Obama’s decision not to prosecute the perpetrators of our torture regime, the failure to hold big banks and investors responsible results in a lack of “moral hazard,” which means there is no penalty for destructive behavior. With no one else to blame, the Right produced a populist Tea Party that blamed big government instead of too-big-too fail banks.

Since the President knows that he has to raise $1 billion to run for office, and his Republican adversaries face the same issue, no one wants to step on the toes of guilty investors. In a more rational world, we would see arrests and huge fines, and we would also see the move to tax investment profits at the same rate as earned income, Ina rational world, we would also see a financial transaction tax to slow the pace of our global casino. Yet, instead, we get empty rhetoric and talk about deficit reductions and debt limits.

Let’s hope that the Occupy Wall Street actions turn into an effective national movements that tells the right story and provides the right solutions.

Monday, October 3, 2011

OccupyLA Update

On October 2, 2011, John Bruning the UC-AFT Field Representative for UCLA, filed the following report:

I went to the OccupyLA march to City Hall on Saturday morning, not really sure what to expect. There was a wide variety of people there: progressives, libertarians, "Anonymous" types, socialists, anarchists, students, vets, older folks, etc.

Nearing the end of the second day, we're still working through decision-making processes, goals, other structures, and next steps. It's a very collective process, which means that it's a very slow process, but it's also meaningful and it keeps power decentralized.

We've overcome a few challenges so far and survived one night of "illegally" sleeping on the City Hall lawn. But we still have practical challenges to overcome for the movement to grow.

First is education. There are a few of us with backgrounds in organizing and direct action, but the vast majority are new to activism and don't know what to do. There's been a lot of sitting around for the past few days, but there's movement to start holding workshops and skillshares soon.

Second is action. Everyone here wants to do SOMETHING. There was an action today at the Metro station, but it suffered from a lack of planning. We are looking into ways to most effectively plug ReFund CA and OccupyLA together, and the Thursday action at the downtown LA Bank of America is already being discussed here.

Finally, many people are trying to figure out how to take OccupyLA out of the park and expand into other communities. There has been talk of more public occupations around the metro area, and also reaching out to the rest of the 99% who can't be here, through workplace and community organizing.

I have to go to the General Assembly now, but it's very exciting and there's a lot of energy here, and the next few days will be critical to see if this movement continues in LA and what form and direction it will take.

Monday, September 26, 2011

A Report from Congress and the White House

I spent September 22nd and 23rd in D.C., and I got a full dose of a city under attack from the Right and high humidity. On Thursday evening, we had a meeting with Congressional members from California, and I was able to speak to Nancy Pelosi. She stressed how things are so bad that Republicans are trying to make the Democrats come up with budget reductions to cover the costs of disaster relief. Likewise, at the White House, all of the President’s top advisors emphasized how difficult the other side is acting and how hard it is to get anything done.

I asked one of the architects of the President’s jobs bill, what the administration can do for recent college students and graduates who are facing the triple whammy of skyrocketing tuition costs, giant student loans, and poor employment prospects. I also questioned why the jobs bill did not simply propose a government works program that would directly hire millions of people. The President’s economic advisor responded that the jobs bill is the best they can accomplish with the Republicans in control of the House. He also said that he agrees with my assessment concerning the sorry plight of college students, but they wanted to put together a package that was responsible and achievable. I added that since the Republicans will block everything except for the tax cuts, why didn’t the President propose something clear and bold, and then let it get shot down. [We were told by White House officials not to directly quote anything from our meetings]

I posed similar questions to David Plouffe, the President’s main political advisor, and Bill Daley, the President’s Chief of Staff. Both of them stressed that the President is being responsible, and he is proposing things that the Republicans have supported in the past, and so if they reject them now, they are just being cynical. Several of the President’s senior advisors pointed out how the jobs bill will fund community college infrastructure and also help the states so they do not layoff more teachers. In response to one of my questions about the decreased funding for higher education, White House officials emphasized how hard the President and the Democrats in Congress had to fight to protect Pell grants.

I walked away thinking that the administration is underestimating the horrific nature of our employment situation. After all, as I told several top advisors, there are close to 25 million people who are unemployed or underemployed, and we were told that the jobs bill may create 1.5 to 2 million jobs. In one of my more aggressive moments, I asked how can we support the President, if we do not know what Democrats stand for anymore. After all, the President’s recent jobs bill and deficit reduction program rely on the classic right-wing themes of cutting taxes, reducing the deficit, and reforming entitlement programs. The President’s main political advisor got rather testy when I made this claim, and he went on to list everything the President has done. I really think they do not get it, and they refuse to present a clear and consistent set of progressive policies.

Several people in the audience thanked me for my questions and for holding the administration’s feet to the fire. I was later told by people working for the President that my questions were heard, and I should stay in touch. Later, during a meeting with the Department of Labor, I stressed how universities are using the current economic downturn to outsource work, casualize labor, and ignore basic labor laws. I was told that the Republicans are doing everything they can to tie the hands of this administration, and we must continue to highlight the positive things the President has done.

I actually do think that the President has done some very positive things, but we are in a crisis, and we need bold, clear action. While talking to members of Congress and White House Staff, I proposed a government works program that would hire 10 million people and would not rely on tax cuts, subsidies, or corporate hiring. I argued that the administration needs to show that government can work, and the only way we are going to reduce unemployment to the 3-4% range is if the government simply hires people. I suggested that the administration use TARP funds and money from mortgage fraud suits to fund a jobs program without the help of the Congress. I was told that this can’t be done, but they will look into some of my other suggestions.

To discuss how we can push the country in a more progressive direction, I am organizing a meeting in November at UCLA. For more information, you can read my article on an alternative jobs bill and the need to rethink our current political stalemate. Please let me know what you think.

Tuesday, September 13, 2011

UC-AFT Going to the White House

I have been invited to attend a day-long meeting at the White House on September 23rd as a community leader, and while the main topic will be jobs and education, I have been asked to provide a list of important discussion points concerning my community, which I am defining as public universities. So here is a first draft of what I hope to discuss:

1. President Obama should stress that his stimulus plan saved thousands of university jobs and helped to control tuition increases, and now without the ARRA money, tuition is skyrocketing, classes are being cut, and students are taking on tremendous debt.

2. The ARRA money also helped to fund important research that is now being curtailed. While universities are the engines of economic growth and technological innovation, they are now facing reduced federal grants and decreases in graduate student funding. We hope the President will consider using TARP funds to support green technology and research at our universities.

3. When states are forced to pay for increased healthcare costs and unemployment benefits during a time of decreased state revenue (taxes), the one thing they know they can cut is higher education, and it is middle-class parents who end up paying for increased tuition costs. Federal money should be used to protect public universities from decreased state funding.

4. In order to save money, universities have moved to a system where the vast majority of the faculty are temporary and part-time with no possibility for tenure or a living wage. To reverse this situation, the President should require any university or college receiving federal funding to hire the majority of new faculty members on a full-time status.

5. Like other American institutions, universities are bearing the burden of excessive healthcare costs. The President should consider freezing health insurance premiums for the next two years.

6. The President needs to make a strong statement about the positive contributions teachers, librarians, staff, and professors make to our society. While many Republicans are demonizing teachers, public employees, and unions, we need a leader who stands up for our nation’s educators.

7. Public universities are still the main paths to the middle-class, and they must be protected and supported. To help rally his base for the next election, President Obama should produce a comprehensive plan to protect the middle class, and this plan needs to address the loss of funding for public universities. Instead of giving subsidies and tax breaks to oil companies, federal funds should be redirected towards new energy research at our public universities.

8. The President should act through executive order to monitor financial aid that goes to for-profit colleges. These schools often place students in debt without providing effective instruction.

9. Due to the reduction of state support for public universities and the resulting increases in tuition, students are taking on massive student loans, which is creating another asset bubble. The President should act to subsidize student loans and extend the payment schedules.

If you have any suggestions, please comment below.

Monday, September 12, 2011

UC Might Increase Tuition 81% Over the Next Four Years

When the Regents meet September 14th, they will discuss a multiyear funding proposal that will likely result in a series of large tuition increases over the next few years. The heart of the plan is found here: “Components of a multi-year plan would include the assumptions about efficiencies and revenue- generating strategies, and a proposal that, under the optimal scenario, would call for eight percent annual increases each in State funds and in tuition and fees through 2015-16. If the State is unable to meet its share of this cost, student fees would be raised further to make up the State’s deficit. Thus, if the State provides only four percent increases each year, student tuition and fees would increase by 12 percent annually. If the State provides no increase, student tuition and fees would increase by 16 percent annually. Incorporating this principle into a multi-year plan will make clear to all stakeholders that a failure to invest in the University will directly increase the amount students and their families pay to attend.” According to this structure, if the state does not increase funding over the next four years, tuition will go up 16% each year for a cumulative total of 81%.

Of course, the state could increase its funding, and this would mean a smaller increase for students, but if recent history is any indicator, the state is more likely to decrease funding, and this possibility is not addressed directly in the formula mentioned above. What the new plan does argue is that a four-year strategy would force the state to think twice before it reduces funding for the UC system: “Establishing the direct relationship between State funding and required tuition increases into a multi-year plan will make clear to all stakeholders – the Governor and Legislature, students and parents, and other interested citizens – that a failure to invest in the University will cause an increase in the amount students and their families pay to attend.” So far the state has not been very concerned about tuition increases, and so the real result of this plan could be that the state will just take for granted huge tuition increases. After all, students keep enrolling, and the university has shown that it will cover any state reductions by forcing students and parents to pay more.

Friday, September 2, 2011

The State Response to the State Audit and the Future of UC Funding

I have met recently with several legislators, the Legislative Analyst, a member of the state auditor’s team, and people from the Brown administration to discuss the audit of the UC system. All of these stakeholders stated that the audit requires follow up, and in fact, the UC is required to report in sixty days, six months, and one year on how they are responding to the auditor’s recommendations. In order to ensure that UC does indeed respond in an effective manner, a legislative hearing is being considered for early next year.

The two main issues that the state is looking at is how does the UC spend state funds and how much does it cost to educate each additional undergraduate, graduate, and professional student. While the UC’s response to the audit was that the process was a waste of taxpayers’ money, and nothing important was found, several legislators do think that the UC needs much more transparency in its budget. The biggest concerns include the high cost of medical education and the unequal distribution of funds to the campuses.

Of course, the UC can now say that it is making the system more transparent by allowing the campuses to keep all of the revenue they generate, but there is still the question of state funds, which I have shown accounts for most of the inequality of funding among the campuses. This issue of state funding will be discussed at a Regents meeting at the end of the year after the committee on “rebenching” finishes its analysis.

As I have stressed, the big tension is between keeping any new funding model “revenue neutral” or moving to a more equitable system. In order to accomplish either of these tasks, the UC still has to open up and reveal how it has been distributing state funds to the campuses and what it plans to do in the future. It turns out that the state audit is also looking at these same issues, and so it is possible that the two processes, internal and external, will work together. Yet, it is clear that the wealthier campuses will fight to keep their high levels of funding, and in order to maintain the status quo, the push will be to keep the spending of state funds nontransparent.

Already, we find an indication that the medical centers are being privileged by the Office of the President. In a July letter to President Yudof from the Academic Council, we find the following: “Council advises that the full $650 million reduction in State funds in the 2011-2012 budget year be allocated among the campuses under the methodology applicable to State fund reductions developed in the Funding Streams Proposal of December 21, 2010.” As the letter continues, it clarifies that, “The allocation of budget reductions was based in part on a principle that the proportionate allocations to campuses reflect each campus’s relative ability to offset reductions by raising nonresident tuition (NRT) and Professional Degree Supplemental Tuition (PDST).” The idea here is that the campuses that have increased their revenue by increasing the number of high-paying nonresident undergraduates and professional students should receive a higher budget reduction.

It turns out that UCOP did not follow this method, and the Academic Council was not notified by this change: “we were surprised to learn only last Friday, July 22, that allocations were likely to be based on the proportions derived from the Funding Streams Proposal provisions for allocating augmentations rather than reductions.” In other words, when it was distributing cuts to the campuses, UCOP did not take into account the different abilities of the campuses to generate their own income to make up for any reductions. Thus, the poorer campuses will get poorer, and the wealthier campuses will get wealthier.

The Academic Council hints that a major driving force behind UCOP’s decision to protect the wealthier campuses is the high cost of medical education: “The San Francisco situation is far more complex. A new business model to support medical education in a time of diminished state funding is urgently needed. I note, however, that the relative scarcity of tuition income at UCSF means that UCSF’s share of the $500 million cut is a substantially smaller fraction of UCSF’s total state support. The relative scarcity of tuition at UCSF cannot also be used to justify shielding UCSF from the effect of the $150 million cut.” The Academic Council makes an important argument here, which is that the UC cannot continue to disadvantage the other campuses in order to use state funds to subsidize medical education at UCSF.

Everyone in the UC system should be concerned about how UCOP and the regents decide to distribute state funds. Since the campuses will be able to keep their own revenue, there is an incentive for the wealthier campuses to increase their wealth by increasing their number of nonresident students and decreasing their number of Californian students. Moreover, the medical centers will continue to use their enormous resources to fight for more funding, while the smaller campuses will suffer from a lack of new revenue. All of these trends will force continual tuition increases for undergraduates at a time when undergraduate budgets are being downsized. Let us hope that the state audit pushes the UC system to find a more equitable balance.

Wednesday, August 10, 2011

The Market and You

Since we are now all invested in the stock market, even if it is indirectly, it is important to understand certain key aspects of how Wall Street functions today. One aspect is that while many people are invested through pensions and 401k plans, few people understand how the market works, and many do not have any control over their own investments. Moreover, although the media often says things like, “the market went down today on news of the debt deal,” the market is not a single entity speaking with a single voice; however, dominant players in the markets often follow each other, and the result is that large movements can occur based purely on a herd mentality.

Some people are now asking why the markets have gone up the last couple of years, while the economy appears to be doing very badly. One reason for this disconnect between the real economy and the financial economy is that the Federal Reserve has sought to strengthen the banks by essentially allowing them to borrow money for free. The idea behind this policy is that during the fiscal meltdown of 2008-9, the banks stopped lending money, and there was a real credit crunch that cut off the flow of cash to major corporations and financial institutions. The Fed also felt that if they gave money to the banks, and the banks lent money to corporations, the companies would start hiring people and stimulate the economy. However, it is now clear that companies and banks are sitting on trillions of dollars, and they have shown that they would rather make money through financial transactions than through producing new jobs.

Another reason why Wall Street has gone up while Main Street has gone down is that Wall Street rewards companies for shedding jobs because this increases the profit margin. There is thus an inherent push for companies to cut their labor costs and increase compensation for people at the top, and many banks and corporations have used their profits and debt to buy their own stocks and increase bonuses for their top earners.

Another powerful player in the markets are the private equity firms that often use borrowed money to take over companies (leveraged buyouts) and make these corporations more profitable by laying off workers and selling parts of the companies. These takeovers often go bad because the bought company has to take on so much debt, while it reduces its productivity. Moreover, Mitt Romney, who is now running for president, made much of his money through his private equity firm, Bain Capital, and so it is possible that our next leader will pursue the leveraged buyout model on a national level.

While many people in our federal government now feel that the key to a healthy economy is to put more money in the hands of the banks and large corporations, it is clear that our multinational companies and financial institutions have no incentive to invest in job creation. In the past, corporations knew that they needed to produce well-paying jobs in America so that there would be enough people with cash to buy their products, but now in the global economy, multinational corporations often look around the world for consumers. There is thus little incentive for companies to hire more workers or provide a good wage for Americans.

The only solution is a national job policy or industrial plan that would push companies to use their savings to increase employment. However, the only way to do this would be massive subsidies, tax breaks, trade tariffs, or penalties for exporting jobs. Of course, the other solution is to have the national government feed money into new industries like green technology. Yet, not only is the Congress blocking this type of program, but the move against government spending means that more jobs will be lost through the reduction of federal and state budgets.

Adding to this employment problem is the growing power of the bond raters and bond buyers who believe that the key to economic health is reduced taxes and a reduction of governmental spending. These financial players are not interested in job growth or stagnant wages; in fact, bond raters often reward companies that fire workers or eliminate benefits.

Only a strong national leader can reverse this course, but it appears that the president and Congress have bought into the idea that we must follow the demands of the markets and the raters. It is clear that we must organize against these forces to rebalance the economy and take back our jobs from the financial raiders.

Thursday, August 4, 2011

UC Crushed by Debt Deal

The University of California will certainly be a big loser in the debt deal recently signed by President Obama. In fact, what most commentators have missed is that in the first round of budget cuts triggered by the debt deal, graduate students will be forced to pay more for their loans, and they will also have to pay earlier.

While the first round of cuts protected Pell grants and federal research grants, the next round will most likely cut deeply into both of these programs. Moreover, as George Skelton shows, future and present cuts to Medicaid will force states to shift more funds away from state-supported programs as they seek to pay for escalating healthcare costs. In other words, when the federal government cuts social programs, the states have to make up for the losses, and the result is that discretionary programs like higher education are reduced.

If we combine the future federal cuts to Pell grants and research grants with the increased burden on states to fund social welfare programs, we are left with a significant decline in funds for university research and graduate education. Ironically, these cuts to the UC system are occurring during a time when the Academic Council is asking President Yudof to accept more graduate students and discontinue the tuition derived from nonresident graduate students. Part of this new funding model asks the state to increase its support for UC research and expensive graduate programs during a time of diminishing state funds.

Next week, I will dissect the Academic Council plan, but for now, I just want to stress that the only real solution is for the Senate faculty to realize that UC should move to a model where it only accepts graduate students it can fully fund. While this would reduce the number of graduate students, it would increase the quality, and it would counter-act the increased costs of student loans and the loss of research grant money. Furthermore, it is important to stress that UC is one of the biggest producers of PhDs in the world, and there is a growing number of unemployed and under-employed people with PhDs. Although the UC argues that more graduate students are needed in order to staff large undergraduate courses, it is clear that one of the reasons why our PhD students cannot get jobs after they earn their degrees is that there are so many graduate students teaching undergraduate courses. Moreover, by staffing courses with people lacking PhDs, the message is sent out to administrators that anyone can teach undergraduate courses, and so there is no need to hire new professors.

My argument here is not to denigrate or downgrade graduate education; rather, I am arguing that we have to protect graduate students who are often forced to live in poverty as they await a chance to compete in the academic job lottery.

Monday, August 1, 2011

The Big Audit Question

While the UC administration has tried to portray the state audit as a wasteful use of taxpayer dollars that came up with nothing important, the university will not be able to just walk away from some of the auditor’s finding. In fact, UC is required to report on their compliance with the audit’s recommendations, and one of the biggest issues still remains how the system redistributes tuition dollars and state funds to the campus. As the audit explains, “Because the Office of the President does not provide all money in the general funds and tuition budget to the campuses on a per-student basis (for example, it provides funding for specific research and public service programs to individual campuses), we understand that differences likely will exist. However, we would also expect that the university would be able to identify the reasons for any differences in the per-student base budgets provided to the campuses. The Office of the President stated that variation in base budgets is the cumulative result of decades of budget decisions by the regents and past presidents to achieve the university’s mission of teaching, research, and public service, and that quantifying the impact of these decisions would require an extraordinary amount of analysis by budget staff. The Office of the President believes that such an analysis would not be a good use of limited administrative resources.” Perhaps it would be difficult to document the history behind the redistribution of funds, but it should not be hard to simply explain the current method.

After all, the UC now claims that it will allow the campuses to keep all of the funds they generate on their own, and what they are working on is how to distribute state funds. Yet, in my analysis of several documents generated by the Academic Council and various Senate committees, I have discovered that a battle is being fought between the wealthy and the poorer campuses, and there are many loopholes to the redistribution of state funds and tuition dollars. Even though the campuses will keep their tuition revenue, the new system is supposed to be “revenue neutral,” which means that the current system of covert redistribution will remain.

As the audit indicates, the wealthier campuses are resisting any move to fund the campuses on an equal basis: “The Office of the President further stated that it is a goal of the university that all campuses achieve the level of excellence in teaching, research, and public service achieved by the Berkeley and Los Angeles campuses, although each in its own unique areas, and that while other campuses receive a lower amount of funding per student due to the factors discussed previously, without a significant increase in investment from the State, it would be problematic to equalize funding. It further stated that the university does not wish to jeopardize the achievements of the Berkeley and Los Angeles campuses by shifting funds away to other campuses in an effort to provide an equal amount of the general funds and tuition budget per student.” I quote this passage at length because it reveals the current battle being waged among the different campuses. After all, the UC has always been divided internally between the quest to allow some campuses to be superstars and the countering desire to make sure all campuses flourish. Obviously, the UC cannot have it both ways, and so the tradition is to muddle through and keep everything hidden and non-transparent.

Funding Streams
If we now turn to UCOP’s new policy on funding streams, we learn that, “Beginning in 2011-12, all campus-generated funds will be retained or returned to the source campus. Current policies and practices that distribute a share of fee funds, indirect cost recovery funds, patent revenues, Short-Term Investment Pool earnings, and application fee revenues to the systemwide budget and/or other campuses will be eliminated. Implementation of this principle will require “un-pooling” of General Funds revenues, which will be conducted in a manner that is largely revenue-neutral to campuses upon implementation.” Once again, it is hard to imagine how the new policy will allow the campuses to keep all of their funds, while it remains “largely revenue-neutral.” Perhaps the idea is that the wealthy campuses will make up for any losses by increasing their number of high paying nonresident students and professional students.

The new UCOP policy also indicates that some type of redistribution will still occur through financial aid: “Funding of the undergraduate University Student Aid Program (USAP) will be handled separately and will be an exception to the overarching principle. Each year, campuses will be directed to allocate a specified share of fee revenues to USAP. As needed, campuses may be assessed a specific amount for redistribution to other campuses in order to achieve the Education Financing Model goal of equal loan/work levels across the system.” Thus to pay for the financial aid on the campuses with a high level of aid-eligible students, the campuses with a lower percentage of lower-income students will have to transfer funds to the low-income campuses. It is hard to predict what kind of perverse incentives this new system will produce.

It is important to stress that while UCOP objected to the auditor’s implication that the current system subsidizes wealthier campuses by taking funds away from the campuses with more under-represented students, the new policy report does justify the practice of cross-subsidization: “The high tuition charged to nonresident undergraduates may help fund fellowships for graduate students. Student fee revenue derived from lower-cost disciplines may subsidize instructional equipment purchases in other areas. Student fees for general campus instruction may subsidize the health sciences, while indirect cost recovery on health science research provides a complementary subsidy for general campus activities.” Of course it would be impossible to eliminate the tradition of cross-subsidization, but the question remains whether the university can actually account for who is sending money to whom.

In one of the most clarifying passages, UCOP actually admits that subsidization is occurring between campuses: “When student fees were modest, this consequence was not a major concern. Over the last decade, with student fees rising to levels approaching the level of per-student support from the State, concern has been expressed about the fairness and appropriateness of using student fees derived at one campus to fund increases in faculty salaries and other costs at another campus.” As I have been arguing now for a few years, this type of covert subsidization is the central problem: undergraduate students are subsidizing research faculty on other campuses and parents, students, and taxpayers were never told about this practice.

UCOP can now claim that it is changing this covert funding system, but there are so many loopholes in their new policy that I fear very little will change. Not only has the system failed to determine how to distribute state funds, but it looks like it will be allowing campuses to set their own revenue and enrollment targets: “While these adjustments are intended to be revenue-­‐neutral upon implementation, campuses will experience budget increases if revenues rise. Likewise, campuses will be responsible for addressing budget shortfalls if revenues decline.” This final sentence begs the question of what does a campus do if it cannot attract more high-paying nonresident students or professional students.

Ultimately, it appears that very little will change, and the highest-ranked campuses will continue to receive more funding, while the poor campuses will become poorer. This sounds a lot like America writ large.

Thursday, July 28, 2011

State Releases Audit of UC System

After more than a year of research and investigation, the state auditor has released her audit of the UC system. The major findings can be found in the following passage: “the university budgeted widely varying amounts to its 10 campuses. For fiscal year 2009–10, the per-student budget amount ranged from $12,309 for the Santa Barbara campus to $55,186 for the San Francisco campus. Although the university identified four factors that it believes contributed to the differing budget amounts, it did not quantify their effects. The university can also improve the transparency of its financial operations. Although the university publishes annually a report of the campuses’ financial schedules, it could provide other information including beginning and ending balances for individual funds and could publish consistent information for its auxiliary enterprises. We further reported that the Office of the President needs to more precisely track about $1 billion of expenses annually that it currently tracks in a single accounting code—Miscellaneous Services—and that a recent change in university policy allows campuses to subsidize auxiliary enterprises with funding from other sources, despite the intent that they be self-supporting. Finally, we discovered two instances when the university designated $23 million in student funding to pay for capital projects on the Los Angeles campus that were not authorized by the student referendum establishing the fee.” These findings reveal that the UC has been covertly redistributing state funds and student tuition dollars without the knowledge of student, parents, and taxpayers. Moreover, while the UC has improved aspects of its budget transparency, there still is a great deal of money that cannot be traced. In short, the UC fails to act like a public institution because it does not provide important information to the public.

In its response to these criticisms, the UC argues that its budgetary system is simply too complex to explain, and a more detailed analysis of its spending and funding would require many staff hours and years to gather: “I cannot help but comment on the extraordinary time and effort – and considerable expense on the part of the BSA and the University – that went into this audit, which in the end found only minor issues to address. We are proud of the fact that we have come through this review with validation of so many of our procedures and policies which in recent years have come under considerable public scrutiny. But, at what cost? I urge the Legislative Audit Committee to require those who seek to use the limited audit resources of the State to provide more evidence of malfeasance than innuendo and presupposition behind their requests.” The UC clearly does not get it if they think that the audit only dealt with “minor issues” like the secret redistribution of state funds and student tuition or the inability of the system to track its own expenses.

In response to UC’s response, the auditor retorts: “We appreciate the university’s concern about the trade‐off in staff time to implement this recommendation. In that light, the university may wish to consider implementing a Web site similar to the one we created that contains supplemental accounting information we obtained during this audit. On our Web site, we present a link (‐105/) to information related to public funding from the university’s corporate financial system related to fund categories; fund groups; and funds that includes beginning balances, revenues, expenses, transfers, and ending balances. Our information technology team created this Web site using fewer than 60 hours of staff time. We therefore fail to see why the university believes it needs between 12 and 18 months to review and implement this recommendation.” As the auditor implies, on the one hand, the system says that it highly transparent, and at the same time, they argue that they cannot afford to clarify their complicated budgetary system.

In one of the more surprising findings in the audit, we found out that the regents have the authority to use any student voted fees for any purpose the regents want to pursue: “According to the Office of the President, referendum results are advisory under Section 84.20 of the policy, and the regents retain ultimate authority under the State Constitution to impose or modify any and all student fees, including those established by campus‐based referenda.” So if the students vote to fund a learning center, the regents can use the money to fund a new athletic center.

Speaking of athletics, the regents have also authorized a change in policy that allows self-supporting auxiliaries to be funded by multiple funding sources: “Campuses are provided the flexibility to organize and manage their auxiliary operations to meet their individual needs under the University’s Business and Finance Bulletin A-72, Establishment of Auxiliary Enterprises (BFB-72). Generally, auxiliaries are self-supporting, although they are not required to be self-supporting. Other appropriate funds can be used to support auxiliary organizations at the discretion of the chancellor. Donor gifts are an example of funds from other appropriate sources that may be used to support an auxiliary organization. Funds from other sources are only used when permitted.” In other words, self-supporting entities don’t have to be self-supporting.

Turning to the most controversial aspect of the report, the auditor points out that the campuses serving the most under-represented students also get the lowest level of findings. While it is understandable that the university objects to this conclusion, they cannot object to the facts. Whatever the cause, the reality is that Black and Hispanic students may be receiving an inferior education because their tuition dollars are going to support non-under-represented professional students on other campuses. A more accurate description of this situation is that a side-effect of undergraduates subsidizing graduate and professional students on other campuses is that under-represented students are being under-funded.

As the report indicates, the UC is going through the process of changing its funding streams so that campuses get to keep their tuition dollars and other revenue; however, the university still has not figured out what to do about state funds, which make up for most of the inequity caused by redistribution. Furthermore, the UC has argued that the new funding model will be revenue neutral, which means that the wealthy campuses will remain wealthy, while the poor campuses stay poor.

On a positive note, the auditor calls for the UC to distinguish among the costs of undergraduate, graduate, and professional education: “As part of its reexamination of the base budget, it should . . . identify the amount of revenues from the general funds and tuition budget that each campus receives for specific types of students (such as undergraduate, graduate, and health sciences) and explain any differences in the amount provided per student among the campuses.” If the UC does clarify these difference, we can begin to see how the university is really spending its money.

More later.

Click here for UC’s counter-productive spin

Tuesday, July 19, 2011

Our Irrational Higher Ed Economy

David Segal's New York Times article on the economics of law schools highlights many of the same factors that we presently see facing the University of California and other universities and colleges: while the price for higher education continues to escalate, the quality of instruction is being downsized. In the case of law schools, Segal reports that many schools are increasing their enrollments and raising their tuition because there is such a high demand from students, and even though many students with large loans can not find jobs when they graduate, schools are not reducing the supply: “Legal diplomas have such allure that law schools have been able to jack up tuition four times faster than the soaring cost of college. And many law schools have added students to their incoming classes — a step that, for them, means almost pure profits — even during the worst recession in the legal profession’s history.”

Segal hints that one reason why some law schools are increasing their price tag and their enrollments is that it helps them raise their standing in the all-important U.S. News & World Report rankings: “There are many reasons for this ever-climbing sticker price, but the most bizarre comes courtesy of the highly influential US News rankings. Part of the US News algorithm is a figure called expenditures per student, which is essentially the sum that a school spends on teacher salaries, libraries and other education expenses, divided by the number of students.” As I have pointed out before, this standard method of university accounting not only has no real relation to educational quality, but it pushes schools to increase their budgets by supporting unnecessary expenses like new administrative positions.

Just as the counter-productive U.S. News ranking system distorts the priorities of higher education institutions, an equally faulty bond rating system pushes schools to increase tuition and enrollments: “Like all stand-alone institutions, N.Y.L.S. is even more dependent on student tuition than those attached to universities, and Moody’s highlighted this fact in its 2006 appraisal of the school’s bonds. Under a section about potential “challenges” that could lead to a downgrade, Moody’s cited “significant and sustained deterioration of student market position.”” In other words, schools are told that if they do not increase their revenue generated from students, the schools’ will see their bond ratings go down and their interest rates go up.
Thus in the pursuit of higher rankings and lower interest rates, universities and colleges force more students to take on higher debt during a time when there are fewer jobs. The central decisions of our institutions of higher education are therefore being determined by faulty rating and ranking systems in which no one really believes and everyone uses. Welcome to the irrational economy and the death of the middle class.

Wednesday, July 13, 2011

A Tale of Two UCs

As we get ready for another large tuition increase, and we read about the elimination of several UC degree programs, the bond rating agency, Fitch, has re-affirmed the university’s strong fiscal standing. While the bond raters have been wrong in the past, we can still read the latest analysis of UC’s fiscal health as indicating the real priorities of the administration.

Since the UC has decided to help reduce its pension liability by selling about $1 billion of commercial paper (debt), it has asked to have its financial status rated. As I have argued in the past, due to the UCs high level of debt, it is dependent on getting a high rating from the bond raters so that it can receive a low interest rate, and one result of this dependency on debt is that the bond raters can tell the university how they think the system should structure its finances. Moreover, even though the bond raters pretend to be neutral and free of any ideology, they covertly push the same agenda that we find in the World Bank and the International Monetary fund. This agenda pushes for the privatization of public entities, a taking on of huge debts, and the deregulation of markets. The plan for the UC set out by Fitch is thus in many ways the global plan being pushed by conservatives and bond raters.

In reading the summary of Fitch’s report, we learn that the university has received a high rating because of, “UC's substantial level of balance sheet resources and liquidity; diverse revenue base, which enables the system to weather temporary weakness in any one funding source; and manageable debt burden, despite the expansive, capital intensive nature of its operations.” In other words, UC has many different revenue streams, and although it has a high level of debt, over $14 billion, it has the resources to take care of its financial obligations.

According to Fitch, one of the main signs of UC’s fiscal health is its ability to constantly raise tuition: “Recent reductions in state appropriations, and the potential for additional cuts through the intermediate term, are partially mitigated by the university's still considerable, though now more limited, ability to raise tuition and fees, and its overall limited reliance on state operating support.” In other words, the UC should not worry too much about losing state funds because it has shown a willingness to raise tuition. In fact, this same logic of privatization is driving the state’s reduction of funding for the UC; since the Democrats believe they cannot raise taxes, they cut the UC, which they know will turn around and raise tuition.

Not only does the state feel comfortable reducing the university’s funding, but they are planning to borrow another $1 billion from the UC system, and the reason why the administration will accept this deal is that the university will turn a profit by lending money to the state. This deal make sense on paper because due to UC’s high bond rating and the state’s low rating, the state has to pay a higher interest rate to borrow money, and if the UC lends money, the state can improve its bond rating, and the UC can profit from the difference between its low interest rate and the state’s high interest rate.

What is left out of this equation is that students are paying 6.8% to take out their loans, and these loans not only allow the UC to raise tuition, but the money generated from tuition can be leant to the state at something like 5%, which is better than the 2-3% the UC gets from putting tuition dollars into its Short Term Investment Pool. If we connect the dots, we see that students are lending money to the state, so that the university can bring in more money, but the end result is that the students will have to pay for this interest deal.

Perhaps the biggest casualty of this constant escalation of tuition is the middle class. While students whose parents make below $50,000 will have their tuition covered by financial aid, other students who are not rich and do not qualify for aid will end up paying more and taking out huge loans. In fact, over the period of 1999 to 2009, the percentage of UC students whose parents combined income is between $50,000 and $150,000 has gone from 50% to 40%.

As I have stressed before, almost everything the UC does loses money, and so the only stable source of income is student tuition dollars. Ultimately, the state and the bond raters are telling the UC to screw the middle class, and the UC is obliging on a regular basis.

Thursday, July 7, 2011

UC’s Steady Move to Privatization

At the next UC regents meeting, a proposal will be presented to increase tuition by 9.6%, which will be added to the previously accepted 8% increase for a total increase of 17.6%. The official reason for this increase is that the state has reduced UC funding by $650 million. Moreover, the anticipated state cut has also pushed UC Berkeley, UCLA, and UCSD to increase its nonresident student enrollments, and in the case of Berkeley, about a third of its new students are coming from outside of California, and these nonresident students are very attractive because they full tuition without any financial aid. This is what privatization looks look.

By increasing the cost of attendance and decreasing the percentage of Californian students, the UC is following in the footsteps of Michigan and Virginia, and the result will soon be that a larger proportion of students will come from outside of California and more of them will come from families in the top income bracket. However, unlike Michigan and Virginia, the UC is still dedicated to using financial aid to make school affordable for lower-income and lower-middle class students. Of course, something has to give here, and it is the Californian middle-class students who cannot afford the increased tuition but do not qualify for financial aid who will find themselves excluded from a UC education.

The UC likes to argue that it has no choice but to raise tuition and chase nonresident students, but as I have shown before, the administration’s logic is flawed. If the university wanted to, it could decrease tuition and increase student enrollments, but this would require a very different funding model. Instead of having undergraduates subsidize graduate education, professional education, research, and administration, the system could make sure that each sector could support itself. This process would require budgetary transparency and an increase in funding for for graduate and professional students.

When in the past I have called for this type of budgeting, I have been told that the only way to maintain UC’s excellence is by hiding its funding process from the public and everyone else. In other words, if people knew that the UC was jacking up undergraduate tuition in order to support expensive graduate and research programs, citizens would rebel and call for the defunding of the university. However, my response is that only a transparent budget would allow us to see if there really are non-essential costs that could be eliminated. In fact, part of being a public university is allowing the public to see how you really spend your funds.

Yet, while professors and administrators often complain about the creeping privatization of the UC system, they still want to be paid like they are working for private schools. Moreover, the fear of losing star professors to elite private universities pushes the system to pay some of its employees at a high market rate, while all of the other faculty members and workers are asked to do more for less. By allowing individual faculty members to negotiate private deals with administrators, the system not only creates collusion between the faculty and the administration, but it also drives up costs as it eliminates transparency and equity.

This system of private deals at a public university is going to get even worse if the regents approve of the plan of letting the president decide on his own about employee compensation increases. This new system will not only decrease transparency, but it will also increase inequality as the president garners support by handing out raises. Public institutions do not function this way; rather, this is how autocrats rise to power and maintain their control. If we really want a public university, all of us have to fight for it.

Tuesday, June 28, 2011

Brown Delivers a Republican Budget without Republicans

In any other year, the new budget plan supported by Governor Brown and the Democrats in the legislature would have been considered a major victory for fiscal conservatives. Not only does the budget reduce vital services by billions of dollars, but it does virtually nothing to increase future revenues. In fact, in the great tradition of Californian governors, Brown can only make his plan seem balanced by projecting wildly optimistic tax returns, and if $4 billion new dollars don't come in, another round of budget cuts will be triggered.

What I do not understand is why the progressive caucus in the legislature did not try to block the deal and put on the table progressive solutions. Perhaps our only hope is that Brown will work with unions to put progressive taxes on a special election ballot. Brown has even hinted that he might support modifying Prop 13.

In terms of the UC, the news is mixed. We did not get the full $1 billion cut, but more reductions will occur if the rosy tax revenue predictions do not come to fruition. Of course, the total cut of $650 million will justify a new round of tuition increases and a faster slide towards privatization.

Tuesday, June 21, 2011

The State of the State: A Progressive Solution

The current California budget conflict is unlike any other; not only has the governor vetoed an entire state budget for the first time in history, but it is unclear whether his own party knew that he was going to reject their complicated budget proposal. I personally find it hard to believe that the Democratic leadership did not know that the governor was going to veto their plan. After all, I predicted that the legislators would come up with some plan just to make sure they could meet their June 15th deadline in order to get their paychecks. I also know that the governor is dead set on having citizens vote on tax extensions, and he believes that he can get the four Republican votes he needs to put the taxes on the ballot; however, everything has become complicated by the new voting districts, which give the Democrats the hope that they can win a super-majority in the legislature, and therefore they may not need the Republicans at all in the future.

As I have previously written, all of the plans being discussed are bad, and if Brown decides to use the unions to fund a petition-gathering effort, the unions should insist that the current tax extensions be discarded, and a whole new set of progressive taxes must be presented. Not only would it be easier to pass a tax on the wealthiest Californians, but it would be more just and fair. Moreover, a tax on oil extraction to increase funding for higher education would also be a popular tax, and it is even worth the effort to put a majority vote for new revenue on the ballot.

The best possible strategy would be for Brown to pass a modified version of the budget he has just vetoed and then work with the unions to place progressive taxes on a special election ballot. Brown could also use the new projected tax revenue to reduce the state cuts to higher education and other needed public services. If the unions work together and present a united front to the governor, we can push for a progressive solution to help all Californians.

Friday, June 10, 2011

Jerry Brown’s Bad Budget Deal

It looks very possible that Governor Brown will get enough Republican votes next week to pass a state budget and put tax extensions on a special election ballot for September. The remaining stumbling block is the extension of the current taxes, which are set to expire July 1, and Brown wants them to continue until the special election. Here is why I think the whole budget deal is very bad:

1. Brown has basically endorsed the conservative argument that our state and national fiscal problems are due to governmental over-spending. While he is calling for a vote on the tax extensions, his budget relies on deep cuts to needed social programs coupled with a scaling back of pensions and an elimination of several state offices. In other words, he is endorsing the conservative push for austerity during a time when we need increased support for jobs and benefits.

2. It is possible that the voters will reject the tax extensions, and then we move to an all-cuts budget, which only an extreme right-wing proponent of government and taxes could support. Once again, it has taken a Democrat to fulfill Republican promises.

3. In order to push for the tax extensions, which place most of the burden on struggling middle-class and lower-class workers, unions and Democratic politicians will have to spend huge sums of money fighting for a very bad deal.

4. Even if the tax extensions do pass, they serve as a temporary fix, and they do not address the fundamental revenue problem of the state. Moreover, if the budget comes with a spending cap, the horrible cuts to social programs will be locked in.

The only solution is for the Democrats to simply refuse to sign onto any budget deal and to turn their attention to a special election to support real progressive solutions like the end of the rule requiring a super majority vote on taxes in the legislature.

Tuesday, May 31, 2011

More Questions and Answers Regarding the UC Budget

One of the most surprising facts that have come out of my exchanges with the budget office of UCOP is that only 38% of the cost of instruction is spent on faculty salaries and benefits. Another interesting fact is that the university claims it spends almost the same amount of money on departmental support as it does on faculty salaries. Furthermore, in a new response to my questions regarding this data, I have been told that only 62.8% of state funds go to support general campus activities; in other words, 37.2% of state funds go to the health sciences, research, and public services.

While the UCOP budget office feels that I have unfairly called them non-transparent, they also freely admit that none of these calculations of the cost of instruction can be found on any of their web sites. They have also added that their budgeting methods are highly complex, and there is often no clear way of tracing how funds are actually spent. For example, in response to my inquiry into how much state funds go to support summer instruction, I got the following: “The amount of State funding dedicated to summer sessions is not easily determined due to the variety of funding arrangements both within and across the campuses and the fact that recent budget cuts have reduced significantly the amount of funding available for all of instruction.” I think this is an honest answer, but it shows how difficult it is for the university to have any type of real budget transparency.

This problem of following the money is evident in UCOP’s response to my question concerning the different costs of educating undergraduates versus graduate students: “Due to the costs and the cross-subsidization of undergraduate and graduate instruction and research, and at the suggestion of the Legislative Analyst’s Office, these analyses were discontinued. No analyses were done to determine the undergraduate versus graduate costs of operating libraries, maintaining facilities, or managing the University.” Since the university cannot figure out how to separate costs for graduate and undergraduate students, it now simply uses a generalized average that makes it impossible to tell how the system is actually spending its money.

The problem of budget transparency is so important because even though the university claims that reducing undergraduate enrollments is a way to save money, they really do not know if this true. In fact, while the official policy of the regents is to increase the number of graduate students versus undergraduates, it is clear that the campuses are doing the opposite, and I suspect the reason for this conflict is that the local leaders realize that undergraduates are the only real source of flexible income.

In order to correct these problems, we need to work with the Legislative Analyst and the Department of Finance to require the university to calculate the real cost of educating undergraduate, graduate, and professional students. We should also require the university to report on its non-instructional costs with the goal of seeing how much the campuses are spending on administration.