Comments on: Salary Cuts at UC

By: Mariam Grodzins

Mariam Grodzins — Fri, 24 Jul 2009 01:35:25 +0000

I received a press release from UPTE (University Professional and Technical Employees) today (July 23) headlined “UC Regents award huge pay increases to execs while furloughing staff.” The press release includes over four pages of specific examples, and can be found at:

http://www.upte.org/about/press/2009-07-23.pdf

Anyone wondering about President Yudof’s personal commitment to shared sacrifice might be interested to learn that he was awarded $3,548 to cover costs of shipping vehicles from Austin Texas . . . in addition to [his] annual car allowance of $8,916.”

Check out the press release. There’s lots more.

By: A J Cascardi

A J Cascardi — Wed, 01 Jul 2009 02:56:06 +0000

It seems that the UCOP decides how strict or lax it wants to be about the use of “restricted” funds. In times of budget difficulty it wants to be lax, though it wants to be strict in times of surplus. The problem is that, without legal challenge, the policy fluctuations will continue to be set by UCOP.

AJ Cascardi,
Professor, US Berkeley

By: Mariam Grodzins

Mariam Grodzins — Sun, 28 Jun 2009 17:37:17 +0000

Your article tells us that Yudof’s proposal will be presented to the Regents as a formal “Declaration of Financial Emergency,” which if approved will allow him to do more or less anything he wants. It seems highly unlikely (assuming your numbers are correct) that Yudof was unaware that his plan would yield the results you describe. Taken together with the Declaration of Financial Emergency, it looks like his numbers are not the result of an honest mistake, but a power grab with the specific goal of leaving him with a big pile of money to spend as he wishes, at the expense of UC employees.

At the Budget Town Hall at UCLA on June 24, 2009, Steve Olsen, Vice Chancellor for Finance, Budget and Capital Programs, apparently confirmed this when he said: “If you calculate the salary savings, it adds up to far more money than is needed for the budgetary savings. . . . The reason is that the University of California is a very financially diverse organization, has lots of different funding sources of which only a portion represents the General Fund, which is the state part of it. So, the savings that are needed for the budget are around $195 million. The reason that the savings are actually greater than that is . . . the equity principle.”

The equity principle, which you call in your paper the “Principle of Equity in Sacrifice,” appears to be designed to obscure the real purpose of the plan, which is that Yudof wants the 8 percent cut because he has things he wants to do with the extra saved money. Is there a reason why he hasn’t mentioned what those things are? It seems unlikely that the plan is the result of his personal dedication to the Principle of Equity in Sacrifice.

By: Sprouler

Sprouler — Wed, 24 Jun 2009 22:58:01 +0000

Very good questions asked above… 1)Did your analysis, Prof. Schwartz, include overhead? and 2)Will the State in the end lose because of the income tax not paid by all the non-UC-funded salaries cut? I suppose 3)will Yudof use all the funds freed up in his plan to cut all (including non-UC) salary costs to shore up the UC pension?

By: O. Kay

O. Kay — Tue, 23 Jun 2009 19:47:45 +0000

Fantastic and lucid analysis by the esteemed professor.
Thank you so much for your good works sir.
I look forward to seeing your due diligence on behalf of staff, students and the University-at-large continue…

Best,
~ok~

By: Catter Aobe

Catter Aobe — Tue, 23 Jun 2009 19:32:11 +0000

You need to also consider overhead. Salary paid out of Federal funds or contract funds is taxed by the university at 50%. So if salaries paid out of Federal funds are cut by $100 M then the university saves none of that money and actually loses $50 M. That’s really nonsensical! The same overhead is taxed on contract funds also.

Gift funds are not charged overhead but they are also taxed for “administrative costs” at 15%. So cutting those salaries will also cost the university money.

Also, the state earns income tax from all salaries. I don’t know what the average tax rate is for UC but I’d figure 15% is a reasonable average. By cutting salaries that don’t save UC money the state loses tax earnings. Also those people then will stop buying goods which slows the economy. It’s the exact opposite of a stimulus plan.

Clearly some people who actually understand economics need to have a say in what UC is doing. The current plan is a disaster.