Pension Plan as football between UC and Sacramento
by Charles Schwartz, UC Berkeley
In an enthusiastic letter to faculty and staff issued today (10/13), President Yudof talks about the new state budget and how it is good for the University. Here is one particular paragraph where he talks about UCRP, our financially stressed pension plan.
“The Legislature also adopted budget bill language asking for the Legislative Analyst, the Department of Finance and UC to work together on a proposal to fund UCRP in the future. This is a very positive sign.”
I wrote to Steve Boilard, of the Legislative Analyst’s Office in Sacramento, asking if he had any further information about this. Here is the reply I received.
“Well, it’s not as positive as you might think. The Governor vetoed the language. [See Footnote for details.] We had spearheaded the effort to get language in the budget calling for such a proposal. We agree with many others that (1) there’s no way to avoid re-starting contributions to the plan, (2) unfunded obligations are already mounting, and (3) the particular plan for restarting contributions (who pays what, and when) should be discussed among all parties.
“Here’s the Gov’s veto language: Item 6440-001-0001-For support of University of California. I revise this item by deleting Provision 17. I am vetoing the provisional language that would require the University of California (UC) to report on its proposal for long-term state funding for the UC Retirement Plan (UCRP), including any alternative funding plans that might be proposed. This language is unnecessary, as forwarding every proposal received from any person or entity is unwarranted. Further, the UC Office of the President is committed to reporting on its UCRP proposals and has indicated that it would provide detailed reports on the long-term funding of the UCRP without the adoption of this language”
That sounds to me like President Yudof is playing a rather dishonest game with all of us. I have also heard, from an anonymous but well-informed source, that there are rumors in Sacramento to the effect that UC asked the Governor to veto that language about UCRP.
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Footnote. Here is the full text of the Legislative language referred to above.
17. The Legislature requests that the Regents of the University of California, following consultation of university executive staff with all employee bargaining units and the Academic Senate, submit a proposal, along with any alternative proposal by the consulted groups, for the long-term funding of the University of California Retirement Plan on or before March 15, 2011. The proposal should include all of the following: (a) A description of projected employer and employee contribution rates for each of the next 30 fiscal years, based on reasonable projections and assumptions, including reasonable assumptions of future university growth and hiring, developed by the university and its actuaries. (b) A proposed methodology for determining the amount, if any, of General Fund augmentations to fund the plan in future fiscal years, including a specific methodology for determining the portion of payroll allocable to the General Fund for these purposes. (c) A proposed methodology for increasing or decreasing employee, employer, state, or other contributions in the event that the plan’s normal costs or unfunded accrued actuarial liabilities, and the costs associated with those liabilities, differ from those that are projected. (d) Any proposed changes to pension benefit levels for future university employees necessary to implement the funding plan proposal. (e) Any proposed statutory changes necessary to implement the funding plan proposal. The proposal should incorporate reasonable projections concerning future receipts of federal funding for the plan and should include graphs and figures, as appropriate, to display the effects of proposals both in dollars and as a percentage of payroll. Sensitivity analyses displaying the fiscal effects of different assumptions for investment returns are encouraged. The university is requested to submit copies of the report to the Chairperson of the Joint Legislative Budget Committee, the chairpersons and vice chairpersons of relevant fiscal and policy committees of the Legislature, the Governor, the Director of Finance, the Legislative Analyst, and representatives of the faculty and staff bargaining units. Nothing in this provision or any other provision of law shall be interpreted to create any type of commitment or obligation, either express or implied, for the General Fund to contribute any moneys in any fiscal year to the university or its retirement plan.