The Gilded 36 and What "Demoralizing" Really Means at UC

By Gregory Levine and Louise Fortmann
Crossposted with Sacramento Bee

On December 29, 2010 the San Francisco Chronicle reported that, "Three dozen of the University of California's highest paid executives are threatening to sue unless UC agrees to spend tens of millions of dollars to dramatically increase retirement benefits for employees earning more than $245,000."

Some of these "Gilded 36" receive salaries in excess of $500,000. All will receive sizable pensions, even without this increase, while their salaries, bonuses, and perks allow opportunities for additional retirement saving and investment. These are opportunities the majority of UC employees and Californians can only dream of.

In their letter to UC President Mark Yudof, these executives and deans stated that failure to increase their pension benefits would be "demoralizing" to them. We- faculty who teach and guide students towards careers and contributions to society- point to other, far more demoralizing trends on UC campuses: Tuition increases that force students to borrow more, take on second jobs, and withdraw before finishing their degrees; budget cuts that vaporize classes in key subjects, wipe out hours of library access, and leave unfixed broken chairs, projectors, and lavatories; layoffs of skilled staff that gut essential services; declining graduate student funding that leads the brightest applicants to choose private Universities over UC; realizing that teaching and working at UC does not mean that you can afford to send your own children to its campuses.

The question to ask the Gilded 36 goes beyond contracts and lawsuits: Can their demand for tens of millions of dollars in additional pension payout be justified morally and ethically given the fiscal shortfall facing California, when budget cuts imperil the instructional and research mission of UC, and when the UC employee pension faces a $21.6 Billion unfunded obligation that threatens the futures of thousands of UC employees and their families? By making the UC pension appear to be an excessive giveaway, the Gilded 36's demand obscures the real function of the pension as deferred payment for the hard work that UC employees do now to ensure that the University remains an engine of education, innovation, and shared benefit for California.


We feel no sympathy when the Gilded 36 complain that a deal is a deal. The Master Plan for Higher Education was a "deal" with the people of California, their children, and their children's children. It has been broken repeatedly by the state's defunding of public education and mismanagement by UC Presidents and Regents. Some deals, when broken, mean the difference between a higher or a lower six-figure pension. Other deals, when broken, undermine the world's greatest public university system, narrow access to education, and threaten California's economic recovery and cultural vitality.

We feel no sympathy for the administrative and academic elite who claim the right to be compensated at "market value," when they have accepted employment at a public university and receive salaries that, while not at market value, are often higher than the salaries of the majority of UC employees and Californians by a factor of ten. We reject the assertion that executives at the top must be retained whatever the cost. This big business notion is antithetical to UC's core missions: expanding access to the highest quality teaching and maintaining the highest caliber of research for the good of California as a whole. The Gilded 36 should model themselves not after private sector executives but after UC faculty and staff who teach and work at strikingly non-market value salaries because they care about more than simply personal financial gain; they care about the public good.

We feel no sympathy for the suggestion that these high-paid UC employees have sacrificed much during this crisis. How many of the Gilded 36 worry about meeting basic living costs, not the costs of luxury? Many Californians and many UC employees and students worry on a daily basis about keeping a roof over their heads and paying for heat, food, healthcare, daycare, and transportation.

The hardships of the fiscal crisis at UC are felt most painfully not by its executive and academic elite but by the majority of students, staff, lecturers, and faculty. This majority- together with UC alumni and indeed all Californians who value fairness and equity- should speak out forcefully and repeatedly against the blatant greed demonstrated by the Gilded 36 as well as the larger ideology of private greed and entitlement that is destroying public education and, arguably, the state as a whole. UC's leaders, as servants of the public good, must demonstrate to the Governor, state legislature, and people of California that educational access and quality and support for advanced research- being essential to California's future- must come before the disproportionate personal gain of the few.

Gregory Levine
Associate Professor of Art History, UC Berkeley, for SAVE the University

Louise Fortmann
Professor of Environmental Science, Policy and Management, UC Berkeley, for the Berkeley Faculty Association

According to Herodotus They Only Needed 300

“I do not know of any organization that achieves budget discipline from the bottom up. We need to be sufficiently top-down to get the job done. Nobody’s going to volunteer to make the kind of changes that are required.”
                  Christopher Edley (94)

Some of the discussion on Chris' post regarding the letter from the 36 in defense of their pensions has focused on the number of those affected.  Part of the problem in calculating this number has to do with the lack of clarity about what constitutes "covered compensation."  I cannot clarify for individual cases but the official program description for UCRP (for members with Social Security) indicates on page 26 the following definition of Covered Compensation:

Covered Compensation 
 
The gross monthly pay that an active employee receives for a regular and normal appointment, including pay while on sabbatical or other approved leave of absence with pay. Not included are:

pay for overtime unless in the form of compensatory time off;

pay for correspondence courses, summer session, intersession and for interquarter or vacation  periods or University extension courses, unless such employment constitutes part of an annual or indefinite appointment;
 
pay for a position that is not normally full time except if paid on a salary or hourly rate basis;

pay that exceeds the full-time rate for the regular, normal position to which the member is appointed;
 
pay that exceeds the base salary as negotiated under the General Health Sciences Compensation Plan or Medical School Clinical Compensation Plan;
 
pay that exceeds the established base pay rates, including nonelective deferred compensation, honoraria and consulting fees; payments received as uniform allowance, unless included as part of compensation for a regular and normal appointment;
 
pay that exceeds the IRC §401(a)(17) dollar limit.

For Plan year 2009–2010, the earnings limit is $245,000. (For those who were active members before July 1, 1994, the earnings limit for Plan year 2009–2010 is $360,000.); and payments received as housing allowance beginning with January 1994 earnings.

Covered compensation does not include pay from sources other than the University of California.

Now I have to admit that some of these categories make no sense to me but others may know better.

I would also point out that if you run the ucglobalpay and use the category of professor (you can do tis for the system and not for any single campus), put in a base salary of $245,000 (just for a test)  not only do the numbers drop considerably (you get 403 total but only 219 for professors in the 2009 year)  but they are overwhelmingly located--surprise!--in the medical schools and to a lesser extent in the professional schools.
Just for the record if you put $245,000 in the line for "gross pay" (although I suspect that gross pay is not the correct category given the covered compensation definitions above) you get total 2124, for Professors 851.  Similar patters about medical schools and professional schools seem to apply (although I did it quickly)

That is where the financial action is on this issue.

Just Trying to Say that We Don't Care

UC"s latest image disaster came in the form of what I dearly hope is UC's final 2010 appearance in the California press.  Today's San Francisco Chronicle headline reads, "Highest-paid UC execs demand millions in benefits."   This refers to a demand by 36 senior executives that the Regents authorize UC to "calculate [their] retirement benefits as a percentage of their entire salaries, instead of the federally instituted limit of $245,000. The difference would be significant for the more than 200 UC employees who currently earn more than $245,000."

The salaries and the payouts are explained in this graphic. A $400,000 salary with the cap yields a pension of about $184,000 a year, but is bumped to $300,000 a year without.

I have never seen comments on any SF Chronicle story like the ones prompted here. There were 750 when I started this post. There will be over 800 before I finish.  I would guess that 740 of them are negative, except that I haven't found a supportive one yet.  Hundreds are furiously hostile. In the poll, only 5% think that the higher pensions should be granted if the university incurred a legal obligation to pay them.  Nearly two-thirds take option 3, which is that the letter writers be fired.

The symbolism of the pension spike is way beyond the actual money: UC's top officials, the ones who set the policies that affect the state, display selfish greed, total oblivion to the public mission, and a tight focus on lining their already bulging pockets. It confirms the majority suspicion that universities like UC care much more about the "bottom line" than about education (Question 6).  People don't see anything in this kind of effort that universities are supposed to be about.  There is in the background a sense of the university's abandonment of the state's suffering middle class, and of course nothing for the poor who still want to send their kids to college. Tuition has tripled over the decade, debt goes up incessantly, public pensions are under attack exactly because of $300,000 payouts,  thousands of students show up to UC every quarter with nothing but borrowed petty cash, and yet what they see senior executives spending their time on is maximizing their personal take.  As one commenter said, "oink oink oink. I know this is a dumb question but what happened to the UC system's mission of educating students?"  And these aren't even the commenters who are angry that UC has good pensions to begin with.



You can read the letter of the 36 to judge for yourself whether they have a legal case. My own reading is that their real argument is what they term the "ethical" one: in 1999 the Regents said they would remove the cap on salary eligible for pension accural if the IRS allowed it, people decided to stay at UC for that reason, the IRS granted the request, and now they are owed extra back pension. President Yudof, in contrast, defines UC's position as saying that the 1999 resolution was never implemented and the cap on the contribution level was not eliminated.  Both of these statements seem to be factually true.  The other argument of the 36 is that UC needs to pay market-level salaries and benefits, and this will only happen if UC removes the cap.


This latter argument is factually false.  UC has been proving for years that it doesn't has to pay market rates, and does so by paying sub-market wages to most of its faculty and staff.  More importantly, this argument displays an ignorance about the status of a public university that drives many people nuts. The 36 want market-level salaries, i.e., a top-end salary at a wealthy private-sector institution.   They at the same time want public-sector defined-benefit pensions, which historically developed to protect employees who made much less than their private-sector counterparts.   Public-sector pensions were never meant to support private-sector executive lifestyles.  The public has absolutely no obligation to pay for them. Hence the logic of the $245,000 cap.


There's a deeper stupidity in all this, which is the energy of this letter on behalf of a tiny group of executives that they have never directed at political and business leaders who've let the University go to hell.  They threaten to depose former Regents and UC Presidents.  When did they ever threaten the Schwarzenegger administration during their endless rounds of fee hikes and general fund cuts?   The 36 are brilliant, passionate advocates for themselves. With one known exception they have done no public advocacy for the university.  All 36 signers are non-instructional executives, and at least half are non-academic, but this is no excuse.  For much of the public, a University still stands for collective betterment, mutual development, enlightenment, progress for all, solidarity, and some kind of common life of knowledge. The wage and benefit inequalities deepened by this pension spike suggest an executive class that is comfortable with the inequalities that are damaging millions of individual lives and the future of the state as a whole. When they stand for the university, the university stands for nothing.


Ditto this sorry lecturing about public funding from the Dean of the UC Irvine Law School, which is actually a clarion call for no caps on executive salaries.  Somehow, the educational activities of UC come down paying senior professors the same that they get at Yale.

One proposal being discussed is freezing or decreasing executive and faculty salaries. But this is no answer. If the University of California is going to retain and attract high-level faculty, it must pay the same as comparable schools across the country. Over the last few weeks, I have negotiated salaries with superb professors we are attempting to recruit who are currently teaching at Harvard, Northwestern and Yale. The University of California must match their current salaries or they will not come. As much as I love living in Southern California, I could not have afforded to leave Duke University if it meant taking a substantial pay cut.

Count the comments on the SFC article calling for exactly that - substantial pay cuts for UC executives, and the rapid return of the discontented to whatever elite school they came from.  The Dean's final sally is this: "To limit tuition increases without increasing state funding, or to prevent the university from paying administrators and faculty at rates similar to comparable schools, would inevitably destroy a great university."  The university's greatness is here defined through its unfettered ability to raise both tuition and executive pay. 

These terrible appeals must come to an end, and here are two simple things that should be done instead. President Yudof should

•  affirm the $245,000 pension calculation cap, giving as his reason the second-tier pensions recently allotted to all future generations and the financial sacrifices that regular UC employees have made for the university.  He should bring this to the Regents for endorsement at their March meeting.
• announce a freeze on new non-instructional administrative hiring.  Even replacement non-instructional hiring should be centrally reviewed.   In addition, President Yudof should announce that given UC's 74% administrative proportion, all new hiring for two years will be instructional, and thus directly involved in the University's core mission of teaching and research.

There are 816 comments on the SFC article.