Friday, February 18, 2005

The Bear Will Hang His Head In Shame 

Dan Weintraub of the Sacramento Bee was the first to spot it:

The UCLA Faculty Assn. has filed a ballot measure with the AG's office that mirrors Schwarzenegger's pension reform proposal with one exception: it would leave in place the defined benefit pension plan for University of California employees. The UC plan is fully funded and in surplus. The faculty group is apparently hoping that when the time comes to start gathering signatures, the governor will choose their proposal rather than his original plan and thus avoid opposition from the university and its employees.”

Alas, it’s all too true. Anthropology professor and UCLA Faculty Association Chair Dwight Read has indeed submitted the “California Public Employee Pension Reform Act” to the Attorney General’s office as one step towards qualifying for the next state election ballot. Most of the text is copied word for word from a measure (ACAX1_1) that was introduced in the legislature back on January 6th to implement the Governor’s plan to strangle the state employee pension system and replace it with privatized accounts. (Background
here and here.)

“But Professor Tax! When we hand in term papers that we’ve copied from the Internet you mark an ‘F’grade on them and you get very upset about ‘plagiarism’ and ‘academic standards’. Isn’t the UCLA Faculty Association setting a really bad example? ”

True -- but the real problem isn’t the plagiarism (legal codes are in the public domain), but the part that’s original with Dr. Read’s Association. Let's look at what they added and changed. The Governor’s original plan in ACAX1_1 would prohibit “defined benefit” pension arrangements for any employee hired after July 1, 2007 by any “public agency” – a defined term that:

“includes, but is not limited to, the State of California, and any city, city and county, or county, including a charter city or charter county, district, school district, University of California, California State University or other political subdivision or public entity of, or organized under the laws of, this State, or any department, instrumentality, or agency thereof.”
Dr. Read seems to believe (n. 1), however, that defined benefit pensions are good as long as he and his colleagues at UC are the ones who benefit, but that such plans are bad when they benefit anyone else. In the version on file with the AG's office, the introductory pitch to the gullible public – the “Whereas” words -- repeat the party line about the budgetary evils of pension plans generally. However, the actual proposal now applies only to “public agencies as defined in subparagraph SEC. 4 (d) (3)” (n. 2), meaning all of them "except the University of California, its laboratories, and its affiliates, all of which are excluded from the California Public Employee Defined Contribution Plan.“ This means that UC would keep its own defined benefit retirement pension plan – a plan that
the University calls “one of the most generous benefits of UC employment”.

"But isn't the University of California a *public* state supported university? Don't our tax dollars pay Dr. Read's salary?"

You're right. State Budget Code: 6440 University of California. The
proposed general fund appropriation for 2005-06 is $ 2,835,841,000, and taxpayers are also on the hook for the billions in bonded debt that built all those lecture halls and cyclotrons. UC is public, except when the magic pencil of statutory drafting says it isn't. The initiative sponsors try to rationalize the magic pencil in Sec. 2(h), an unconvincing attempt to explain why the UC retirement plan should not be held to the same standard as everyone else. First, we learn, UC has Competitive Faculty Compensation. (fn 3.) The defined benefit plan helps the University attract good professors, because:

"The University of California's generous retirement savings and investment plan benefits are some of the most tangible rewards of University employment. The impressive array of plans and investment products can help you achieve future financial security."

But there’s no reason to believe that UC professors are the only people who want financial security, and if similar plans help other public agencies get good employees, then abolishing them is a bad idea. This is really an argument against the initiative, not for it.

The second reason to exempt UC, we learn, is the unique role of the Regents in managing the UC Retirement plan as a public trust. How unique? According to the
Spring 2004 Newsletter of the UCLA Faculty Association (the initiative's sponsor), very unique indeed:

“The transcripts of the Regents’ discussions conveyed pressure to turn around a faltering investment performance that had trailed the market by about one percentage point since 1984. In these closed sessions, UC Treasurer David Russ calculated that UC could have added $2.5B to its $26B portfolio of U.S. stocks from 1992-2002 had it simply pegged its investments to overall market indexes—or benchmarks based on S & P 500 and the Russell 3000. In addition, it could have added another $2.3B by following the advice of professionals about which indexes to invest in (SJ Mercury News, 1/14/2004). The Regents’ discussions were leading up to a major change of strategy: fire most of the internal investment staff and outsource to professional financial advisors. On Nov. 5, 2002, state election day, the Regents informed the UC staff about the firings. The next day, the announcement appeared in the SF Chronicle, but few people read it (transcripts from the closed sessions reveal that the Regents and others discussing these events knew that few people would notice anything during these days except election results).”
Or maybe secrecy, mediocre results and arbitrary firings aren’t unique to the UC Regents after all.

The other changes the UCLA folks made in der Governor's plan just compound the injury to everyone else. Not content with denying others the retirement benefits they continue to enjoy, they would add strict limits on "public agency" contributions to employee plans -- a maximum 6% of pay, with a 1:2 employee contribution match requirement. For
state employees, this would be about a 50% to 70% reduction in employer pension funding. In an attempt to placate voter sympathies with teachers, cops and firefighters, the UCLA folks allow, in Sec. 2 (e) "important adjustments for education and public safety employees". The adjustments would raise the maximum public agency share a full 3%, up to a 9% maximum, which is only a small benefits cut for teachers not covered by social security (currently 10%), but still a huge hit for State Highway Patrol officers. (currently at 33%).

We all can understand why some university professors would propose a ballot measure that preserves their own pension position by sacrificing others. They are scared, and want to curry favor with Governor Narcissus. Perhaps Finance Director Tom Campbell, lately Dean Campbell of the UC Berkeley Business School will take the hint and help bail out his erstwhile colleagues. Perhaps the Faculty Association folks even believe their own rationalizations about why their pensions are special. It’s understandable.

Understandable, but still inexcusable. Is there any English word that describes such behavior? The French call it “
collaboration”: not in the nice sense of “working for the common good”, but as in “helping an adversary injure friends in order to escape injury to one’s self.” Pronounce it in the manner of the corrupt and charming Captain Reynaud in Casablanca: "Collaboration”. It still doesn't sound very nice. Let's hope that the faculty at UCLA and the other UC campuses, in their better wisdom, sense the precarious nature of state support for all public college education. They may conclude, on reflection, that it's not in their interest to deepen the divide between UC and the CSU. If so, "This could be the start of a beautiful friendship."


fn. 1 In what may be a clever ploy or profound absent-mindedness, Dr. Read refers to the UCLA Faculty Association, rather than himself, as the “proponent” of the measure.

fn 2. Or maybe it applies to “all state and local government employees as defined in subparagraph SEC. 4 (d)(3)” -- § 2(c), or to "employers of public agencies as defined in subparagraph SEC. 4 (d) (3)" -- § 3(b). Legislative drafting is not the Faculty Association’s strong point, as evidenced by Sec. 5(d):

"Public Agency" as defined in subparagraph SEC. 4 (d) (3) and "Defined Contribution Plan" shall be as defined in Article XX, Section 8 of the Constitution.”

This word tangle is the result of trying to fit a constitutional amendment inside a statute while knowing nothing about the Federal tax and retirement security laws that shape pension plan design.

Fn 3. Strangely enough, the
January 2005 Newsletter of the UCLA Faculty Association complains that faculty pay needs to be boosted by 10.6% or maybe 17.5% so it will equal the pay at comparable institutions. It’s hard to know what the numbers mean, tho, since an earlier newsletter describes a “salary puzzle” at UC, with many professors getting pay supplements “off-scale”, through non-state funds. In 2001-02, UCLA full professors ranked 11th nationally with pay of $115,700.

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