Anti-Pension Group Admits it Has No Money for its Ballot Initiatives

A group pushing ballot initiatives that would have swept UC into a statewide pension formula turns out to have no money for signature gathering.

Excerpt:
 A conservative group announced Wednesday that it was suspending its campaign to put public employee pension reform on the November ballot.  Dan Pellissier, president of California Pension Reform, said his group could not raise enough money to mount a petition-signature drive. A successful drive typically requires at least $2 million...  "California Pension Reform is suspending its effort to qualify an initiative for the 2012 ballot after determining that the attorney general's false and misleading title and summary makes it nearly impossible to pass," Pellissier said in a statement. The group submitted two measures that qualified for signature gathering. One would have put new public employees into defined contribution plans, while the other would have put new workers into a hybrid plan that blends pensions with a 401(k)-style system...

Full story at http://www.insidebayarea.com/top-stories/ci_19921630

LAO Report on Higher Ed Contains Significant Pension Recommendations

The state’s Legislative Analyst has released a lengthyreport on funding higher education which covers UC, CSU, and the communitycolleges (as well as CalGrants).  Thereport is essentially a response to the governor’s January budget proposal withregard to higher ed.

Generally, the report tends to disagree with the governor’sapproach which the Legislative Analyst views as giving too much autonomy to UCand the other segments with regard to enrollment and other matters.  On the other hand, it documents the trendtowards reduced state funding and thus seems to continue the pay-less/say-moreapproach which is odd on its face.

The Legislative Analyst does raise questions about thetrigger cuts proposed by the governor in case his tax initiative does not passin November.

There is a lengthy section on pension matters, especiallyfor UC which has not received explicit state funding for its pension for overtwo decades and which has had to divert other funding to deal with resumedpension contributions.  The report seemsto favor some state funding for the UC pension and – significantly - does notcondition it on UC being covered by the statewide plan proposed by thegovernor.  That is a step in the rightdirection if followed by the legislature in the final budget.  The report favors somewhat less of a pensioncontribution than UC has requested.  However,establishing the principle of some state responsibility would be an advance.

Excerpts from the pension portion are below:

Retirement Costs

The Governor proposes major changes to the way in which some retirementcosts are funded for higher education. For CSU, the Governor proposes to nolonger make base adjustments to reflect changing retirement costs. For UC, theGovernor proposes (1) a $90 million base augmentation that could be used forpension costs or other purposes, and (2) no out–year adjustments for retirementcosts. The budget proposes no changes to the way retirement is funded for CCC.

Background

CSU Pension Benefits. CSU employees are members of theCalifornia Public Employees Retirement System (CalPERS)—the same retirementsystem to which most state employees belong. Funding for this system comes fromboth employer contributions and employee contributions. Each year, as is thecase with other state departments, CSU's employer contributions to CalPERS arecharged against its main General Fund appropriation. The employer contributionis based on a percent of employee salaries and wages that is determined byCalPERS and specified in the annual budget act. The Governor's budget annuallyadjusts CSU's main appropriation to reflect any estimated changes in theemployer contribution. For example, the Governor's budget reduces CSU's mainappropriation by $38 million due to a lower employer rate and lower payrollcosts in the current year. The CSU is expected to contribute $404 million toCalPERS in 2012–13.
UC Pension Benefits. Employees of UC (and Hastings) aremembers of the University of California Retirement Plan (UCRP). This retirementplan is separate from CalPERS and under the control of UC. Prior to 1990, thestate adjusted UC's General Fund appropriation to reflect increases anddecreases in the employer's share of retirement contributions for state–fundedUC employees. Starting in 1990, however, UC halted both employer and employeecontributions to UCRP because the pension plan had become"superfunded." Specifically, the plan at that time was enjoyingexceptionally strong investment returns, resulting in assets that exceededliabilities by more than 50 percent. This "funding holiday" lastednearly 20 years until the plan's assets had declined considerably andcontributions once again became necessary. In April 2010, both UC and itsemployees resumed contributions to the plan. The state, however, has notprovided UC with any additional funding specifically for that purpose.

Governor Proposes New Approach To Funding Retirement Costs

The Governor proposes two major changes related to funding for universityretirement plans:

• A $90 million base budget augmentation for UC that, according to the administration, "can be used to address costs related to retirement program contributions." The administration emphasizes that this funding is not being provided specifically to fund costs for UCRP. Rather, UC could use it for any purpose related to its state–related programs—including, but not limited to, UCRP.
• A new policy that the segments' budgets no longer be adjusted for changes in retirement costs in the future. Instead, state–related retirement costs would be funded entirely from the segments' unrestricted base appropriations.

Unclear Which Retirement Costs Are Affected. The Governor'sproposed language refers simply to "retirement costs." At the timethis analysis was prepared, the administration had not provided sufficientclarity on whether this would include costs for retiree health and dentalbenefits. For example, funding for CSU's retiree health care costs arecurrently bundled together with funding for other CalPERS retiree health carecosts. Since the administration has not yet indicated how it would split outfunding for CSU, we are unsure whether the proposal applies to these costs. Theadministration also was unable to provide information regarding base fundingfor retiree health costs for UC. For these reasons, our budget analysis onlyfocuses on funding for pension costs for UC and CSU.

UC Proposal Has More Merit,But Raises Several Questions

The request for pension–related funding for UC is more difficult andcomplicated than that for CSU. This is because (1) the state currently is notproviding any pension–related funding to UC, and (2) UC has full control overits pension system. To address the Governor's proposal, the Legislature shouldconsider the following questions:

• What is the main justification for the state to provide funding for UC's retirement costs? In other words, why is funding for these costs a state responsibility?
• Given that UC controls its own pension plan, are UC's pension benefits reasonable? How do they compare to the pension benefits the state provides state employees?
• How much funding should the state provide UC in 2012–13? More specifically, what methodology or calculations support the request for $90 million?
• Finally, should the state lock in the pension amount provided UC at the 2012–13 contribution level or provide UC with budget adjustments for pension costs in future years? …

Pension Costs Should Be Funded as Part of Workload Budget. Thestate currently provides funding for pension–related costs for all other stateagencies as part of a normal, workload budget. In other words, the stateprovides funding to state agencies for the salaries and benefits (includingpension benefits) related to their budgeted positions. Given that the stateprovides UC with funding for the salaries and benefits of some of itsemployees, it would make sense from a standard, workload budgeting perspectiveto also provide funding related to pension costs. As noted earlier, the statedid provide such pension–related funding to UC for many years prior to thepension holiday that began in 1990. (As we discuss in the nearby text box, thestate has repeatedly deferred a final budget increase for pension costs sincethat time.) Given that the university has had to restart its contributions toits pension plan in recent years, we find justification in its request that thestate also resume providing pension–related funding.
UC Pension Benefits Similar to State Employee Pension Benefits. Althoughthe state does not control UC's pension system, actions taken to date by theRegents have largely mirrored recent changes to state employee pensionbenefits. For example, the Regents have taken action to reduce pension costs inthe long term by increasing the minimum retirement age for new employees. Inaddition, …the Regents have approved increases to employee contribution ratesthat are beginning to bring them in line with state employee contributionrates, which are now generally 8 percent. (Some of UC's proposed employeecontribution increases are still subject to collective bargaining.) Additionalcontribution increases beyond July 2013 will also likely be necessary to reducethe plan's significant unfunded liability that has accrued due to thedecades–long pension funding holiday and recent market downturns.

UC's Estimate of State's Share of 2012–13 PensionCosts Is Overstated. The $90 million that UC requested from theadministration is only a fraction of the $255.6 million that UC estimates to bethe state's share for 2012–13. The UC states it requested the lower amount inrecognition of the state's severe fiscal shortfall. The university furtherindicates that it will likely seek the full amount of what it estimates to bethe state's share (which it calculates could rise to roughly $450 million) infuture years...

We find two issues that the Legislature should carefully consider withrespect to how the university has estimated the state's share of UC retirementcosts.

• First, we find that the request for $90 million in 2012–13 is overstated. …UC's estimate of the state's share of its 2012–13 retirement cost increase totals about $78 million. The UC appears to be requesting a greater amount because it believes that the state should provide contributions to account not only for incremental retirement costs in 2012–13, but also for part of the cost increases in the two prior years. We take a different view. The UC has managed—by both redirecting internal resources as well as increasing student tuition—to fund all of its employer contributions in both 2010–11 and 2011–12. If the Legislature were to provide funding related to prior years, the funding would in effect free up existing UC base funding for other purposes. In our view, given the state's fiscal shortfall, such an augmentation would be unwise.
• Second, the university's calculation of the state's share of retirement contributions includes employer costs related to tuition–funded salaries. From a workload budgeting standpoint, the state portion of retirement costs should only be related to state–funded payroll costs. Given, however, that the Governor's budget assumes no increases for tuition in 2012–13, the Legislature may wish to consider providing the funding for pension costs related to tuition–funded salaries in 2012–13. In future years, higher pension costs—just like any other UC cost—presumably would be covered by the General Fund and tuition fees in proportion to their current funding levels.

Timing Not Right to Lock In Base Funding for Pensions. Aswith the CSU proposal, now would be a poor time to choose to lock in a basefunding level for UC pensions, given that the Governor is separately proposingto modify public employee pensions to reduce costs in the long run. Inaddition, as noted earlier, UC intends to increase its employer contributionsover the next few years, although it has not yet reached agreement with all ofits union–represented employees on the employee contribution rate. In our view,the Legislature should carefully evaluate future requests from UC for pensionfunding on a year–by–year basis in the context of the university's currentpension benefit and contribution structure. In the long term, however, it couldmake sense to expect UC to fund its pension costs out of its base budget, giventhat the university's retirement system is separate from the state's. Thiscould only work once a reasonable funding level has been identified andcontribution amounts have stabilized.

Recommendations

…Recommend Restarting Budget Adjustments for UC. Asdiscussed above, we find that there is sufficient justification on a workloadbudget basis to provide UC with an augmentation that the university could useto address its pension costs. We recommend, however, that the Legislature onlyprovide funding for the incremental change in 2012–13 in UC's pension costs forstate– and tuition–funded employees—which we estimate to be $78 million. Thiswould mean reducing the Governor's request for $90 million in General Fundsupport by $12 million. In addition, we recommend that the Legislature adoptintent language in the budget specifying that in the future funding for UCretirement costs (1) shall be determined annually by the Legislature, (2) shallbe contingent on such factors as the comparability of UC's pension benefits andcontributions to those of state employees, and (3) shall not necessarilyinclude funding for tuition–supported employee pension costs or pension costsincurred prior to 2012–13.

The full report is at http://lao.ca.gov/analysis/2012/highered/higher-ed-020812.pdf

A video presentation of the report highlights is availablebelow:

More History Lessons (from Faculty Association Chair Dwight Read)

As Chair of the Faculty Association at UCLA, I would like to emphasize againthe point that was made in the Saturday, Jan. 21, 2012 Blog on this site,“Plenty of Nothing.”
 
The Governor wrote in his proposed budget: "The University of California(UC) will receive an increase of $90 million from the General Fund for baseoperating costs, which can be used to address costs related to retirementprogram contributions."
 
The main purpose of the public employee retirement law (PERL), passed in 1931,was to separate pension funding from all other kinds of funding. Early on, thestate recognized that pension funding is long-term funding and must followclear guidelines and sound actuarial principles to ensure that the state hasthe resources to keep its pension promises. Those principles require that theplan estimate many factors: the cost of service for the current year, the rateof return earned on investments, mortality rates, projected salary and benefitincreases, etc. Based on these estimates and the plan design, the state can setthe employee and employer contributions necessary to meet the fundingrequirements.
 
Each year public retirement plan sponsors need to ask the state to make aspecific contribution to their retirement plan based on the actuarialprinciples agreed upon. This contribution is not lumped together with any otherfunding. Each year the State evaluates those requests and makes a separateallocation to the retirement plan, which can be used for nothing else.Retirement is and should be separate.
 
The same was always true for UC. In the past, before 1990 when contributions toUCRP were suspended or, one could say, dropped to "zero," the UCRegents like all other public pension plans in the state requested retirementfunding from the state. And the state allocated UCRP funding annually as partof the budget category, "Fixed Costs and Economic Factors," asubcategory of "Unallocated Adjustments." The accounting categorieswere different for UCRP than they were for CSU or other public pension plans inCalifornia, but the principle was exactly the same: retirement funding isseparate, not to be comingled with any other use of the funds.  Althoughthe Regents can spend General Fund allocations as they wish, given theirautonomy in the state, they never wavered in the past from using statecontributions for UCRP for anything other than the employer contribution unlessgiven specific permission by the Legislature to do otherwise. They honored thefounding principle of public retirement funding.
 
Contrary to this principle, the Governor now wants to fund UCRP by way of anincremental increase to the General Fund. Although the Regents regarded theGovernor’s gesture positively -- “This represents a major step forward in termsof securing the State’s participation in employer contributions for UC employeesupport which is automatically provided for employees of California’s other twohigher education segments.”  -- it neither recognizes the obligation ofthe state to support retirement of the public employees at the University ofCalifornia, nor does it provide actual funding for retirement based onactuarial principles. What the Governor awards can just as easily be removed bya legislative reduction in UC funding. How will budget decisions such as theminus $100 million trigger in the current budget affect long-term pensionpromises?

That is exactly why the forefathers and mothers of public pension funding inCalifornia knew that funding retirement is a serious business and must followseparate financial principles from all other kinds of funding in order to keepthe state and the employee pension plans on a sound financial basis.
 
I urge clarity and transparency in talk about public pension funding. Anaugmentation to UC’s budget from the state General Fund is welcome, but it isnot the same as state support allocated specifically for UCRP. And I urge theLegislature to do the right thing: fund $90 million to UCRP directly as part ofthe long tradition of supporting public employee retirement in California andin accordance with PERL principles of retirement funding.

 
Dwight Read,
Chair, UCLA Faculty Association  

UC Tuition: His Way or the Conway?

The photo shows Assembly Speaker John Pérez talking to GOPminority leader Connie Conway.  Given theexcerpt below from today’s online San Francisco Chronicle, let’s hope he isbeing super-persuasive.

==============
Excerpt:

California students from middle-income families wouldreceive massive breaks on tuition and fees at the state's colleges anduniversities under legislation Assembly Speaker John Pérez plans to introducetoday at the Capitol.  Under the plan,undergraduate students from families with household income of less than$150,000 would have their tuition and fees cut by two-thirds, bringing the costbelow what it was nearly a decade ago.  Itwould amount to a $4,000 annual savings for California State University studentsand just over $8,100 for students attending the University of California andwould take effect as soon as this fall. Both new students and current studentswould be eligible…

The speaker's office estimates the program would cost thestate about $1 billion per year, which would be raised by eliminating acorporate tax break that was approved in 2009 as part of budget negotiationsbetween Democrats and Republicans. That tax break allows corporations to choosethe cheaper of two formulas for calculating the taxes they owe…

Any change in the tax requires a two-thirds vote of the Legislature,which means at least two Republicans in each house must agree…

Full story at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/02/08/MNOJ1N2D0B.DTL

Actually, we have some audio of what Pérez is saying to Conway:

"That Which Cannot Go on Forever Must Come to an End"

So said Herbert Stein, who was President Nixon's chief economist for a time.  He wasn't speaking about rising tuition back then.  However, President Obama's remarks on rising university tuition at the State of the Union address - which were roughly along those lines - continue to generate controversy.


Inside Higher Ed today has a long piece on responses in the U.S. Senate.  The article concludes with:  Perhaps sensing a popular cause to champion with an election looming, senators in both parties seemed eager to continue discussions on how to hold down college prices.  Committee Chairman Tom Harkin, Democrat of Iowa, promised more discussion on the subject.  “This," he said, " is the first of many hearings."


Full article at: http://www.insidehighered.com/news/2012/02/03/senate-help-committee-hears-college-affordability-testimony

We Missed the Boat on Pensions With the Governor: Time to Talk to the Legislature

We missed the boat when it came to getting the governor to exempt UC from his statewide pension plan.  His plan, which now goes to the legislature, includes UC explicitly (p. 13), involves a hybrid plan (defined benefit plus defined contribution) for new hires, and has a 75% cap on retirement benefits.

A summary of the plan: The changes would kick in Jan. 1, 2013. Labor agreements that contradict the governor's plan would prevail until the pacts expire.

The statutory language includes these proposals:
• Ends additional retirement service credit purchases, or "airtime."
• Forfeits all or part of pensions for elected officials or civil servants convicted of a felony associated with their offices or jobs.
• Ends retroactive pension enhancements.
• Ends "pension holidays" for employers and employees.
• Mandates that all employees pay "at least one-half" the normal costs for defined benefit plans or the defined portion of a hybrid plan. Employers may not pick up the employee share.
• Limits the hours and wages for retirees who return to government work.
• Calculates benefits based on a 36-month average of an employees' wages.
• Narrows the definition of wages that can be included for pension calculation purposes.
• Establishes a hybrid pension system for new hires. It would replace 75 percent of an employee's income after 30 years of service and a "normal" retirement age of 57 for public safety employees or, for all other workers, 35 years of service at age 67.
• Sets 5 years and 52 years old as the minimum length of service and age that safety classes can qualify for retirement, 57 years old for all other groups.
• Eliminates seats on the CalPERS Board of Administration now occupied by a member of State Personnel Board and an insurance industry representative
• Gives CalPERS board membership to the Department of Finance director.
• Adds an independent health insurance expert and a representative from a contracting agency to the CalPERS board, both appointed by the governor.
• Adds three public representatives to CalPERS' board, two appointed by the governor and one jointly appointed by the Assembly speaker and the Senate Rules Committee.
• Sets 25 years of service as the threshold to receive 100 percent of the state's retiree health benefit. Applies to new hires only.

Full article at http://blogs.sacbee.com/the_state_worker/2012/02/jerry-brown-delivers-pension-reform-language-to-legislators.html

Some of the plan would be in a constitutional amendment which requires a 2/3 vote of the legislature if it is to be put on by the legislature.  (It could be done by initiative but the governor is already putting a tax measure on the ballot by initiative and might have trouble getting the money for an additional pension initiative.)

In any event, as noted in a recent blog post, UCOP and the Regents need to be talking to the legislature.

The governor's proposal is at:
http://gov.ca.gov/docs/Pension_Language_part_1.pdf

UPDATE: Union reaction http://www.sacbee.com/2012/02/03/4235853/unions-howl-at-details-of-jerry.html

UC Needs to Get Off the State Pension Train Before It Goes Too Far

As we have noted many times, the Regents modified the UC pension plan back in December 2010 to deal with its funding issues.  Since that time, the risk has been that UC would be swept into some statewide pension reform really aimed mainly at CalPERS and CalSTRS.  UC needs to get off that train before it is too late.

The excerpt below from a recent news report indicates that the train is rolling and so far we are on board. UCOP and the Regents need to be involved in legislative discussions.

...At a hearing of the Legislature's Conference Committee on Employee Pensions last week, an executive of the State Teachers Retirement System spelled out a possible way forward.It's called a "cash balance" retirement plan, a little-known tax-advantaged option available to both public and private employers. It works like a 401(k) plan in that each worker has an individualized account and his or her benefits are determined by how much it has accumulated at the time of retirement. It is superior to a 401(k) plan in that the funds are administered at very low fees by professional managers with a large, well-balanced portfolio. Because of that, workers are guaranteed a small return on their accounts.

There would be a near-zero risk for taxpayers, because even the harshest critics of the current system acknowledge that public pension funds can safely guarantee a rate of return higher than a benchmark rate of interest on certain U.S. government securities. The idea being floated in Sacramento is to create a hybrid system in which a cash balance plan would be stacked on top of a traditional pension.

Employee and employer retirement contributions on the first tier of income — say, the first $60,000 or $80,000 or $100,000 — would go into the existing pension fund, and retirees' pensions would be capped at whatever level that ceiling is set.

Retirement contributions on income above that level would go into a cash balance account for each employee. Taxpayers would no longer be on the hook for making up the difference if pension funds are unable to attain their projected rate of investment returns...  Full article at http://www.vcstar.com/news/2012/jan/31/herdt-the-seed-of-a-pension-compromise/

Worries About the Obama Tuition Plan Seem Confined to Private Universities

Earlier posts on this blog  noted the remarks of President Obama indicating that the federal government would somehow penalize universities whose tuitions were rising.  But yours truly also opined that it was very unlikely that public universities, such as UC, would be penalized since their tuitions were lower than the privates and they tended to enroll a greater percentage of lower income students.

A short piece today in Inside Higher Ed seems to reinforce that view.  It seems that it is presidents of private universities that are upset.

See http://www.insidehighered.com/quicktakes/2012/02/01/white-house-adviser-takes-questions-obamas-plan

In short, it's one less thing to worry about.  So be happy:


PS: An earlier blog post also gave you some assurance about the kind of headlines depicted below:

Audio Recording Indicates that UC Needs to Talk With Legislative Leaders on Pensions

Yesterday’s State Worker blog of the Sacramento Bee carried a story about remarks by California StateSenate President Darrell Steinberg on public pensions.  It includes a link to a recording ofSteinberg’s remarks on pensions at a press conference of 1-26-2012.  Good luck with that link; the IT guy at theBee must have gone home for the weekend. Nevertheless, yours truly has come to the rescue and you can hear itwithout hassle by clicking on the link below.

There is a back story which state politicos will understand regardingSteinberg’s remarks.  Last year, thelegislature kept waiting for Gov. Brown to negotiate a deal with Republicans –which never happened.  When it becameclear it wouldn’t happen, the legislature slapped together a budget just beforethe June 15 deadline so its members would get paid.  (Voters had earlier approved a propositionthat cut off legislative pay if the budget deadline was not met.)  The governor then vetoed the budget and thestate controller said it wasn’t technically “balanced” and thus cut off pay fora few days until another budget was enacted. Reporters in the recording ask Steinberg if the legislature wants towait for Brown to come up with a specific legislative bill on pensions (asopposed to the general concepts he {Brown} has proposed).  Steinberg in effect says that the legislaturehas learned its lesson about waiting for Brown and this time will work on itsown.

Steinberg indicates that the legislature is willing tocontemplate Brown’s hybrid concept (mix of defined benefit and definedcontribution for new hires) but he also indicates he likes definedbenefit.  However, the details are notimportant at this point.  You can readthe Bee blog at http://blogs.sacbee.com/the_state_worker/2012/01/darrell-steinberg-says-pension-reform-must-pass-strength-test.htmlfor more detail and listen to the recording. The main point is that if UCwants to carve out some kind of exemption for the changes in its pension system that theRegents already enacted in December 2010, UCOP and the Regents need to starttalking with Steinberg & Co. With some creativity, we can adjust the Regents’ plan to be a hybrid ifneeded, say, by adding a small defined contribution element along the lines ofwhat we had during the two-decade contribution “holiday” which got us intotrouble.

Bottom line: Thegovernor is not the only player.  Indeed,he may not be the key player on pensions; UCOP and the Regents need to engagethe legislative leaders.

Listen to therecording below:

More on the Obama/Tuition Issue

As a prior blog post noted, President Obama's State of the Nation address earlier this week contained a threat to cut federal support to universities whose tuitions were rising. But it was not clear what exactly was involved.

Insider Higher Ed has a brief story - with a link to a NY Times iece and a link to a White House fact sheet about the proposal.  In fact, to the extent that the proposal is implemented - always a question given Congressional gridlock - UC and UCLA are likely to benefit.  Our tuition is rising but it is still low compared to the privates and many publics.  And we have a good record at this campus with low income student enrollment and support.  The issue is whether UC would be rewarded for relatively low tuition or penalized for percentage increases in tuition starting from a low base.  The tuition under consideration is not the sticker price - which is what gets aired at Regents meetings - but the net price after student aid from the university.

The Insider Higher Ed story is at http://www.insidehighered.com/quicktakes/2012/01/27/full-details-obamas-college-affordability-proposals-updated

Below is (most of) the fact sheet:

For ImmediateRelease

January 27, 2012

FACT SHEET: PresidentObama’s Blueprint for Keeping College Affordable and Within Reach for AllAmericans

“Ofcourse, it’s not enough for us to increase student aid… States also need to dotheir part, by making higher education a higher priority in theirbudgets.   And colleges and universities have to do their part byworking to keep costs down.”

                                                                                               President Barack Obama

                                                                                               State of the Union, January 24, 2012

Inhis State of the Union address, President Obama laid out a blueprint for aneconomy that’s built to last – an economy built on American manufacturing,American energy, skills for American workers, and a renewal of American values.As an important part of keeping the American promise alive, the Presidentcalled for a comprehensive approach to tackling rising college costs.  Intoday’s global economy, a college education is no longer just a privilege forsome, but rather a prerequisite for all.  To reach a national goal ofleading the world with the highest share of college graduates by 2020, we mustmake college more affordable.

PresidentObama has emphasized the responsibility shared by the federal government,states, colleges, and universities to promote access and affordability inhigher education, by reining in college costs, providing value for Americanfamilies, and preparing students with a solid education to succeed in theircareers. Over the past three years, the Obama Administration has taken historic steps to help studentsafford college, including reforming our student aid system to become moreefficient and reliable and by expanding grant aid and college taxcredits. 

This year, President Obama is calling on Congress to advance new reforms that will promote shared responsibility toaddress the college affordability challenge. If these proposals are passed,this will be the first time in history that the federal government has tiedfederal campus aid to responsible campus tuition policies. 

President Obama will begin the third day of his post-State of the Uniontravels with an event at the University of Michigan campus in Ann Arbor,focusing on the importance of tackling rising college costs to ensure America’sstudentsand workers can obtain the education and training they need so that we have aworkforce prepared for the jobs of the 21^st century.

Shared Responsibility toTackle Rising College Costs

Rewarding Schools thatKeep College Affordable

·        ThePresident’s proposal to reform student aid to keep tuition from spiraling toohigh and drive greater value will improve distribution of federal financial aid and increasecampus-based aid. This reform will reward colleges that are succeeding inmeeting the following principles:

1)     Settingresponsible tuition policy, offering relatively lower net tuition prices and/or restrainingtuition growth.

2)     Providinggood value to students and families, offering quality education and training that preparesgraduates to obtain employment and repay their loans.

3)     Servinglow-income students, enrolling and graduating relatively higher numbers ofPell-eligible students.

The campus-based aid that the federal government provides to collegesthrough Supplemental Educational Opportunity Grants (SEOG), Perkins Loans, andWork Study isdistributed under an antiquated formula that rewards colleges for longevity inthe program and provides no incentive to keep tuition costs low. The President is proposing to change how those funds are distributed byimplementing an improved formula that shifts aid from schools with risingtuition to those acting responsibly, focused on setting responsible tuitionpolicy, providing good value in education, and ensuring that higher numbers oflow-income students complete their education. He is also proposing to increasethe amount of campus-based aid to $10 billion annually. The increase isprimarily driven by an expansion of loans in the federal Perkins program –which comes at no additional taxpayer cost.

Colleges that can show that they are providing students with good long-termvalue will be rewarded with additional dollars to help students attend. Thosethat show poor value, or who don't act responsibly in setting tuition,will receive less federal campus-based aid.  Students will receivethe greatest government grant and loan support at colleges where they arelikely to be best served, and little or no campus aid will flow to collegesthat fail to meet affordability and value standards.

Creating New Incentivesto Promote Affordability and Quality

·        The Raceto the Top: College Affordability and Completion will promote change instate systems of higher education. The President is proposing a program thatwould spur systemic state reforms to reduce costs for students and promotesuccess in our higher education system at public colleges. This $1 billioninvestment would incentivize states to:

o   Revamp the structure of state financing forhigher education.

o   Align entry and exit standards with K-12education and colleges to facilitate on-time completion.

o   Maintain adequate levels of funding forhigher education in order to address important long-term causes of cost growthat the public institutions that serve two-thirds of four-year college students.

The Race to the Top forCollege Affordability and Completion would incentivize governors and statelegislatures around the nation to act on spurring this innovative reform.Through cost-saving measures like redesigning courses and making better use ofeducation technology, institutions can keep costs down to provide greateraffordability for students.

·        TheFirst in the World competition will improve long-term productivity in higher education by investing$55 million to enable individual colleges (including Minority-ServingInstitutions) and nonprofit organizations to develop, validate, or scale upinnovative and effective strategies for boosting productivity and enhancingquality on campuses. This initiative would provide modest start-up funding forindividual colleges, including private colleges, for projects that could leadto longer-term and larger productivity improvements among colleges anduniversities – such as course redesign through the improved use of technology,early college preparation activities to lessen the need for remediation,competency-based approaches to gaining college credit, and other ideas aimed atspurring changes in the culture of higher education.

EmpoweringFamilies and Students to be Informed Consumers

·        New actionsto provide consumers with clearer information about college costs and qualitywill improve the decision-making process in higher education for Americanstudents and allow families to hold schools accountable for their tuition andoutcomes.  President Obama is proposing new tools to provide students andfamilies with information on higher education, presented in a comparable andeasy-to-understand format:

o   The Administration will create a CollegeScorecard for all degree-granting institutions making it easier forstudents and families to choose a college that is best suited to their needs,priced affordably, and consistent with their career and educationalgoals. 

o   We will also make an updated version of the‘Financial Aid Shopping Sheet,’ announced in October, a requiredtemplate for all colleges, rather than a voluntary tool, to make it easier forfamilies to compare college financial aid packages.

o   The President is also proposing to begin collectingearnings and employment information for colleges, so that studentscan have an even better sense of the post post-graduation outcomes they canexpect.

RedoublingFederal Support to Tackle College Costs

·        Ashighlighted by the President in his State of the Union address, we are callingon Congress to:

o   Keep student loaninterest rates low: This summer, the interest rates on subsidized Stafford studentloans are set to double from 3.4% to 6.8% – a significant burden at a time whenthe economy is still fragile and students are taking on increasing amounts ofdebt to earn a degree. The President is asking Congress to prevent that hikefrom taking place for a year to keep student debt down, a proposal that willkeep interest rates low for 7.4 million student loan borrowers and save theaverage student over a thousand dollars.

o   Double the number ofwork-study jobs available:  The President also proposes to double the number ofcareer-related work-study opportunities so that students are able to gainvaluable work-related experience while in school.

o   Maintain our commitmentto college affordability: Over 9 million students and families per year take advantage ofthe Obama Administration’s American Opportunity Tax Credit – supporting up to$10,000 over four years of college.  In his State of the Union address,the President called on Congress to make this tax credit permanent and preventit from expiring in 2012. 

Building on Progress

President Obama has worked throughout hisAdministration to expand access to college and provide greater resources andsupport so that more students graduate with the skills and knowledge they needto succeed in the workforce:

·        Helpingstudents and families pay for college: The Obama Administration has raised the maximum Pell Grant awardto $5,635 next year – a $905 increase since 2008.

Making collegeloans more affordable: The Obama Administration’s “Pay as You Earn” plan will enable 1.6million students to take advantage of a new option to cap student loanrepayments at 10% of monthly income as soon as this year. Borrowerslooking to determine whether or not income-based repayment is the right optionfor them should visit http://studentaid.ed.gov/ibr. 

UPDATE: NPR has a report at
http://www.npr.org/blogs/thetwo-way/2012/01/27/145985134/college-presidents-have-problems-with-obamas-message-on-tuition

UPDATE: President Yudof's response:

The University of California appreciates President Obama's focus on higher education and his efforts to assure that college is within reach for all Americans. We are pleased that the president is looking at ways to reward institutions that are doing a good job graduating more low-income students.

The University of California already has tuition that is highly redistributive: One third of every tuition dollar goes to financial aid, and more than half of our students pay no tuition. We have a strong record of providing high-quality education to students from families from a broad range of income levels, and we look forward to working with the Obama administration and Congress on these proposals as they move forward.

UC is proud of the robust state and institutional financial aid our enrolled students receive, and the university is continuously working to ensure that college costs remain low and affordable. Over the years, UC has cut costs and become significantly more efficient, while serving a historically high number of students. UC will continue to take actions to reduce costs and maintain its high quality and will work with the state of California to ensure a strong commitment to funding public higher education.

http://www.facebook.com/note.php?note_id=10150510256328379

OMG! Whoops. Oh My Whatever-You-Are!

InsideHigher Ed pointed to this story:

"It'sno wonder President Obama wants every kid to go to college," said… formerPennsylvania senator (Santorum.) "The indoctrination that occurs inAmerican universities is one of the keys to the left holding and maintainingpower in America. And it is indoctrination. If it was the other way around, theACLU would be out there making sure that there wasn't one penny of governmentdollars going to colleges and universities, right?"

Hecontinued: "If they taught Judeo-Christian principles in those collegesand universities, they would be stripped of every dollar. If they teach radicalsecular ideology, they get all the government support that they can possiblygive them. Because you know 62 percent of children who enter college with afaith conviction leave without it."

Santorumwent on to encourage his audience not to "give money" to colleges anduniversities that he said are causing harm to the country.  "I'll bet you there are people in thisroom who give money to colleges and universities who are undermining the veryprinciples of our country every single day by indoctrinating kids withleft-wing ideology," he said. "And you continue to give to thesecolleges and universities. Let me have a suggestion: Stop it." …

Fullstory at http://www.cbsnews.com/8301-503544_162-57366219-503544/rick-santorum-left-uses-college-for-indoctrination/

The Inside HigherEd reference is at http://www.insidehighered.com/quicktakes/2012/01/26/santorum-attacks-colleges-religion-politics

Well, maybe some ofthese folks would like to donate:

Someone let the cat out of the bag on the state budget

Normally, the governor's budget proposal (reminder - it is a proposal, not an enacted budget) would be made public January 10.  Someone in the governor's entourage apparently goofed and posted it on the web today.  So there was a hasty unveiling without the usual leaking of bits and pieces for days before January 10.

As it happens, yours truly is about to go to Chicago for three days so only a rough perusal of the budget was possible.  But here are some highlights.  First, take a look at the chart on the left.  The dark part of the bars are what folks mean by deficits in normal English parlance.  That is not necessarily the language spoken in Sacramento.  But what the dark bars tell you is that without changing anything with regard to revenue or spending, there would be about $5 billion deficit (outflow > inflow) in the next budget year that would gradually decline with (assumed) economic growth.  However, each year of deficit adds to the debt in the general fund, which is not supposed to be in debt.
==================================

The numerical table of "problem definition" tells us that the budget is roughly in balance for the current year that started last July 1.  But there is a debt overhang inherited from the past which the governor would like to pay off.  Paying off such past debt means - again using common English parlance - running a surplus.  The faster you want to pay off the debt, the more of a surplus you need.  The governor would like all of it gone by the end of the next fiscal year which starts July 1, 2012.  But note that there is always the issue of how fast you should go in paying off past debt.  The Legislative Analyst has pointed out this issue in prior years.

==================================

The governor's solution is in part temporary tax increases he will propose in a ballot initiative that will appear in November 2012.  Signatures will have to be obtained since it is clear he will not get a 2/3 vote in the legislature to put such a proposal on the ballot.  Some of that revenue - assuming the initiative passes - would show up in the current year.  So the rough balance above becomes a surplus for the current year.  And there is a larger surplus for the coming year.

But what if voters do not pass the tax increases?  Then there will be a trigger - as there was in the current year.  And guess what?  UC would be cut $200 million relative to the proposal for next year.

==================================

Note that there is a footnote on the trigger table which effectively says the governor expects a UC tuition increase.  The proposed UC budget - assuming the initiative passes - raises the UC budget by almost $300 million.  (You can find the UC budget on page 149 of the budget summary - see link below.)  So the $200 trigger cut, if it happens, still leaves an added $100 million, net.

Again, a reminder that a proposal is not an enactment.  The legislature will hold hearings.  There will be a "May revise" of the budget unless there is speedy enactment of a budget.  And there could be much drama before a budget enactment occurs.

If you would like to see the governor's official budget proposal, go to:
http://www.ebudget.ca.gov/pdf/BudgetSummary/FullBudgetSummary.pdf

Update: There is a statement from UCOP on the budget at http://www.universityofcalifornia.edu/news/article/26905.  It pegs the increase to UC at $90 million.  Given my trip to Chicago, I can't reconcile that figure with the $300 million cited above.  But here is the statement:

OAKLAND — Patrick Lenz, UC vice president for budget and capital resources, made the following statement today (Thursday, Jan. 5) regarding Gov. Jerry Brown's proposed state budget for 2012-13:  


We're gratified that Gov. Brown is proposing an additional $90 million in funding for the University of California — an ongoing increase that the governor said can be used to address costs of employee retirement. We applaud the governor's willingness to grant UC leadership maximum flexibility in navigating these fiscal times, and also his recognition that, after a 20-year hiatus, the state has a responsibility to resume paying for a portion of retirement costs.

The administration's focus on protecting higher education from further budget reductions is a welcome relief, and the governor's stated desire for a long-term state investment is encouraging. It appears the governor is moving in the right direction after cuts totaling $750 million this year alone.

His proposal is only the first step toward a state budget for 2012-13. We will continue to make the case that public higher education is not a cost but the best investment an innovative state like California can make.

We will continue to seek out and implement administrative efficiencies that already are saving hundreds of millions of dollars a year — savings that go straight to our core mission. We also are working hard to identify alternative revenue sources that could help us preserve quality and access.

Finally, we intend to press forward with the governor and legislature to develop a long-term plan that would give the university much-needed financial stability, help the families of students and benefit Californians in every part of the state.

Washington Dysfunction to be Reflected in Your Paycheck

Excerpt from an email circulated at Anderson – in case youdid not get one similar:

This notice is in regards to the Social Security (OASDI) taxdeducted from the January 3, 2012 paychecks.

In 2010, President Obama signed into law the Tax ReliefUnemployment Insurance Reauthorization, and Job Creation Act of 2010.  Included in the Act was a provision thatreduced the Social Security withholding rate from 6.2% to 4.2% for 2011.  This change was effective with wages paid onor after January 1, 2011 and included an expiration date of December 31,2011.   In order to comply with theexpiration date of December 31, 2011 and to insure that December earnings werepaid in a timely manner, the Social Security tax rate was changed back to 6.2%in time for the pay compute of the January 3, 2012 paychecks.

On December 23, 2011, President Obama signed the TemporaryPayroll Tax Cut Continuation Act of 2011 to extend the 2% reduction in SocialSecurity (OASDI) tax withholding on wages paid after January 1, 2012.  Since this change was not enacted in time toaffect the 1/3/2012 pay checks, monthly employees paid on January 3, 2012 weresubject to Social Security withholding tax at the old rate (6.2%).  A refund for the difference has been automaticallyprocessed and will be reflected on the February 1, 2012 paychecks.

UC Excerpt from Dec. 14 Legislative Pepper Spray Hearing

As readers of this blog are aware, an incident in which student demonstrators at UC-Davis sparked concerns and received wide public attention. A joint legislative hearing was held on December 14. Below is an audio of the testimony of UC president Mark Yudof and General Counsel Charles Robinson at the “Legislative Hearing on California University Campus Police Policy.”

The excerpts include the formal statements of the two witnesses from UC plus a question and answer session which followed similar testimony by CSU witnesses.The main information to be found in these excerpts is that there is likely to be a UC-systemwide policy about police activity that comes out of the various reviews. March 1, 2012 was given as the probable date in which the findings/outcomes would be released. Note that there are occasional silent pauses due to interruptions in streaming. President Yudof indicated he found no conflict of interest involved in the choice of former LA Police Chief William Bratton to conduct an investigation. Some legislators expressed concern about what they perceived as a large number of independently-conducted investigations going on at UC.Links are below:

Part 1:
 
Part 2:
 
Part 3:
 
Alternative audio link of full excerpt (not divided into parts):


Note 1: The CSU portions were largely edited out although some elements remain since they were part of the general discussion.
Note 2: Full video of the hearings is available in three parts from CalChannel. The excerpts here are from parts 1 and 2. It is not known how long CalChannel will retain the hearings online. There are 3 links at:

http://www.calchannel.com/channel/viewVideo/3196

http://www.calchannel.com/channel/viewVideo/3197

http://www.calchannel.com/channel/viewvideo/3198

Another Hint of Discussions with the State Behind Closed Doors on Multiyear Tuition Increase Deal

The text below in italics is from UC President Yudof’s Facebook page. As noted in a prior post on this blog, there are hints of a multiyear-tuition-increase/steady-budget-support-from-the-state being discussed behind closed doors with Brown administration officials. See the bold print below.

We are extremely disappointed that UC is faced with yet another significant State budget reduction: the $100 million “trigger cut” just announced. This additional cut will exacerbate the fiscal challenges the University faces in the current year and place additional stress on the quality of education provided to UC students. While the $650 million cut to UC enacted by the State last June resulted in additional tuition hikes for our students, let me assure you there are no 2011-12 mid-year tuition increases planned.

Over the past several years, cuts to higher education by the Governor and the Legislature have had a severe impact on students, their families, faculty and staff. The University has consistently objected to additional mid-year cuts, and while we certainly understand the ongoing fiscal challenges the State faces, we are requesting that this latest reduction be considered a one-time cut to UC’s budget and not made a permanent reduction. We will ask to have this funding restored to UC at the beginning of the next fiscal year (July 1, 2012).

In the current economic environment, marked by a huge State deficit and a limited revenue stream, we recognize that the Governor is in the eye of a “perfect storm.”

As we draw closer to the 2012-13 State budget release in January, however, we are asking the Governor to refrain from any additional cuts to higher education. Faculty and staff have sacrificed, and our students in particular have given more than their fair share.

Moreover, as we move forward, we will continue to work closely with State officials to develop a long-term revenue plan that will give the University much-needed financial stability.

This has been a challenging year for the University of California. I understand the concerns that many in the UC community have voiced over the recent incidents surrounding student protests on some of our campuses. I assure you that a thorough review of these incidents is in progress. I am making every effort possible to protect our long-held traditions of free speech and peaceful protests. During these difficult times, I ask you not to lose sight of our common goals—to make public higher education a priority and to keep a UC education accessible and affordable for Californians.

Thank you for your continued support for the University of California and best wishes for a happy holiday season.

Sincerely yours,

Mark G. Yudof

President

University of California

From http://www.facebook.com/note.php?note_id=10150425120888379

One problem with this strategy is that a handshake deal between the UC president and the governor on a "compact" reached behind closed doors did not work out well under Schwarzenegger. The governor cannot appropriate funds; only the legislature can. To make such a deal work, there needs to be wider participation including the legislature, the Legislative Analyst, major interest groups, etc.

It would be nice to know what is going on behind the door:

Our earlier post on this subject is at http://uclafacultyassociation.blogspot.com/2011/12/buried-lede-uc-reviving-multiyear.html