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Friday, November 20, 2009


The Troubles at UCRP

1. Under normal circumstances, 17.02% of covered compensation (your base salary) is the annual contribution required to maintain a healthy pension fund. For all of UC, this amounts to $1.3395 billion. The Regents’ 2010-2011 proposed budget funds UCRP at just over one third this amount. Thus, the Regents’ plan will underfund UCRP by $867 million in the academic year 2010-2011.

2. Circumstances are not normal: UCRP is no longer a fully funded pension plan. Part of this problem arose because of poor market returns, but most of the shortfall can be attributed to the 20 year hiatus in contributions: there were no contributions into UCRP for a period of 20 years up to and including today. Contributions will resume on April 15, 2010. As of September 30, 2009 (after a spectacular rise in the domestic and international stock markets in the third quarter of 2009), UCRP had a shortfall of $10.19 billion. This shortfall must be attended to via additional contributions over and above the 17.02% noted above. Otherwise, the shortfall will grow, and sometime in the not so distant future the pension plan will extract enormous sums from the UC operating budget and from employee wages.

3. Circumstances may never return to normal: on Nov. 18, the CA Legislative Analyst’s Office opined that no additional state contributions to UCRP would be forthcoming between 2009-10 and 2014-15.

To obtain a clear picture of the magnitude of our problem, observe that the now planned $867 million underfunding for 2010-2011 is larger than the state funded budget cut UC experienced in 2009-2010 (when the state cut our budget from $3.3 billion to $2.5 billion). On top of this, an additional and even larger contribution of $1,154 million needs to be made in each of the next 15 years to amortize/eliminate the current $10.19 billion shortfall.

The FA wants to encourage the Regents, the administration, and the faculty to get out of denial mode and make proper plans to fund UCRP. They need to step forward now and address this significant issue before it dwarfs all other issues at UC.

2 comments:

Anonymous said...

Preside Yudof approves $3,000,000 for consultants when the talent, motivation and resources are available at UC. Do the work internally and save UC and UCB $150,000,000. Youdof and he academic senate leadership need to do the consultants work with the talents and resources of UC. U can do it Academic senate leadership and President Yudof. Do your jobs!

Anonymous said...

1- UCRP is safe because the regents are legally oblogated to cover the liability? Really? Why then aren''t the Regents covering the liability now? And how will they fill the gap of $1 Billion a year when the UC is losing more funding than that and the State is facing $20 Billion annual deficits out several years? UCRP is safe? Nonsense.

2 - Why is UCRP in trouble? Yes, 20 years without contributions and the downturn were contributing factors. But let's look at the failure to contribute. Whose fault was that? Just the Regents? Did the faculty call for contributions from its salary? No. The faculty called for raises and excessive growth by hiring. We spent the system into the red, believing that the funds for doing so really existed. the funds did not exist. They were, in effect, borrowed agains teh UCRP, not just from VERIPS, but by sustaining salaries when we should have been making contributions. The funds were also borrowed in the housing boom and the dot com boom. Fake booms, we overspent at UC, and the busts hit.

Let's take some responsibility as the step toward looking the situation square in the eye. Then we can propose some real solutions.

Oh. Any serious analysis of the UCRP must take into consideration the likelihood of another major stock market pull back, deflation, and a national economy that would be lucky to perform as well as Japan's economy 1990-2009.

UCRP, UC, the State of California, and the US economy are in very serious trouble.