A group of 36 University of California executives are threatening legal action against the UC Board of Regents unless the University increases retirement benefits for roughly 200 of its highest-paid employees.
In a Dec. 9 letter to the Regents, the collective — which doesn’t include any UCSB administrators — asked the board to immediately implement Appendix E. The policy would lift the cap on pension plans for employees earning over $245,000 a year.
Although the Board unanimously approved the measure in February of 1999, it has yet to instate the federally mandated cap since it was lifted by the IRS in 2007.
“We understand the current political sensitivities relating to pension benefits,” the letter said.
“But the Regents have historically stood strong for doing what is right; in this instance that means honoring commitments made to employees by a previous Board.”
In a statement released in response to the letter, UC President Mark G. Yudof and Board of Regents Chair Russell Gould said even though it was approved by the Board, it’s not mandatory to implement the policy.
“The initial regental action required that an implementation plan be developed and submitted by the President of the University and approved by the Chair of the Board and the Chair of the Finance Committee,” the statement read. “For reasons of fiscal prudence in a changing economy, this step —necessary for the proposal to become effective — was never taken. … While those who signed the letter are without question highly valued employees, we must disagree with them on this particular issue.”
Richard Walker, UC Berkeley geography professor and UCB faculty association vice chair, said the demands are unreasonable considering the UC’s current financial crisis.
“The entire reaction has been shock — shock that the elite executives, even faculty, would pursue their self-interest at the expense of the university as a whole,” Walker said. “Our pension fund is in dire straits and everyone will have to sacrifice and that includes them. I don’t think that $245,000 is at all a hardship for anyone.”
The letter was sent days before the Board approved various measures — including increasing UC employees’ minimum retirement age and rate of contributions to the pension fund, as well as decreasing employee retirement benefits — to reduce its $21.6 billion worth of unfunded pension liabilities.
According to Walker, these tactics, in addition to the 40 percent increase in tuition over the past two years, are the result of administrators’ short-sighted planning.
“The university and the state failed to pay into the pension fund for 20 years,” Walker said. “They thought they’d ride stock markets. Well, that didn’t work out too well. Now they have a huge deficit that they have to fill. If they had paid in properly, they never would have had to raise tuition this much.”
The UC currently calculates all pensions as a percentage of the first $245,000 of an employee’s salary. If implemented, the policy would add $5.5 million to the deficit every year and an additional $51 million to make the changes retroactive to 2007.
However, according to the letter, failure to implement the policy will result in “costly and unsuccessful” legal action.
“Forcing resolution in the courts will put 200 of the University’s most senior, most visible current and former executives and faculty leaders in public contention with the president and the Board,” the letter said.
The letter, whose signatories include administrators such as Mark Laret, chief executive officer of UCSF Medical Center, and Christopher Edley Jr., dean of the UC Berkeley law school, has generated a huge public outcry, particularly from fellow faculty members.
UCSB English professor L.O. Aranye Fradenburg said it is unjust for lower-paid employees and students to bear the burden of poor administrative planning.
“They are pressing this issue at a time when the University is taking more and more and more money out of our paychecks for our pensions, to make up a huge shortfall caused by the financial mismanagement of some of the administrators who signed the letter,” Fradenburg said in an e-mail. “There is a double standard: administrators of medical schools and financial administrators deserve a huge pension increase while everyone else’s pension benefits are eroding.”
UCSB history professor Harold Marcuse said executives should strive to ease the UC’s current budgetary woes before making exorbitant demands for their own hefty salaries.
“They have to be accountable to the public and sensitive to the budget situation,” Marcuse said. “They might feel that they can press legal claims but ultimately, if they had been doing their job, we might not be in the dire straits that we are. Our administration and executives are the ones who need to be making the right budget decisions, the right investment decisions and the right management decisions to keep the UC system afloat.”
Fradenburg said the executives should bear the circumstances they expect students and lower-paid employees to tolerate.
“I don’t think [the agreement] should apply today,” Fradenburg said. “A deal is a deal, but so many deals have been broken recently, it’s hard to see why this one has to be honored instead. … If the administrators win the lawsuit, every other person in the UC system who was promised a raise and didn’t get it will be suing too.”
While an official suit has yet to be filed, Walker said the threat alone carried a message of entitlement.
“This letter from the high-earning ‘Gilded 36’ is a slap in the face to everyone else who works for the university, is looking forward to a pension, is paying into it and to students,” Walker said. “It’s an insult to all of us and it needs to be resisted.”