California Should Have a Pension for Frugality

A Brewing Pension Crisis Threatens the Golden State's Finances

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Richard Zierer

Pensions for UC employees are at record highs. An LA Times article reports more than 5,400 UC retirees collected pensions worth $100,000 or more in 2016, up more than 50 percent from just a few years earlier. The same article claims in 1990 the UC system allowed employees to pay nothing towards their pensions while simultaneously increasing tuition on students, turning what had been an overfunded pension system into a $12 billion unfunded liability by 2015.  

Meanwhile, our tuition has gone from an average of $3,800 in 1994 to $12,294 today. This fiscal irresponsibility has resulted in a massive transfer of wealth from our generation in order to fund generous pensions, many of which go to bureaucrats rather than professors, while student/teacher ratios soar.  The present course of action is untenable, and a drastic course correction is needed to prevent our generation from sinking even further into debt.

$1.3 billion dollars: that’s the amount of money the UC system spends on pensions every year. It amounts to nearly 5 percent of the UC system’s $27 billion budget in 2015. The LA Times article reported that UC President Napolitano has proposed increasing UC tuition by 28 percent over five years to cover payroll and retirement costs.

As previously mentioned, this pension crisis has in part been caused by the decision to abolish employee contributions to them during the 1990s and early 2000s. According to the LA Times, UC administration staff more than doubled from 2000 to 2015, while the number of faculty stagnated; tenure-track faculty members increased only 8 percent from 2000 to 2015. This has had a major impact on class sizes.  

These tenure-track professors are not the only UC employees collecting pensions; in fact, many of the largest pensions go to retired administrators. What’s worse, administrators now outnumber tenure-track faculty members; the LA Times article stated tenure-track faculty members often make lower salaries than administrators. If this bureaucratic growth continues unchecked, pension expenditures will increase significantly over the next decade. This explosion in spending will be considerable over even the next five years.

Tuition hikes are irresponsible given alternative options. Tuition increases have occurred despite regents allowing employees to avoid contributing to the pension plans beginning in 1990. Additionally, many students report not being able to complete their degree in four years because of class availability, while many others report not being able to get into the classes they need to graduate on time.  

The root of the problem is not that tuition is too low. Clearly this was not the case in the 1980s, when tuition was just $719 per year, including student fees! It has much more to do with the fact that administration staff increased by 60 percent from 2004 to 2014, to about 10,000 employees. This unchecked growth presents funding challenges, not just in the short-term (in the form of salary and benefits for current employees) but in the long-term, as these employees retire and begin to collect their generous state pensions.

The number of UC retirees collecting pensions worth more than $100,000 a year increased 60 percent from 2012 to 2016, according to the LA Times article. In 2016, “nearly three dozen” employees collected pensions in excess of $300,000 a year – a four-fold increase from 2012. The UC System is the third largest employer in the state of California; it is not a business, and it funds itself by taking money from taxpayers as well as from its students in the form of tuition. Let’s demand that the UC system be more responsible with its spending and ensure that we get what we are paying for.

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