Doghouse Pension Politics

Another negative report about the University of California appeared last weekend, this time on the front page of Sunday's Los Angeles Times.  The headline summarized the storyline: "UC is handing out generous pensions, and students are paying the price with higher tuition."

The piece has some analytical problems, but that doesn't keep it from painting a powerfully dark picture of the UC system.  I should say up front that I appreciate the investigative efforts of the piece's author, Jack Dolan, and his Times colleagues to collect internal university data and to report coherently on an important issue.

UC employees have been treated to two major pension tierings in less than a decade (where new employees get reduced benefits).  They have had their contributions increase from 0 to 7-9 percent of pretax salary depending on their employee group, during a period of de facto salary freezes.  No UC employee group ever requested the "contribution holiday" in the first place: UCRP was greatly overfunded at the time, and then zero contributions became an administrative end-run around pay freezes and stagnation during the first big round of state budget cuts that started in 1991-92. For the ensuing 25 years, most UC salaries have lagged behind their peers: faculty have generally been at least 10 percent behind.  The overfunded UC Retirement Program (UCRP) balanced that out, so that "total compensation" stayed competitive.  Now total compensation has fallen behind as well (by 10 percent for ladder faculty in a 2014 Mercer Total Remuneration Study; also see Berkeley FA overview) and this is due to deteriorating benefits as well as the tiering of and the rising contributions to the retirement plan.  UC now contributes 14 percent of salary to UCRP, with 6 percent of that going to backfill the effects of the "holiday," which, stupid as its protraction was, tried to counterbalance substandard salaries (UCRP page 8). So UC employees have little to learn about UC pension problems from the Dolan article.   And yet they were likely disturbed by Dolan's equation of all UC employees with the tiny $300,000+ Club whose payouts have been critiqued by faculty before, and that the article wrongly implies represent a pervasive, fatal overgenerosity to the whole.

(1)

That said, I'm interested in the larger framing problem the Dolan piece represents. How can UC frame its operations and missions in a way that avoids this kind of repeated damage to its reputation?  Fixing root causes is of course the real solution.  But real fixes are themselves blocked by a framing narrative that makes it much harder to address root causes or even to see what they are.

The master frame is "UC is rich and dishonest and doesn't need or deserve more state money."  Dolan's piece adds, "UC acts rich with pensions when it's actually poor, and thus hurts its students."  These are both "private good" frames that rest on "public-choice" political economy, as I'll discuss below.

We are in Year Ten (or Twenty) of a university strategy crisis about changing these narratives.  How can UC increase the chances of an alternative front page headline like,

After years of austerity, UC struggles to meet needs of students without hurting staff" (or vice versa)?  

A frame composed of such headlines would allow UC to address deep problems (e.g. inadequate public funding, including no ongoing state pension funding) rather than go after the specific mistakes of their critics.

Let's take a look at how Dolan's argument works.  He argues that a "good chunk" of this year's 2.5 percent tuition increase (rising for resident undergraduates from $12,294 to $12,630) will go to filling in the pension shortfall rather than improving campus operations. UC has $57 million in new tuition money for operations, but could have had $83 million were it not sending $26 million to add a drop to the pension deficit bucket.  The piece rolls several pension issues into a giant D.U.M.E spliff, as my Mardi Gras office candle would put it.

1. "The average UC pension for people who retired after 30 years is $88,000."
2. "More than 5400 UC retirees received pensions over $100,000."
3. "The number of UC retirees collecting six-figure pensions has increased 60% since 2012."
4. "Nearly three dozen [former employees] received pensions in excess of $300,000 last year, four times as many as in 2012."
5. Former UC President Mark Yudof got a sweetheart pension deal that put him in the top ten, though he "worked at the university for only seven years--including one year on paid sabbatical and another in which he taught one class per semester."
6. The pension fund can't really afford this because it has a $15 billion shortfall--which has been getting worse.
7. The pension problem "is distinctly self-inflicted. In 1990, administrators  . .  . stopped making contributions for 20 years, even as their investments foundered."

The result is "a jaw-dropping bill for the next generation--which has now arrived." Students are paying the price.

That's just the first section of the piece.  The next section details how Mark Yudof got his pension up from the $45,000 per year the formula would have granted him--first to $230,000 per year for 5 years (via a custom formula he negotiated with senior UC officials), then to $357,000 per year when the year of sabbatical and year of teaching counted part of the president formula).  Then there's discussion of the medical professors who make up the bulk of the top-10 list.  Dolan interviewed two of them, Lawrence Bassett and Nostratola Vaziri (41.4 and 36.7 years of service), who both said they stayed for the work not the pension.  That's probably true, but leads to

     8. UC's justification for Defined Benefit pensions--they retain top talent--is false.

The rest of the piece is a mixture of people claiming that paying higher salaries on Defined Contribution plans would be cheaper, and a recount of how UCOP stonewalled The Times and another organization that thought the pension data was public. The piece notes that Regent Richard Blum did not respond to requests to explain the contract he negotiated with Yudof, and ends with this paragraph:

Napolitano’s staff also initially refused when The Times requested the pension information in February. It took until June for them to provide usable data — which showed the dramatic rise in six-figure pension payments and revealed for the first time the full amount of Yudof’s pension.

That brings us to 

    9. UC officials are not transparent and, lip service aside, don't think they are accountable to the public.

And throw in the conclusion (in pension author Lawrence McQuillan's words): 

    10. "this year's higher tuition is just the beginning of bailouts by students and their parents" of UC and other public universities. 

This chain of statements is very damaging.   (1) is not a bad but a good: $88,000 after 30 years is a reasonable pension for an institution comprised of the most highly qualified kinds of people in society, and whose professors are usually 30 when they get their doctorate and can start their career--or 35-40 given the shortage of tenure-track jobs and the stopgap of postdocs.  But then (1) gets buried by (2) through (10).  

We could analyze (2) through (10) and show that each of them is not entirely true and/or is decontextualized, and that there are counterexamples. We could say reforms have taken place, as UC CFO Nathan Brostrom does.  These kinds of rebuttals are satisfying and helpful but leave the current framework in place.  An example of failure in the recent series of UC-negative reports was UCOP's point-by-point rebuttal to the audit that we discussed several times in May (starting here).  It weirdly resulted in UCOP's formal capitulation, with no clarification for the public of the principles at stake.

(2)

What would work better is critique embedded in an explicit alternative framework.  For universities this should be a public good framework.  I theorize this in The Great Mistake, but I'll just do a summary narrative here.  The private good framework makes Defined Benefit pensions anomalous, and statements like "we're 83 percent funded!" won't change that.  In addition, a pervasive public-choice theory casts DB pensions as typical expressions of public-employee self-interest that are won at the expense of the customer (students). In contrast, DB pensions (to stick with our case here) are normal and logical in a public good framework. Here's a sample narrative, in the voice of the University administration:

Public universities create and sustain public goods in a variety of ways.  One public good is a fair salary that reflects the past effort and educational attainment of the employee and the value their ongoing labor.  Market rates are one guideline for but not the final determinant of salary.  The same is true for retirement.  Retirement security is a public good, and historical experience shows that Defined Benefit pensions are the best way of providing that.  We also know that pool investing is more efficient than individual investing.  Although UC is always being told to replace DB with Defined Contribution (DC) pensions, the main benefit would be to push the cost of retirement off state and institutional books and onto the budget of the individual employee.  There are no truly convincing ethical defenses of this "risk shift" to individuals.  In addition, the decades-long replacement of DB by DC plans (e.g. the 401(k)) has created a retirement crisis in the country. This is the real problem with pensions: not enough people have them.  We are not willing to shift from good to bad retirement design simply because the 401(k) satisfies a policy bias towards market solutions--even when their performance is worse.

In the public good context, we reject the LA Times article's assumption that students and university staff have opposing interests. We detect a standard public-choice framework, which posits that public employees are there to maximize their own welfare rather than to perform a satisfying and valuable service for a decently supportive salary, which is what we know empirically to be the case.  Public-choice assumptions misstate the problem: the problem is not that university staff have excessive pensions at the expense of the customer-student because bureaucracies defeat market discipline; the problem is that the system of public-good activities--learning, researching, disseminating knowledge--has been underfunded and continuously stressed.   We will not cut part of our employees' total compensation on the basis of an incorrect paradigm.

Since the University and society work together in a common public enterprise, we need to disclose what the funding does and explain how the institution works.  We have not been doing this well. This is largely because we don't trust the political system to grasp the history and rationale of policies unique to universities (like supplemental summer salaries for sponsored research) before they starting kicking those policies around as political footballs. We are always afraid of retaliation and have a duty to protect the university from it.  And yet we realize that we have increased public distrust by how we handle negative findings like those of the UCOP audit.  We know the price of selective disclosure is far too high, and we will end the practice of not disclosing budgetary information until we are sued or threatened with lawsuits, as was the case with the pension story. Non-disclosure blocks practical reforms by cutting us off from shared public-good goals.  Secrecy protects bad practices and thus prevents us from protecting a good overall policy.  So while pensions above $100,000 are justified (2), and their increase (3) can be traced to demographics, the spiked Yudof pension (5), was not.  We can tell you why we thought the Yudof deal was a good idea at the time, but we won't be doing such things again.  

The same goes for the 20 year pension "holiday."  This was sustained in an attempt to compensate UC faculty and staff for substandard salaries. They were below market value then, and they remain at least 10 percent below peer levels today.  We should have ended this practice much sooner, and both employees and employer are paying high costs out of pocket to make up for this mistake.  The state saved quite a bit of money from the pension holiday too.  When we place the Dolan article in a public good frame, we can see that the real issue is for all parties to contribute to keeping the retirement system solvent.  The University and its employees are doing their part: only the state rejects an ongoing commitment. A public good framework makes a state contribution natural. 

More generally, we won't engage in practices we can't defend in our overall philosophical framework, in which any practice must be able to withstand full disclosure.  At the same time, all practices that survive this test will be fully defended by us.   

Finally, our core public good is the creation and dissemination of advanced knowledge. In this context, we must insist that coverage follows full academic standards.  Here Jack Dolan's article falls short.  Dolan puts out large numbers without context. For example, 5400 pensions above $100,000 is  less than 10 percent of the over 60,000 former employees now receiving pensions (UCRP page 4). The average professional/support staff pension is $33,000; the average senior professional pension is under $60,000; even faculty, who mostly don't have 30 years of UC service, receive on average under $83,000. Mark Yudof and the other big pensions do not represent the system.  The article's cherry-picking of examples is a classic error, though it feeds the private-good paradigm that underwrites Dolan's analysis.  We will apply the same standards to critiques of us that we apply to our own research and administration.

That's a first draft on a public good frame for the retirement issue, and it could no doubt be improved. But the main point stands.  Reframing would give the public a new way of thinking about a scandal-plagued system. It could get them focused on UC's real problems and interested in actually fixing them.  And it has a better chance of breaking the doghouse cycle that the defenses we rely on now.

BFA Editorial on Free Speech and the University

In the aftermath of the failure of Milofest, the Berkeley Faculty Association has written an op-ed that raises important questions about the relationship between free speech, academic freedom, and political attacks on the university.  As the BFA notes:

Freedom of speech is one foundational principle of the public university. Academic freedom is another. Since 1964, when the UC Berkeley administration was successfully challenged by the Free Speech Movement to extend First Amendment protections to campus space, the university has had to balance the obligation to allow citizens’ speech against the commitment to academic freedom. As a public entity, UC Berkeley must respect the airing of diverse viewpoints; as a higher learning institution, UC Berkeley must protect its autonomy from political interference and harassment. Increasingly, the threat to the campus’ autonomy, on which academic freedom depends, derives not from government legislators—as in the era of the FSM, when former UC President Clark Kerr and former UC Berkeley chancellor Edward Strong were faced with adjudicating competing obligations to free speech and academic freedom. Rather, the threat increasingly derives from private interests hostile to the university’s mission of research and teaching.

You can read the entire statement at the DAILY CAL

Napolitano Sues Trump: Dealing with DACA Termination

Trump presides as the King of Pain, inflicting turmoil and loss on others, seemingly without effort or long-term benefit.  Last week the pain came from his administration's termination of the Deferred Action for Childhood Arrivals (DACA) program this coming March.  The idea seems to be to threaten the program's 800,000 recipients with impeding job loss and deportation while the Congress that made DACA necessary by failing to pass immigration reform works again on passing immigration reform.

In "The Psychic Toll of Trump's DACA Decision," Karla Conejo Villavicencio writes,

Spreading fear and anxiety, of course, is part of the administration’s plan. Thomas Homan, the acting director of ICE, recently said: “If you’re in this country illegally and you committed a crime by entering this country, you should be uncomfortable. You should look over your shoulder, and you need to be worried.”

The renewed fear comes to a community that already leads a kind of lower-caste life bounded by suffering.

Undocumented life in America is hard on the mind and body. Poverty, precarious employment, poor access to health care, discrimination and trauma from the migration itself often lead to disorders like depression, anxiety and post-traumatic stress disorder. Access to mental health treatment is scant, the demands of simply surviving are overwhelming, the fear of being discovered discourages people from seeking care, and the stigma of mental illness has perpetuated a culture of silence that only worsens the suffering. . . . All of the immigrants I have interviewed and known throughout my life seem to accept chronic exhaustion, low self-esteem, fear and panic, low moods and fits of crying as normal for the melancholic migrant struggling to subsist without being arrested. 

DACA was intended to give limited relief to one set of undocumented US residents: those who were brought to the U.S. by their parents as minors (under age 16) before 2007. It authorises two-year renewal work permits and "defers removal proceedings."  It was implemented in 2012 with a major assist from UC president Janet Napolitano when she was Barack Obama's Secretary of Homeland Security. The program has been generally popular: in 2013, back before he ran for president, Trump met with Dreamer activists (above; photo credit: Estuardo Rodriguez).

In the wake of the announcement, Janet Napolitano has gone one step further. She and the UC Regents are suing the Department of Homeland Security to prevent it from ending DACA.  The lawsuit claims that DACA is being terminated through an "unreasoned executive whim" that violates the Due Process Clause of the Fifth Amendment and the Administrative Procedures Act.  In her op-ed explaining her decision, Napolitano writes that the Department of Justice

offers no rationale based on the merits of DACA itself, but rather on the purported illegality of a separate program with different rules and aimed at different immigrants (the parents of DACA-eligible young people), a program that never went into effect. That justification is flat out wrong. The DACA program was a legal exercise of the department’s prosecutorial discretion and no court has found DACA to be invalid. 

In fact, in 2014, the Department of Justice office that reviews the constitutionality of executive branch actions determined that DACA was lawful. Now the Trump administration’s DOJ offers no reasoned analysis for its about-face.

Like many other university heads, Napolitano had already denounced the decision to end the DACA program while affirming the continuation of DACA-related legal, financial aid and advising programs (UC's are also summarised here; UCSB's Undocumented Student Services page is here).  In addition, she had confirmed that UCOP was

Directing campus police not to contact, detain, question or arrest individuals based on suspected undocumented status, or to enter agreements to undertake joint efforts to make arrests for federal immigration law violations.

Other universities, including the Cal State system, were already declining to cooperate with immigration officials, prompting threats of retaliation from some officials (e.g. Texas).  The University of California now becomes the first to sue, with standing to sue grounded in the harm done to its 4000 DACA students.

In the meantime, DACA students, please note: "Students whose legal status expires before or on March 5 can renew their two-year DACA status if they apply before October 5."    USCIS information is here.

I'm glad Napolitano has put UC out in front on this issue.  DACA was a patch on an immigration reform process that had been broken by congressional Republicans, and the patch should stay where it is.

But there's also quite a bit of politics to get through, and then a self-made trap for universities, with which I'll conclude.

First, the politics, which have shifted in favor of DACA.  In an echo of the lawsuits against the Muslim travel ban, the attorneys general of 15 states are suing the Trump administration to block DACA's termination, "citing Trump's racial animus."   The White House was already divided on termination, as Trump himself seems to be: his varying statements include suggestions that he would sign future DACA legislation sent to him by Congress and that for the 6 month period leading up to termination, DACA people "have nothing to worry about."  Silicon Valley supports DACA, as does the business wing of the Republican Party, as does every Democratic elected official who has spoken on the matter, as do many governors, mayors, city councils, police chiefs, school district heads, church leaders, and so on. So does two-thirds of the general public.  Ending DACA is turning out to be another unpopular thing that this popularity-obsessed president has done.   He has also done it after hurricane Harvey had devastated southeast Texas and as hurricane Irma was steaming towards Florida.  He did it at the start of a nasty political autumn when he will need solid support from both parties to raise the debt ceiling among other unpleasant political tasks.  DACA back-pedaling may be commencing soon.

Why did he do it then?  The simple answer is that the unifying principle of Trump's worldview is white supremacy. (See Ta-Nehisi Coates' piece, "Our First White President" if you need convincing, or even if you don't.)  More narrowly, his clear "racial animus" made it easier for him to take DACA students hostage to exchange for Democratic support for a border wall.  This is one motive for the timing of the announcement, though too many members of both parties hate this exchange for it to work.

A second motive for Sessions and Trump is that they are losing the immigration issue in the court of public opinion. They must have assumed that white identity politics would keep the base stirred up after it had put them over the top last November.  And yet there was no groundswell to defend the Muslim ban.  There was very limited excitement on the Right--and a fair amount of embarrassed condemnation--after the white supremacist show of force in Charlottesville last month. Charlottesville's immediate effect was to grow the size of anti-Trump counterprotests to proportions that made the Trump fans hard to find.

Trump's anti-immigration stance has not actually built a coalition beyond his base of a quarter to a third of voters.  Though immigration reform politics are complicated, and racism is a steady baseline,  the overall public is not anti-immigrant.  In the most recent national poll, a majority objected to Trump's pardon of Latino-abusing former sheriff Joe Arpaio and, in addition to supporting DACA by a two to one margin, favored some "path to citizenship" for all undocumented residents by nearly three to one (71 percent).  Americans are now more likely to favor increased immigration than they were in 1986 when Ronald Reagan signed the last "path to citizenship" immigration bill.

Still worse for Trump, DACA has been doing four things to erode support for a hardline anti-immigration position.

It has rebranded young Latino immigrants as the new "model minority"--the young Americans next door.

It has appealed to the American desire to side with the innocent, which helps it to see itself as innocent.  (For example, it is easier to admit child refugees from a Honduras made more lethal by Hillary Clinton's support for the 2009 coup against elected president Manuel Zelaya than to confront destructive U.S. policies in Latin America.)

Third, DACA has shown that diverse societies work. Integration is simply more practical as well as more humane than deportation, which seems particularly oafish and stupid in relation to DACA recipients.  Everyday life has tended to cut through the economic debate about whether immigrant labor is competitive with or complementary to native-born labor. Wherever the economy is functioning well, actual practice is an interdependent non-zero sum.

Finally, DACA has been showing that government programs can solve awkward social issues and reduce specific miseries. That fact on the ground disputes the Right's overall world view.

Attorney General Jeff Sessions is a lifelong race politician, and is no doubt aware of all this.  His announcement of the DACA termination sought to broaden termination's appeal on three points.

He stated that a "lawful immigration policy that serves the national interest" prohibits an "open border policy." Second, he stressed DACA's vulnerability to "legal and constitutional challenges," saying that his review found it to be inconsistent with the Constitution's separation of powers. He said he was establishing an orderly wind-down that would give Congress time to act if it so chose.  Third, he claimed that a "lawful and constitutional immigration policy" will "further economically the lives of millions who are struggling."

Sessions thus combined a "nation of laws" defense with a reference to Trump's fabled promises to bring back American jobs.  The overall point was to affirm that DACA residents are generally good people while rejecting Obama's executive order as undermining constitutional law and hurting citizen employment.

In the coming weeks, Sessions will try to appeal to people who know they too come from immigrants, who feel badly about pulling the ladder up now, but who worry about open borders, foreign disorder, ignored lawbreaking, and the scarcity of well-paying jobs.  He will also position defenders of DACA students as lawbreakers themselves. He'll specifically go after universities as a class, saying they think they are too good to follow the same laws that apply to everybody else.   He'll build on the Right's established vision of  universities as part of a liberal elite that has let middle-class jobs disappear while asserting their own special privileges.

To stay ahead of this issue, universities are going to have to do three things--three things in addition to the basic critique of such things as Sessions' own rationales.  The economic debate (e.g. Borjas v Krugman) must continue, but it has been fought to a draw that does little to affect people's sense of their economic experience. 

The first is have a good offense, and Napolitano's lawsuit provides it. It claims that legal procedure was broken not by universities like UC but by Sessions himself.  She is also a Democrat with a  unique claim to the "nation of laws" argument: she was a central player when Obama increased border enforcement and deported more undocumented migrants than any other president in history, and this record produced protests of her UC hire by the immigrants rights community that she sides with on DACA.  It will be hard for Sessions to position the UC lawsuit as emerging from someone who's soft on illegal immigration.

Second, colleges and universities will need to do a much better job of achieving racial equality.  Higher education was meant to be part of the solution to race-based discrimination, but decades of cuts and austerity have impoverished the institutions that serve the majority of students of color, starting with community colleges.  For example, there is a clear correlation between grossly unequal funding and unequal graduation rates (see Stage 7 of The Great Mistake or Separate and Unequal for details).  The U.S. has been trying to equalize K-12 funding across school districts for decades, though the egalitarian principle is honored in the breach, and resegregation has been spreading everywhere. Higher ed needs to get serious about embarking on its own equalization project.  The educational boon would be huge.  So would the political benefits for universities: they would associate themselves with inclusive social development via an equality across aggregate populations this is efficient as well as just. 


Third, racially egalitarian development will be credible only if universities break with their implicit 1990s-era economic model that has helped underdevelop much of the country. I mean the Clinton-style knowledge economy, which was to deliver general prosperity and instead produced stagnant wages for three-quarters of the workforce while devolving whole regions at a time.  Democrat consent to low tax dogma, supported by leaders in tech and finance, has eroded the infrastructure and public services that would have held economy and society together.  At the same time, universities have made their own workforces into microcosms of the dual economy that most voters hate: faculties are divided between a shrinking tenured elite and the contingent masses who comprise about 70 percent of the instructional workforce.  Administrative bloat has not stopped the same segmentation in non-teaching staff: UCSF made national news this year by outsourcing to an offshore company exactly the kind of information technology jobs that universities are supposed to prepare their students to have.  For the general public to care about universities's views on economics and immigration, they will need to set a better example.

In any case, the fates of universities and immigrants are intertwined.  Universities only make sense as a public good grounded in tax-based public systems that support full social development; similarly, immigrant and non-immigrant labor thrive together only in a social ecology sustained by strong, equitably distributed services in health, education, housing, transportation, and employment.  The same degradation of the public sector that has damaged public universities has intensified an artificial competition between immigrant and non-immigrant labor.  Universities could do a better job of using their own scholars's research--represented by the quotations with which I began--to show the range of both market and non-market contributions that immigrants have always been making.

I realize these last two points are a reach, and require new top-level strategy.  But though the UC lawsuit for DACA is a good start, it has a much better chance of lasting success--and of leading to stability and healing--if universities publicly engage with racial capitalism and the dual economy it has created.