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Sunday, June 23, 2013

Sunday, June 23, 2013

Will UCOP's Latest Efficiency Tax Employees?

By Onuttom Narayan (UCSC)

Under the name of UCPath, the University of California will move to a single payroll and HR system for all campuses and medical centers “that meets the core needs of each location while capturing the efficiencies, improved data and cost-savings associated with unified systems.
Unfortunately, one of the likely consequences of this will be a new “tax” on faculty research grants. This is because one aspect of the new system is the introduction of “Composite Benefit Rates” (CBR), where employees are divided into a small number of groups, and the benefits charged to the budget for each employee are based on the average cost for their group instead of the actual cost of their benefits. If all salaries were being paid from state funds, this would be a harmless accounting change. But this is not the case, and as the CBR Steering Committee's final recommendation admits, there will be winners and losers.

Most notably, for faculty members who are academic-year employees, funding sources (e.g. research grants) that pay their summer salary will be charged for benefits at the same rate as for academic year salary. At present, the summer benefit rate is much less (except at UC Davis which has already implemented CBR), because there are few additional benefits associated with summer salary: medical insurance coverage is already provided for the whole year for academic year employees and therefore there is no additional employer contribution for the summer; summer salary is not covered compensation for UCRP, so there is no employer contribution to UCRP for summer salary (there is a small contribution to a defined benefit plan that is included in current summer benefit rates). Because of these, for every dollar in faculty summer salary from a research grant, currently the University only charges the grant an extra 10-14 cents for benefits. Under the new model, the same grant will be charged the 30-35% academic year benefit rate, i.e. approximately 20 to 25 cents more without any increase in benefit expense to UC.  (1) With indirect costs (overhead) charged for the benefits, the new “tax” becomes 30 to 35 cents on the dollar. Summer salary from other sources, such as from summer teaching, will be affected in the same way: the funding source will have to allocate more money for benefits, but it is only for research grants that the faculty will have to figure out where to find the money.

The implementation of the system, which was originally scheduled for this year, will happen with very little warning. Faculty members with current research grants will face the choice of reducing their summer salary or reducing support for graduate students or post-docs.

The CBR Steering Committee euphemistically describes the inclusion of faculty summer salaries as “a topic of interest during this project by many constituents.” This is another way of saying that committees of the Academic Senate strongly resisted this plan, were initially told that this would not happen (and even, at some point, that no benefits would be charged for summer salaries) before discovering at the last minute that the Steering Committee's recommendation had changed. When this issue is raised by the Senate, senior management complains that UC receives far less indirect cost than do private universities—an issue that has nothing to do with benefit costs and is an indirect confession that the plan all along has been to squeeze extra funds from faculty grants.

The change is claimed to be driven by the Division of Consumer Affairs (DCA) of the federal government, with which universities negotiate the charges they levy on research grants. In December 2012, the University Committee on Planning and Budget (UCPB) of the Academic Senate was told that UC representatives – including the Chair of the Academic Senate – had met with DCA and found them receptive to separate benefit rates for summer salaries. In February 2012, UCPB was told that in subsequent meetings with UC representatives – this time without Senate members – DCA eventually decided that the University would have to charge either the same benefit rates for summer and academic-year faculty salaries, or charge no benefits for summer salaries. Nothing in between was permissible, including a rate that would approximate actual charges, and the University eventually decided that charging nothing for summer benefits was unaffordable. At present, the University calculates benefits individually for each employee, a process that the CBR Steering Committee describes as equivalent to “hundreds of thousands” of benefit rates. No explanation was given why federal agencies would, when presented with a proposal to reduce these to a handful of rates, insist on a further reduction that would eliminate a separate summer salary rate, a reduction which would cost federal agencies more than what UC proposed!

Apparently the UC Berkeley administration has gone to DCA to request that Berkeley be allowed to set a separate summer benefit rate. If this is successful, it is possible that other campuses will follow suit. Otherwise, the faculty at large will learn about the new system when a fresh bite is taken out of their research grants.


Anonymous said...

Well, this is not surprisingly. Indirect costs charged to faculty research grants never have been tied to actual expenditures by UC.

Most likely some faculty will be excused from the new charges, and others won't, depending on the whims of the administration.

That is how indirect costs are handled.

Gerry Barnett said...

It would appear that the change will add more to the total funds requested, as an increase in the benefits calculated on the salary portion of the direct expenditure budget for a federal grant. That does not reduce the money requested for direct expenditures unless the total amount requested is already the maximum allowed by the funding agency for that grant program.

The broader questions are (i) how are indirect cost funds spent? and (ii) what spending is attributed to "research," even if not supported by indirect cost funds?

Aranye Nin, Ph.D. said...

It's important to stress that, by "unification," UCPath means taking payroll-related responsibilities away from local office staff (for many of whom, payroll admin is just a part of their responsibilities) and creating warehouses in peripheral locations for workers who have no contact with the people they serve and spend the livelong day performing the same functions over and over again. "Unification" means immiseration and job loss for yet more California workers. Despite the fact that I've published several books and over 50 articles, I never have any summer salary unless I teach 6 times as many courses a year as most scientists instead of the usual 5, so my concern is with UC's outsourcing (to Texas and New Jersey, for example) and degradation of staff functions.

Joel Norris said...

If my summer salary has a charge for UCRP, does that mean that I get a UCRP pension based on my summer salary?

Anonymous said...

Generally all federal grants end up giving researchers a total they must stay under. I know in my case, paying these extra benefits will just reduce money available for grad students, equipment, etc.

How indirect costs are spent has been documented quite a few times, but the short answer: they are not spent in the manner used to justify the costs to the government. They are redistributed to a variety of needs as judged by the administration, so, some faculty pay a lot and get little in return, other faculty pay a little and get a lot in return, depending on the judgement of the administration.

Many people (including Chris Newfield) have argued that the total indirect cost recovery is doesn't cover UC's expenditures. Others including myself don't think the realities of indirect cost spending contradict that argument.

The issue raised here is: can UC charge a summer benefits rate that clearly exceeds the cost of summer benefits, because the UC software can't handle a varying rate, or something.

But UC has an already established record of capricious and varied charges on grants that aren't related to actual costs. It is their ballpark, bats, gloves, balls, etc, and each grant can be charged a new random number, some high, some low, depending on what the administration wants.

As for teaching.... I certainly agree that any UC faculty who have to teach 5 times the rate most scientists teach, which would be 15 courses a year, is being abused by UC. And 18 courses a year would be outrageous.

The odd statistic has been science faculty teach more students per ladder faculty than any other division. That is because their students get bundled into large courses. Humanities teach the most courses per ladder faculty, and social sciences the most students per *all* faculty, but makes the largest use of non-ladder faculty.

Chris Newfield said...

Aranye, thank you for the (bad) news - I didn't realize this was another instance of Operation Excellence style consolidation plus splitting of staff from faculty. time to check in again with that foolish program too.

Onuttom Narayan said...

Anonymous and Gerry: benefits are direct costs. (As with other direct costs, they then have indirect costs added to them.) Hopefully we can still expect to make sense of direct costs!

Joel (and Gerry): No, your UCRP pension will not change. Nor will your summer medical coverage. The increased charges for benefits will get you no additional benefits.

Joel Norris said...

Will the federal agencies allow grants to be charged for benefits that do not actually result in a benefit?

Gerry Barnett said...

I guess there is a difference between existing grants, which now would appear to get charged a new benefit rate, and new grants, in which the benefit rate can be included in the direct budget. It is the former case where the total direct budget is affected.

Joel's question above is a good one. If one has committed to a particular budget, can the institution unilaterally take money from that budget simply to take a greater share.

Of course, since UC apparently doesn't use indirect funds for what it argues with the government it uses them for, UC could always backfill the hit on the direct budget with some of those indirects, no?

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