L3 Harris-Palantir Demo Video Sept 2026   

By: Hannah Appel (UCLA), Seeta Chaganti (UCD), Charmaine Chua (UCB), Noah Zatz (UCLA)

Many thousands - perhaps the majority - of UC workers, decry the violence that surrounds us. We protest the masked ICE agents who kidnap our neighbors, students, and family members. We protest the concentration camps for immigration detainees and the domestic military deployments imposing policies of mass criminalization. We cry out against imperial violence in Venezuela and Iran. We protest genocide, occupation, and apartheid from Palestine to Sudan. And yet, many of the state forces terrorizing our neighbors and innocent civilians around the world use surveillance technology and weapons from companies funded by our pensions.

President Napolitano's formal proposal for a new pension tier has been posted in the Agenda for next week's Regents' Meeting.  I do not have time today to offer a detailed reading of it (although Chris and I hope to have something up soon). But on first glance it does differ in some significant ways from the majority positions of the Retirement Options Task Force that President Napolitano had appointed last fall. The pension options for faculty (especially faculty who are hired at a salary below the PEPRA cap) appear to be better than the ROTF proposed while the pension options for staff are worse than the ROTF proposed.  One thing that hasn't changed is that retirement benefits for the proposed 2016 Tier will be worse than for the 2013 Tier, let alone the 1976 Tier that includes all pre-2013 employees.

If I can't offer a full reading of the proposal it is possible to respond to another issue raised by the President's announcement: the significance of the announcement and the process it concluded for the state of shared governance at UC.   And on this score the implications are clear and unacceptable. The entire pension reduction process has been marked by a fundamental disregard for the institutions of shared governance.  It builds upon and is a culmination of series of actions begun under the previous administration that has eroded both the principles and practices of shared governance.  The result is not only a narrowing of perspective on decision making but the managerial disconnect that I discussed recently.

REVISITING THE PENSION PROCESS

As you know the pension plan emerged from the so-called committee of two process consisting of President Napolitano, Governor Brown, and selected members of their staff.  The Senate's Committee on Planning and Budget was effectively excluded from the committee until it was completed.  Having agreed to pension changes without consultation and without a clear sense of what the effects might be, President Napolitano established the Retirement Options Task Force last summer, to be chaired by her Executive Vice President Rachael Nava. The Task Force fulfilled its charge under a vow of silence and then sent their report in the middle of December.  At that point, President delayed release of the report for a month which insured that the Senate had only 30 days to analyze the proposal and provide comments from around the system.

Put bluntly, the process was set up in a way that there will be no meaningful shared reflection on President Napolitano's decision with the Governor to reduce pension benefits (and therefore compensation) for future employees of UC.  As I have pointed out in an earlier post, the President's office has agreed to sacrifice the compensation possibilities of all future employees in exchange for a small portion of UCRP's present unfunded liability.  UCOP chose to do this without genuine consultation with the Senate or the Unions (who at least have the right to negotiate this process), despite the fact that a wide-ranging discussion of this issue had taken place only a few years earlier, and without even gaining a commitment from the State to assume responsibility for pension costs moving forward.  Indeed, as Chris has noted, this agreement to lower the long-term compensation structures for faculty and staff was part of a budget deal that gained little in terms of the ongoing fiscal needs of the University.

Despite the acute time constraints, a variety of Senate committees put together reports, pointing out a wide range of problems with the proposal and revealing that the imposition of the pension agreement would not only clearly reduce employee pensions but also potentially raise costs on campuses. This is because campuses would need to offer higher salaries and other compensation to make up for the loss of the benefits of UC's traditional retirement system. Among other unanticipated unwelcome outcomes was the further fragmentation of the faculty and staff and the increase of burdens onto campuses.

Although the President's final proposal does address some of the many, many problems raised by various constituencies, her announcement reinforces the extent to which UCOP now marginalizes the practices of shared governance at the University.  Her statement does not acknowledge the strong objections, of the Assembly of the Systemwide Academic Senate, minimizes the very serious and extensive analyses offered by the Academic Senate as an unnamed part of the "input I received from faculty and staff," and places her personal interpretation of individual comments above institutional governance.  Unfortunately, this attitude is not a one-off.  It builds on the exclusion of the Senate from the Budget discussions, the management overreach of the Medical Center centralization, and the President's rewriting of the UC policies on investment in the work of the University's scientists.  It extends the Yudof administration's disregard for Senate objections to the Salary Supplement Plan, not to mention the debacle of the University's Commission on the Future in which the sidelining of the Senate led to UCOP's overestimation of the benefits of online education and of other technological fixes, like UC Path, for alleged inefficiencies.

IMPLICATIONS

There are certainly arguments that can be made--in the pension arena as elsewhere--about appropriate changes in University organization.  But these discussions should take place in a meaningful and open way before decisions have been set in stone.  Even in the final proposal, UCOP doesn't seem committed to this sort of discussion.  In discussing those who suggested that the deal she struck with the governor was a poor one for the University, the executive summary asserted:

Some members of the University community argued that the PEPRA cap should be rejected altogether. This argument fails for compelling reasons. The PEPRA cap is only one part of a comprehensive agreement with the Governor that provides nearly $1 billion in new funding to the University, among other benefits. The Regents have already endorsed this agreement. To reject the PEPRA cap and undo the agreement would require the University to raise resident tuition by 28 percent over the next three years or somehow find other sources of equivalent funding. In today’s political and economic environment, such a result is highly unlikely and undesirable.

Let's unpack this statement.  Of this billion, $436M comes from the short-term contribution to pay down the UCRP unfunded liability (itself generated because of long-term poor management by the Regents).  Another $500M is the result of the Governor's four-year commitment to funding increases (about $125M a year) and a one-time $25M payment by the legislature in exchange for admitting 5000 additional resident students.  Even the $125M barely exceeds inflation--it does not restore the cuts from earlier years and had already been proposed by Governor Brown.  But critics, myself included, have pointed out that the $436M contribution is a one-time commitment in exchange for a permanent reduction and could have been handled more effectively through an extension of the STIP borrowing plan.  The additional claims about the $500M are somewhat misleading since the first two years of support had already been agreed to--what this agreement does is add two more years (so $250M).  And the $25M will cover half of the marginal costs on campuses for the introduction of the new students. If the President follows through on her plans to add another 5000 students that will simply increase UC's underfunding.

I make this point because it is important for the future to understand the limitations of this deal and what it means for the budgeting process--secretive throughout--that produced it.  The President insists that it is a good deal.  But even the Legislative Analyst (not a friend of the University) thinks that as a matter of state policy the state would be wise to pay down far more than this $436M.  If we are facing a permanent change in the pension shouldn't the University have insisted on a permanent commitment from the state to fulfill its responsibilities?  And are we to assume that if the president had not agreed to this agreement in the first place that the governor and the legislature would simply withdraw the existing funding agreement for the out years?  Of course we will never know.  But if we had an effective process of shared governance and considered reflection by the Senate we might not be facing these questions at all.

President's Proposal

March 11, 2016

MEMBERS OF THE UNIVERSITY OF CALIFORNIA COMMUNITY

Dear Colleagues:

I am writing to outline the proposal for the new retirement program I am bringing to The Regents later this month that includes new retirement benefits for future UC employees.

As a reminder, the new retirement benefits will apply only to UC employees hired on or after July 1, 2016. Current employees and retirees are unaffected by these changes as accrued pension benefits are protected by law and cannot be reduced or revoked.

Before getting into the specifics of my proposal, I want to share with you my thinking behind it.

The University of California is a very special institution. There are other fine universities, but there is no other university on the planet that contributes as much to the public, in as many ways as UC does. Arguably, no other single institution does as much for so many.

And at the heart of everything we do, and the excellence UC is renowned for, are our talented faculty and staff. Our people are what make UC great.

Maintaining excellence on such a massive scale is no small task. And it does not come cheaply.

Everything we do — from teaching students, to treating patients and training the next generation of doctors, to redefining the boundaries of what we know, to creating technologies that give rise to new industries, to helping to ensure the vitality of California’s agricultural resources, and everything in between, requires significant financial resources.

When I accepted the opportunity to lead UC two and a half years ago, it was clear to me that one of the most important goals of my presidency would be to maintain UC’s excellence while ensuring a solid financial foundation for UC’s future.

This core principle of protecting both UC’s excellence and its long-term financial health was the basis for last year’s multi-year funding agreement with the State, and is the primary driver of my retirement proposal.

The budget agreement with the Governor and the Legislature last year marked a significant milestone in support of this goal by creating an era of increased State funding and financial stability for the University. Importantly, the agreement reflects the State government’s recognition of the need to invest in UC.

Under this agreement, UC is receiving nearly $1 billion in new annual revenue and one-time funding over the next several years, which will help ensure the University’s long-term financial stability and provides critical funding for many UC priorities.

Among other things, this funding allows us to budget for regular pay increases for faculty and staff over the next several years, and make merit-based pay a more regular component of our systemwide salary programs.

The $1 billion includes $436 million in one-time funds to help pay down our unfunded pension liability, which is key to ensuring the long-term fiscal solvency of the UC pension plan.

To help secure the financial stability of UC and as part of the agreement, I am proposing to The Regents that they approve implementation of a new set of retirement benefits for future UC employees hired on or after July 1, 2016, that limits the pensionable salary for future UC employees, mirroring the cap on pensionable pay for state employees under the 2013 California Public Employees’ Pension Reform Act (the “PEPRA cap”).

Following completion of the budget agreement, which was approved by The Regents, I convened a systemwide task force to suggest options for the new retirement benefits for future employees, consistent with the PEPRA cap.

Task force members included faculty, staff, and representatives from the Academic Senate, the Staff Advisors to The Regents, the Council of UC Staff Assemblies, UC labor unions, and UC administrators.

The task force submitted its recommendations to me in December, and during January and February,

I invited members of the entire UC community to share with me their thoughts about those recommendations.

I want to thank the task force members for their good and thoughtful work, and also the hundreds of faculty and staff who shared their comments, concerns, and ideas with me.

Many of you expressed concern that a new set of retirement benefits could harm the University’s ability to attract and retain top-tier faculty. Improving overall employee compensation and the stability of the UC pension plan were also common concerns. Another concern many of you raised was the need for more retirement education and services to help employees prepare successfully for retirement.

For those of you who shared your views with me, I want you to know I paid close attention. My proposal addresses not only these concerns, but other priorities as well.

Building upon the work of task force, and after much discussion with numerous stakeholders and careful consideration of the input I received from faculty and staff, I will be bringing a package proposal to The Regents that will allow us to:

• Ensure UC’s long-term financial stability, including keeping the UC pension plan strong and continuing to pay down our unfunded pension liability;
• Within the fiscal constraints we face, maintain the caliber of UC personnel and the University’s excellence by offering attractive overall compensation, including retirement benefits, for new faculty and staff;
• Focus on overall employee compensation by (1) allowing UC to budget for regular pay increases for faculty and staff, and (2) making merit-based pay a regular component of systemwide salary programs to reward employees based on their contributions to the University;
• Preserve UC’s quality, which requires recruiting and retaining quality personnel, especially faculty, by devoting resources to help campuses attract and retain faculty and key staff, and improve the student experience; and
• Offer enhanced retirement education and counseling services to all UC employees, as part of the University’s commitment to help employees be “retirement ready.”

Regarding the new retirement program specifically, I am proposing that future employees hired on or after July 1, 2016, be offered a choice between two options:

Option 1 – Pension + 401(k)-style supplemental benefit: The current UC pension benefit capped at the PEPRA salary limit (currently $117,020) plus a supplemental 401(k)-style benefit for eligible employee pay up to the Internal Revenue Service limit (currently $265,000).

Option 2 – New 401(k)-style benefit: A new stand-alone 401(k)-style plan with benefits-eligible employee pay up to the Internal Revenue Service limit (currently $265,000).

Since we compete in a global market for faculty, often against elite private institutions that can typically pay more than UC, maintaining a pension benefit along with a 401(k)-style supplement is important to attracting and retaining the caliber of personnel we need to maintain UC’s excellence.

At the same time, our workforce is highly diverse and people have different retirement needs and goals. A new stand-alone 401(k)-style retirement benefit allows us to offer an attractive retirement benefit to employees who work at UC for only a few years and value a portable retirement benefit they can take with them, and/or who prefer to personally manage their retirement savings.

You can find a chart that further summarizes the features of the two options online herePDF.

In short, I believe this proposal supports the University’s ongoing excellence and will significantly bolster the long-term financial stability of UC and its retirement program, while providing critical funding for other University priorities.

I again want to thank the task force members, and the many faculty and staff who shared their views with me. The input I received from the task force and the University community was invaluable in formulating this proposal.

Yours very truly,

Janet Napolitano
President

The statement can be found posted at: http://ucnet.universityofcalifornia.edu/compensation-and-benefits/2016-retirement-benefits/presidents-proposal.html

UPDATE: More detail can be found at: http://ucnet.universityofcalifornia.edu/compensation-and-benefits/2016-retirement-benefits/faq.html

The following is a letter sent to Colleagues by the UCSB Faculty Association calling for opposition to the proposed new pension tier.

Dear Colleagues:
We are gratified by the strong response at the Town Hall of the faculty, resisting the unsound pension that UC is proposing to offer new hires starting July 1. Over 1,000 faculty have signed the petition opposing the new tier proposals. We are resending this message to give you an opportunity to join your colleagues by signing the petition if you have not done so. The deadline for making known your opinions regarding these changes is February 16.
Allow us to share with you our reasons for objecting to the current proposal:
1) We share the task force chair's bleak account of the "negative effects of the PEPRA cap on retention and timely retirement" (A guide to reviewing the recommendations of the Retirement Options Task Force, p. 7). In other words, the future of the institution is at stake.
2) We take issue with the fact that while the acceptance of the PEPRA cap is presented as UC's side of the deal with the governor and the legislature, the latter's part of the deal has not been fulfilled:
a) UCRP has NOT been acknowledged as a permanent state obligation;
b) the State's promise "of $436 M for the UCRP over the next three years" to help finance the Unfunded Accrued Actuarial Liability (p.4 of the Task Force report) is a misrepresentation. As Michael Meranze has underlined, the Legislature actually has "not engaged in any multi-year promise". In addition, of the $10.7B or 12B UAAL (numbers depending on market-value or actuarial-value), the hypothetical sum of $436 is only a very small percentage, not accomplishing much. In sum, we object to completing our side of a (bad) deal, when there is no actual commitment on the other side.
3) We take issue with the top-down way this complex issue has been handled. The Task Force had to begin from a declared reality that no one in the UC system other than President Napolitano had a hand in ratifying. This is not shared governance. In addition, the fact that the recommendations of the Task Force, whatever their merit, can be taken or left by President Napolitano further erodes whatever good faith and intellectual effort went into these proposals.
4) We are not convinced by the Task Force's arguments that introducing a Defined Contribution option is fiscally advantageous. No credible empirical evidence exists in the report or in recent economic history to support the assertion. Moreover, the proposed options, in their concern for portability, favor short-term employees over long-term employees, further undermining faculty loyalty to the institution or a commitment to public service.
5) We object to the ramifications of adding a new tier to retirement benefits that creates financial divides between those hired before 2016 and those hired thereafter. Even more, we see these changes as part of a broader national trend to eviscerate tenure and full-time employment. Having to acknowledge such systematic differentials to new hires reduces not only our ability to recruit young faculty but also our pride in doing so as well as our willingness to encourage our students to become university professors.
For more information on this issue, please visit our website at ucsbfa.org.

We urge you to sign the petition to express your opposition to proposed changes to the UC Retirement Plan.
UCOP has also set up a comment link where you can provide your feedback on the task force recommendations. We urge you to express your concerns about the plan there. If you do, please also send a copy of your comments to us at newtier@cucfa.org.
Thank you for your attention to this important matter.
The Board of the Santa Barbara Faculty Association
Julie Carlson
Jorge Castillo
Nelson Lichtenstein
Constance Penley
Erika Rappaport
Elisabeth Weber
Robert Williams

This is the statement released today by the Council of UC Faculty Associations (CUCFA). A link to their petition can be found below.

The University of California is currently considering introducing a new pension plan for its employees hired after 2016.  These proposed changes will dramatically reduce pension benefits for most new faculty. The Academic Senate will be reviewing the proposals over the next few weeks. Your opportunity to provide input to the Senate lasts just a couple weeks. For some purposes, it will be most effective to provide input this week. Contact information is at the end of this document.

This ill-conceived and ill-advised plan, which was negotiated behind closed doors by President Napolitano and Governor Brown without any engagement with the Academic Senate, the Regents, the Legislature, or the larger university community, will do serious damage to the quality of the University of California.

While the details are highly technical the implications are not:

1) This is a serious cut in benefits to faculty and many other professional staff, such as staff scientists and nurses, hired after July 2016.  (See pages 44, 45 and 84 of the task force report.)

2) UC faculty are already much more poorly compensated than faculty at UC's peer institutions despite the fact that the cost of living in most parts of California is very high. This plan will make it much harder to attract faculty and other professionals and keep them here.

3) This plan does not do anything to make the existing pension system healthier and could actually decrease the rate at which the unfunded liability is retired. (See page 57 of the task force report.)

We agree with the assessment of Academic Senate leaders J. Daniel Hare and James A. Chalfant's analysis, who concluded:

"If salaries don't increase to compensate for these reduced benefits, then UC will have to settle for a lower-quality of faculty who did not receive better offers elsewhere. Many UC faculty members were hired in spite of more lucrative salary offers elsewhere, just as many have either declined outside offers or declined to pursue them. It may have been true at one time that benefits made up for our uncompetitive salaries. The 2014 Total Remuneration Study showed that no longer to be the case. While salaries and benefits continue to lag, and we are contemplating making the lag even greater with the new-tier options, it is important to note that most of the non-pecuniary attributes of UC employment also are declining."

As Academic Senate Chair Dan Hare stated in his remarks to the Regents in September:

"Any reduction in either salary or benefits surely will have consequences for the ability of UC to build and retain a future faculty that is as distinguished as the current faculty. As recommendations are brought forward in early 2016, I encourage the Regents to carefully consider not only the budgetary cost of future retirement options, but also their impact on how faculty members behave in terms of recruitment and retention. If we are not careful, small budgetary savings will risk far greater costs to the University, our students, and the citizens of California."

We urge you to sign our petition to express your opposition to proposed changes to the UC Retirement Plan. We will forward the names of those that sign to local campus faculty welfare committees so they are aware of local concern about this issue.

UCOP has also set up a comment link where you can provide your feedback on the task force recommendations. We urge you to express your concerns about the plan there and please also send a copy of your comments to us at newtier@cucfa.org.

The Task Force charged with making a silk purse from the sow's war of President Napolitano's pension agreement with Governor Brown issued its report on Friday.  To no one's surprise, the Task Force indicated that the task was impossible; given the limits the Task Force faced most faculty and many staff (especially in the health sciences) hired from July 1, 2016 will face dramatically reduced retirement benefits compared to current employees.  This situation results from two interrelated factors: the actual budget deal that President Napolitano accepted and the desire on the part of Vice-President Brostrom that there be savings produced by the new 2016 tier.  In exchange for a relatively small (about 5% of UCRP's unfunded liability) short-term State contribution to UCRP, UCOP has agreed to reduce the compensation for generations of employees to come.

In this post I am going to do several things:  first, describe the contexts within which the Task Force was presented with its impossible task; second, provide a broad indication of the Task Force Majority's recommendations; and third, describe the process to come with some suggestions and comments on the situation facing faculty and unrepresented staff (as is often the case represented staff may have more control over their situation since they are entitled to collectively bargain on these matters).

THE CONTEXT

You will recall that following UCOP's Fall 2014 proposal for a 5% tuition increase, UC and the Governor's office established the so-called "Committee of Two" to examine the cost structure at the University and secretly negotiated a budget agreement.  (For the Senate's Committee on Planning and Budget's critique of this process see here).  Despite the hullabaloo that accompanied those high level discussions it was clear from the start that the Governor was only interested in cost controls and that the likelihood that the University would gain in substantial ways was quite low.  In the end those expectations were met.  Although UC received a promise from Governor Brown that he would extend his planned base budget increases for an additional 2 years he succeeded both in locking UC in an ongoing under-funding and also in increasing the demands on the University.  In addition, the threat of tuition increases alienated the Legislature and, at least indirectly, led to UC having to agree to expand resident undergraduate enrollment without sufficient funding to pay for the increased costs.  We have commented on the weaknesses of that deal before (here, and here).  But as part of that deal President Napolitano accepted a permanent reduction in pension benefits for future employees in exchange for the Governor's promise of a temporary State contribution to UCRP.s unfunded liability of $436M over three years.

Under the terms of President Napolitano's agreement with the Governor, UC is committed to reducing the cap on the amount of income that can count in calculating an employee's pension benefits in UCRP.  UCRP as you know is a Defined Benefit Plan.  As a result an employee is promised an annual payment after retirement based on a calculation that takes into account an employee's three highest salary years, years of service, and age at retirement.  For employees hired before July 1, 2016,  earnings up to the Federal Cap (now about $265,000) could be counted.  For those hired on July 1, 2016 or later the University is proposing to shift to the PEPRA State Cap (now at $117,020 and tied to inflation). It is important to recognize that these numbers are limits NOT on retirement benefits (which are lower) but on the amount of earnings which can be used to calculate retirement benefits.  Starting with those hired on July 1, 2016 earnings above the PEPRA cap will simply not be included in the calculation.  The Task Force estimates that these new rules will affect roughly 25% of employees hired on or after July 1, 2016 (13-14).  These individuals tend to be concentrated in the Ladder Faculty, the Health Sciences, and Management (13) Because of the large number of represented nurses. about 40% of these individuals will have the ability to engage in bargaining over these terms.

The Task Force was charged with figuring out how to change the retirement system.

THE PROPOSAL

The basic parameters of the proposal can be sketched quickly (and you can find them at pages 5-7 of the Report).

The Task Force is proposing that new employees be given two options:

1) The first (Plan A) is hybrid plan.  In it an employee would participate in the Defined Benefit Plan offered by UCRP (with benefits calculated on income up to the PEPRA cap) with a Supplemental Defined Contribution Plan (with University contributions) on income between the PEPRA cap and the Federal Cap.  Employees who choose Plan A would continue to vest after 5 years (as is the case now) and would continue to contribute the same amount annually to their pension as do employees hired before July 1, 2016. Once in Plan A you would be committed to Plan A.  Plan A is proposed as the default choice.  It is important to note that the Defined Benefit portion of this proposal would operate under the conditions imposed on the 2013 Tier--who already had a later retirement age than earlier hires.

2) The Second (Plan B) is a Defined Contribution Plan with both the employee and the University contributing up to the Federal Cap.  Again, the amount that the employee would contribute would be the same as Plan A.  Employees who chose Plan B at hiring would be allowed to switch to Plan A after 5 years of employment (this would be a one-time opportunity).

A Defined Contribution Plan, as you know, promises a certain amount of annual contributions to a pension fund but no obligations as to payouts after retirement. The risk in the latter type of plan is borne by the individual (just as s/he accrues greater portability and the benefit of any investment brilliance).  A DC plan can be better for shorter term employees.  But the employee bears the risk of either poor investment performance or longevity risk.  It is not exactly clear why the Task Force chose to include a DC plan (it was not required by the Budget Act).

The actual details of the proposal are considerably more complex and depend on a variety of options concerning the actual amount of contributions (by the University) to the different plans, the expected annual growth of the value of the DC plans, the costs to the University of choosing between different contribution levels, the age of hires and the distribution of choices between plans, etc.  These questions mean that the actual effects of these two plans are still in flux as both the Task Force Report and Senate Leaders Dan Hare and Jim Chalfant make clear.  So university employees are being asked to respond to a concept without precise numbers on which to make that decision.

But despite the complexities it is clear that the retirement benefits for affected future employees will be dramatically reduced. (for a quick way to see this effect see 84)

MOVING FORWARD

The Academic Senate (and I assume staff associations) have until February 15th to formulate responses to the Task Force Report.  The Senate, in turn is asking for comments and responses by February 5th.  I want to underline these dates because they show quite clearly the closed-off nature of the process.  Despite the claims by both UCOP and the Task Force about consultation, faculty and staff at large have less than a month to respond to a proposal that will significantly change the compensation for future employees with an unknown effect on the University as whole.  Given this situation I would argue that the Senate and other faculty and staff organizations proceed on two tracks.

The first, involves a series of technical considerations but is politically the easiest to do.  This option would be to insist that wherever the Task Force provides alternatives in the amount of the University's contributions to retirement income that President Napolitano and the Regents choose the most generous alternative.  In addition, the proposed opportunity to switch from Plan B to Plan A should not be set at 5 years but later to allow for faculty to make the decision after their cases for tenure have been resolved.  The guide provided by Chair Hare and Vice-Chair Chalfant is the best place to start for evaluating these different questions.  But this avenue is the conventional one.

The second and more significant option is to reject the proposal.  I think that the Task Force did the best that they could under the circumstances.  And I recognize that trade-offs often need to be made. But the funding gained under this agreement is not worth the damages done to compensation nor the potential damage done to the University as whole.  The Senate should oppose this deal even if it means returning the initial payment of $96M.  There are a variety of reasons for this:

1) As I indicated above there is no question that acceptance of this deal will reduce retirement benefits for a significant portion of future employees.  Nor is there any reason to think that the University has any real program to make these losses up in other ways.  Indeed, as the Report indicates, the University does not have an accurate idea of total compensation and competitiveness (the last report having been done in 2009).  (64-65)

2) What does the University get in return in financial terms?  Not much.  As I indicated above, the three year state contribution addresses only a very small amount of the unfunded liability. And according to the calculations of the Task Force, establishment of the New Tier under present conditions will speed up the elimination of the unfunded liability minimally if at all.  In fact, under certain scenarios the elimination of the unfunded liability might be faster under the 2013 Tier (with borrowing) than under most of the 2016 options.  (57)  Nor does there seem to be much savings in yearly terms.  And these savings are placed far down the road as individuals hired under the 2016 come to replace the 2013 Tier in retirement.

3) The pension deal and the Task Force proposal mark a crossroads for President Napolitano and also for shared governance within the University.  It is conceivable that the President did not realize the extent to which the pension deal would reduce benefits.  But faced with the Task Force report it is clear that the reduction would be significant and that the financial benefits are limited.  If there is significant opposition to this proposal President Napolitano would have the option of concluding that the deal was a mistake.  If there is significant opposition President Napolitano would also have the option of demonstrating an openness to shared governance on policy rather than just on implementation of policy already decided by senior managers.  It is possible, of course, that UCOP has calculated that given overall market conditions they are willing to weaken recruitment and retention of top faculty and staff (that certainly is the implication of the Governor's position).  But at least we would be clearer on that.

CONCLUDING COMMENTS

1) If the University wants to consider revamping the retirement system it should, at the least, demand that the State acknowledge its own obligation to funding of UCRP and restart contributions on an ongoing basis.  Much is made of UC's "pension holiday" and it clearly went on too long.  But it is important to remember that there has been a State "pension holiday" from funding UCRP as well (as it funds other public employee retirement systems).  Renewed ongoing funding would enable UC to eliminate the loss in retirement income or total compensation on the one hand and to reinvest in core functions on the other.

I recognize that this is a politically challenging route.  Taking this route would not be without its dangers in terms of relationships with the governor and the legislature or in terms of motivating those who are opposed to all pensions (especially public ones) But the Governor is at best disingenuous on this issue.  If you look at his 2016 budget proposal, he includes UCRP as part of the debts and obligations under Prop 2 when he wants to indicate how much debt the State has.  (3)   But as a matter of policy he refuses to acknowledge that UCRP is a permanent state obligation.  Moreover, even the short-term funding is only a gubernatorial promise at this point.   The Task Force, to be honest, was less than forthright in this regard when they open their report with the statement that "As part of the 2015/2016 Budget agreement between the University, the Governor, and the Legislature, the State will provide a total of $436 million for the University of California Retirement Plan (UCRP) over the next three years." (4)  The Legislature has not engaged in any multi-year promise.

2) If nothing else, the Report of the Task Force is another indication that UCOP's tuition gambit and subsequent "Committee of Two" process was unsuccessful.  Although I commend President Napolitano for actually advocating for increased State funding (something her predecessor was particularly poor at doing) the Tuition strategy seems to have backfired.  The Legislature was alienated, the budget deal that resulted showed little if any improvement from what the Governor had indicated previously, UC has now agreed to take large numbers of additional students without adequate funding, and the pension deal was a mistake.  Moreover the secrecy of the process not only sidelined effective shared governance but, as with the proposal on the governance of the health sciences, precluded an effective mobilization of debate and ideas about the best ways for the University to move forward.  As with so much of the debate over higher education today, efficiency and speed is held in higher regard than thoughtfully considering the long-term implications of policy and practice or aiming to improve the quality in higher education (as opposed to simply lowering spending). Rushing to produce a bad idea just means you produce a bad idea more quickly.

For your convenience:

The Task Force Report can be found HERE.

The Guide to the Report produced by Chair Hare and Vice-Chair Chalfant can be found HERE.

As Dan Mitchell has been reminding us, UCOP has appointed a Task Force to implement the Regents agreement to reduce pension benefits for future employees.  As a result of the Committee of Two, UCOP has agreed to lower the amount of employee salary that can be counted towards UCRP to approximately $117,000.  They are proposing that some form of hybrid defined benefit/defined contribution plan be created to allow employees to save above that $117,000 limit.  UCOP is also proposing that an all-defined contribution (DC) plan be developed that would allow future employees to opt out from the defined benefit plan entirely.

UCOP insists that the "New retirement benefits options are being developed as a result of the budget agreement between UC and state leaders, which included nearly $500 million to help pay down UC’s unfunded pension liability." But there are several issues that need to be raised about this claim.

1.  UCOP refers to the nearly $500M that the University will receive from the state in exchange for pension modification.  But the University will have received only $96M upon the creation of the new pension tiers. I understand that the actual state budget promises only this one year of funding. Although President Napolitano and Governor Brown may have agreed on the larger number, there is no sign that the Legislature or its leadership have agreed.  What future budgets will look like is always unclear. UCOP, in effect, is proposing a serious reduction in pensions for future employees in exchange for less than a third of the money they now estimate they will have to spend to complete UCPATH.  Will their predictions for future state pension contributions be more accurate than their predictions on UCPATH?

2.  There is no evidence that either the Governor or the Legislature asked that UC create an option for a stand-alone DC plan. Sacramento's concern had to do with the limits on the salary on which benefits could be accrued, which is consistent with its hostility to high levels of UC executive compensation.   The notion that there needs to be a stand-alone DC plan appears to have emerged from UCOP or from some other source within UC.  President Napolitano's justification for this proposal seems to be that it is what has happened in the private sector so it should happen at UC.  But we should recognize that the shift in the private sector occurred not because of widely accepted actuarial proof that DC plans are better for employees but because they enabled businesses to shift the cost of retirement onto retirees. There was nothing natural or inevitable about it. It was not driven by a desire to stabilize or improve retirement security for employees.   

In addition, you'll recall that the University engaged in a serious debate about this question only a few years ago and decided to retain its long-term commitment to a DB plan.  Rather than appointing a task force to determine the best way to implement this new plan UCOP should engage in an open discussion about whether or not this is actually better for employees. There has not been, to my knowledge, any reason to think that the relative benefits of DB vs DC plans has changed in the last few years.  If anything, the weight of the argument suggests that DC plans are worse for employees and may in fact be worse for employers.  DC plans raise the fees on accounts, force employees to assume greater risk, and tie individual retirement fate even more closely to the stock market.  From the vantage point of employers, DC plans increase fees and reduce incentives for employees to stay. There is also--despite assurances to the contrary from UCOP--the danger of ultimately undermining the the DB plan by leaving it an "orphan" plan--moving funds needed to sustain it over the long term into other more volatile directions.

3.  Nearly two years ago, Colleen Lye and James Vernon documented the decline in the quality of UC faculty salaries and benefits.   The 2014 Mercer Remuneration Study confirmed these findings (see slides 33-34 for a summary).  UCOP's acceptance of the state's pension limits and even more so its eagerness to move away from a commitment to a DB plan simply accelerate this decline.  Although I think that there are reasons to cap accrual salary in exchange for sufficient state-funding on an ongoing basis, this is not the deal that UCOP has achieved. And the policy drift towards the Defined Contribution plan is an entirely different matter.  UCOP seems to be removing the conditions that promote loyalty to the institution and seeking to encourage faculty to consider UC a way-station rather than a home.  It is the self-destructiveness of existing conventional wisdom at its most short-sighted.

The faculty, and the Senate as part of the faculty, needs to insist that the Task Force be empowered to decide--after wide-ranging discussion and employee consent--whether a DC plan is good for the university and employees.  It should not be limited to deciding how to implement such a plan. 

In other words, the Task Force needs to maximize the interests of future employees and not simply implement the practices of the private sector.

UPDATE:  Dan Mitchell has now written a new post that very helpfully lays out the problems with "orphan" pension plans.

By Joe Kiskis  (UC Davis)

This note makes a few comments on the final UC budget for 2015-2016 and then focuses on points related to the UC Pension Plan (UCRP). To some extent, it updates previous comments here by including changes since then and information that was not available then.

The 2015-16 UC Budget and UCRP

To get good information on the budget, one must read both AB 93 and SB 97. The process this year was a little convoluted. On June 15, the legislature passed AB 93, the Budget Act of 2015. This was the Legislature's version of the budget and was passed on that day so as to meet the constitutional deadline. It was done before the Legislature and Governor had come to agreement. Their agreement was announced the next day. To account for that and other small items in the following days, SB 97 was passed on June 19. It makes many significant amendments to AB 93, including a number relevant to UC. Both AB 93 and SB 97 were signed by the Governor. However the Governor exercised his line item veto authority in a few minor ways that are not relevant to UC. To get complete information, there are, as usual, trailer bills to read. One of those, SB 81, has a few parts relevant to UC---most significantly concerning the Middle Class Scholarship Program.

The main features of the UC budget concerning tuition and the base budget came out as expected and as have been widely reported. However, it's worth noting that the final language on these points is less proscriptive than in the original version and that what is expected to happen in the out years is just that---an expectation that is not mandated in this budget. Briefly, per the Regents decision of May 2015, tuition for California resident students is to remain constant for two more years. Following that, modest increases comparable to the rate of inflation are possible. On the other hand, for non-resident students, tuition will likely increase by 8% in each of the next two years. System-wide Student Services fees (as opposed to tuition) are allowed to go up 5% ($48).  The increase in the 2015-16 UC base budget is the same as the Governor originally proposed, i.e. 4% or $119.5M. The expectation is that 4% increases will continue through 2018-2019.

There was an expectation that the Legislature would augment the Governor's budget with funding for enrollment growth and that the Governor would not line-item veto it. This did not turn out as well as was hoped. The amount is only $25M, and it is contingent on UC adding 5,000 resident undergrads by 2016-17. This is a short timeline, and the amount is far below that needed to educate 5,000 students for one year. On a per student basis, it is also substantially below the average State contribution to the cost of education.

Earlier versions of the budget had limits on nonresident enrollment. Those did not make it into the final budget.

In the trailer bill, the eligibility requirements for the Middle Class Scholarships have been raised and the funding for the program has been decreased.

UC Retirement Plan (UCRP)

As it turned out, there is a large discrepancy between the language related to UCRP in the publicized agreement from the Committee of Two (or equivalently in the Governor's May Revise statement) and that which actually appeared in the final budget product.

The original claim was that there would be a one-time payment of $436M spread over three years ($96M in the first year) to pay off a small fraction of the UCRP unfunded liability. In return the University agreed to make a permanent change to UCRP by adding another tier that would apply to new employees. In this new tier, UCRP eligible salaries were to be capped at the inflation indexed PEPRA/Social Security limit ($117k for the current year) rather than at the IRS limit of $265k currently used by UCRP. Employees in the new tier would have the option of either a defined benefit plan with the new cap in combination with a supplemental defined contribution part or a defined contribution plan with no defined benefit portion. The second option of a straight defined contribution (DC) plan is most troublesome. Fortunately, no language describing such options was incorporated into the budget bills signed by the Governor.

The Governor's May Revise letter to the Legislature suggested budget bill language. This suggested language said only that UC would get a one year addition of $96M in exchange for making UCRP consistent with the PEPRA cap. It said nothing about how that should be done. It made no mention of $436M, no mention of a DC supplement, and certainly no mention of a DC only option. This recommendation was followed, and the language that the Governor suggested is essentially that of the budget bills. However, to drive home the point that there is no larger deal, the amended version of the budget adds:

"This appropriation does not constitute an obligation on behalf of the state to appropriate any additional funds in subsequent years for any costs of the University of California Retirement Plan." (SB 97, p. 96)

Thus neither the Governor nor the Legislature are pressuring the University to introduce a straight DC option. The DC option is something introduced (most likely by UCOP) during discussions in the Committee of Two but done without appropriate consultation within the University. Nevertheless, the Office of the President intends to pursue the possibility of a DC only option. In the discussions that will take place in the coming months, it is worth keeping in mind that a DC option appears to be primarily a priority of UCOP and not of the Legislature or the Governor. Note also that the relative merits of defined contribution verses defined benefit plans were thoroughly, carefully, and widely discussed in the University about six years ago. The conclusion was that the excellence of the University was best served by continuing with UCRP as a defined benefit plan. Thus in 2010, when the President recommended and the Regents endorsed pension reforms, UCRP was preserved as a defined benefit plan.

by Colleen Lye and James Vernon
Co-chairs of the UC Berkeley Faculty Association
Cross-posted from the Daily Cal
Graphic from UC Accountability Report (2013)

UC faculty need to wake up to the systematic degradation of their pay and benefits.

In 2009, when the salary furlough temporarily cut faculty salaries between 4 and 10 percent, faculty were outraged. Yet since then, our compensation has been hit by a more serious and seemingly permanent double blow.

First, despite modest salary rises of 3 and 2 percent in October 2011 and July 2013, respectively, faculty take-home pay has been effectively cut as employee contributions to pension and health care have escalated. Faculty now pay more for retirement and health care programs that offer less. Second, faculty are no longer treated equally. Different groups of faculty are increasingly pitted against each other as depending on our age, where we live or when we were hired, we receive different levels of retirement, health and other benefits.

Faculty salaries were already uncompetitive. They remain 10 to 15 percent below the university’s own comparable institutions and fell behind those of Stanford, Yale, Harvard and MIT. Unsurprisingly, Berkeley faculty salaries rank a dismal but unsurprising 28th among those offered by elite research universities.

Back in 2009, strong benefits in the form of pension and health care provisions allowed the university to excuse its uncompetitive salaries by reminding us of what it called our “total compensation package.” This is no longer true. Now, as continued austerity management grips university administrators and as campaigns are launched to divest public sector workers of their pensions and retiree health care, faculty are being stripped of these deferred (and other) benefits.

One reason faculty are largely unaware of the degradation of their benefits is that changes have been made incrementally, and they target different constituencies. Gone are the days when all faculty and retirees were treated equally and received the same benefits. And yet, for all faculty, these changes mean we are paying more and getting less.

First, faculty are divided by a new two-tier pension system. The old pension, the so-called 1976 tier, has seen a steady escalation of employee contributions from 0 percent in 2009 to 8 percent in 2014.  These raises alone mean that faculty take-home pay has deteriorated by as much as 3 percent.

The new pension introduced for those hired since 2013 has begun with a 7 percent employee contribution. Despite paying more, new faculty get less. The minimum retirement age has been raised from 50 to 55, the retirement age for maximum pension has been raised from 60 to 65, and the lump-sum cash-out and subsidized survivor benefits have been eliminated.

Second, although there is as yet no legal evidence that retiree health benefits are less “vested” (and thus unalterable except by legislation) than pensions, they have been progressively stripped. And here, again, different groups of faculty are treated differently.

Since 2010, the university’s contribution to retiree health benefits has fallen from 100 percent to 70 percent — but this pales in comparison to the changes introduced in 2013, which have affected 50 percent of faculty and staff. All new hires, together with those with fewer than five years of service or those whose age plus service is fewer than 50 years, will now receive nothing from the university toward their health care if they retire before 55. Meanwhile, contributions for those retiring after 56 will be on a sliding scale (depending on length of service), beginning at just 5 percent!

Worse still, in what is being considered a test case by the UC Board of Regents, retirees no longer living in California have been removed from university’s insurance plans. Instead, they will be given a lump sum of $3,000 per year to help defray costs not covered by Medicare. This represents a significant shift of risk and responsibility for health care from the university to retirees. If it generates the projected $700 million savings of total liability as reported by the UC Office of the President’s CFO to the regents this year, it is likely to be coming soon to a group of retirees near you.

Third, in the fall, more than 3,000 faculty and staff at UC Berkeley alone were forced to change their health care plan in a little more than two months. We were promised these had been negotiated to secure great savings for the university and lower insurance rates for all UC employees. It quickly became clear to us that those lower monthly rates masked a huge turnover in eligible providers, geographically uneven coverage of service and considerably higher deductibles. It is too soon to calculate how much more faculty are paying for their health care, but once again, we are certainly paying more for less.

Finally, at the very end of last semester, a cursory email gave us a one-month warning for major changes to the Mortgage Origination Program and Supplemental Home Loan Program, which had allowed so many faculty access to the inflated Bay Area property market by offering below-market rate or interest-only mortgages in excess of 30 years. A new program is promised but has yet to be announced. We can assume it will again ask new faculty to pay more for less.

It is time for faculty to wise up to this systematic and universal downgrading of our salaries and benefits that also sets different groups of us on different tracks. The contrast with the new contracts recently signed by California Nurses Association and UPTE (and offered to AFSCME) is worth noting. In addition to significantly improved salaries, these unions have been able to maintain a single-tier pension  (for an additional 1 percent contribution) and retain retiree health benefits without the “rule of 50” exception.

So how will faculty respond? With a sigh of resignation? Determination to get an outside offer that would increase one’s personal compensation package? Or will we seek better mechanisms that would permit faculty to negotiate all elements of our compensation rather than have it decreed — and diminished — from up high? It certainly seems unlikely that our administrators will realize that the degradation of faculty compensation will make it harder to recruit and retain the scholars who have made this the best public university in the world.

As we all prepare for the Napolitano era, the Regents are heading to their favorite meeting place at UCSF (safe from undergraduates) with time to stop off at Lawrence Livermore National Laboratory.   There are any number of items to be discussed but first and foremost is the question of the UC budget.  There the crucial meeting is Wednesday's Finance Committee Session.  Among other items, the Finance Committee is to hear about the long-range budget plan, the expected 2014-2015 budget, and the wondrous accomplishments of the "working smarter initiative."  Although we won't know in detail what UCOP is proposing until they actually make their presentations, it is possible to see the general strategies and narratives that UCOP is proposing for budgetary planning and decision-making.

As ever, UCOP appears not to know what it wants to say; as a result it continues to alternate in what it is asking of the State and from the University community.  But appearances can be deceiving.

If you turn the budget presentations into a narrative it would go something like the following: 

After long years of budgetary cuts, Governor Brown has, through his handling of the state's debt, his success in achieving passage of proposition 30, and his willingness to commit to a series of funding increases over the next several years succeeded in staunching the bleeding of budget cuts.  In the new state budget UC's general fund increases total $256M in unrestricted funds although $125M of those go for a tuition buy-out.  In this way, the state is now in the words of OP: "signify the welcome, necessary return of the State to being a true partner with UC." (3) BUT this "true partnership" is, notable for its stability more than its adequacy.  Indeed, at the heart of OP's narrative is the argument that although the State has agreed to helpful increases in funding it is also preventing the University from functioning properly by restricting its ability to raise tuition.

Put another way, the real message behind OP's budget narrative is that UC must increase tuition if it is to continue to function as a leading research University and the Regents, the public, and the State must accept this claim.

The headlines that OP seems to want to emerge from the meeting is that although State funding has increased, it has not increased sufficiently to cover required increases in expenditures so that long-standing problems cannot be addressed.   Again in OP's language:

The State funds provided in 2013-14 ($256.4 million) are a welcome departure from past years’ base budget cuts. However, they are sufficient to fund only the cost increases on the State-funded portion of the budget – which is now less than half of the total core funds.  (2)

Thankfully, the OP has stopped insulting the State every time it seeks funding.  But we must be clear that OP is presenting a scenario in which the state must choose between rising tuition and decreasing quality.

There are several preliminary things to be said about these claims.

First, it is clear that the state funding does remain insufficient.  The increases in State funding do not recover from the years of cuts and leave numerous buildings in need of maintenance, faculty positions unfilled, staff positions cuts etc.  But the University has accepted the state funding end of the equation as satisfactory.  It is the tuition side that they are pushing--not more public investment.  We appear to be entering a period where OP has de facto accepted an updated version of the earlier compact with Arnold.  And we know how well that turned out.

Second, it is not clear that OP's numbers add up.  In its discussion of the 2013-2014 budget OP makes their case for the necessity of tuition increases by insisting that the increase in state funding only covers the cost of increases to the core budget.  According to OP the necessary increase comes to $155M (or more than is left over after the tuition buyout).  But OP is also touting the fact that they will save $80M because of a shift in debt accounting (2) and Executive Vice-Presidents Brostrom and Taylor are claiming that they have created $171M worth of funds this year due to "working smarter." (1)  If these claims of financial and administrative wizardry are accurate then that should leave roughly $100M in funds for UC (or nearly as much as the administration had hoped to get from tuition increases and without the reduction of "return to aid").  So either their claims about the necessity of tuition increases appear overstated or the claims about the wondrous savings are overstated.

Third, if you read the documents I linked at the top (and I urge you to do so) you will see that OP has set off a set of oppositions between "truly mandatory" and "high priority" costs. (2)  Strikingly, the "truly mandatory" costs focus largely on benefits for faculty, staff, and retirees.  The "high priority" costs on the other hand tend to focus on delayed maintenance and steps taken to ensure increased quality in education.  Now, I am happy to see that OP takes the declining benefit situation seriously and also agree that with their insistence that the State commit to its responsibility for UCRP.  But the way that they have set the argument up places employee benefits and salaries and tuition increases in a paired relationship.  Put bluntly, OP appears to be constructing a narrative in which faculty and staff compensation (in all of its forms) is the driver behind increases in tuition.

There are subsidiary lines about alternative sources of revenue--mostly in terms of out of state and especially international students.  But the main thrust appears to be Tuition Hikes Ahoy or say goodbye to quality. 

The UC Regents' busy week includes hiring a new president and also voting on more routine matters, including one that has become routine fairly recently.  That is a proposal to increase employer and employee contributions to the pension again next year.    Each of these increases helps make the pension fund (UCRP) more solvent. Each also amounts to annual cuts to staff and faculty take-home pay.

In 1990, the Regents stopped pension contributions from both the University and from its faculty and staff, when the pension was overfunded, and did not restart them until April 2010, at least ten years after the pension began its decline towards the underfunded state it's in today.  The outcome for staff and faculty was summarized in an April 2013 letter from the University Committee on Faculty Welfare (UCFW) to Senate Chair Bob Powell (scroll down past the cover letter):

Between April 2010, the time that employee contributions were restarted, and July 2013, the value of take-home pay will have declined by a total of 10% due to inflation (6.5%) plus the restart of employee contributions (an additional 6.5%), off-set by only one 3% salary increase, in October 2011.

The employee contribution increased 1.5% in the year just started (bringing it to 6.5% of gross pay.  The proposal this Wednesday is to increase the employee contribution another 1.5% in 2014-15. In that year, each employee will send a total of 8% of their gross pay to the pension fund.

The Senate has had three general positions on this. The first is that contributions need to be ramped up quickly to fix UCRP's underfunding. To that end, Academic Council voted unanimously to support the proposed 2014-15 rates of 14% from the University and 8% from the employees (cover letter). 

The second position has been that the ratio of employee:employer contributions should never be more than 1:2.  That principle has now been temporarily set aside by the endorsement of the ratio of 8:14.

Finally, by a vote of 14-3-1, Council ratified UCFW's proposal that Senate approval be contingent on

the increase in employee contributions to 8% [being] accompanied by an across the board pay raise for faculty (and non represented staff) of at least 3%. A 3% increase would merely compensate for the two most recent 1.5% increases in employee contribution rates effective on July 1, 2013 and July 1, 2014; any increase greater than 3% would constitute a small step toward restoring competitive salaries

Unfortunately, such a pay increase has not been budgeted by the state, which foresees a 5% general fund increase (still well below 2007-08 levels) and no tuition increase (page 4).

I hate to depress my colleagues, but we may well be looking at another 1.5% cut in take-home pay next year, bringing the UC cuts to 8% since 2010, or say 12% when we count inflation and subtract the one-time 3% salary increase .

UC's 2013 Accountability report claims that faculty salaries are 85-89% of their comparators (page 70). The net pay gap  may be closer to negative 25%. 

UC commissions compensation studies, and in the 2000s they generally concluded that while UC faculty and staff salaries lagged, total compensation was as good or better, because pension and health benefits were so good. That was then. As employees pay more to support the pension, the pension becomes a smaller benefit. 

At a UCLA event last fall, former Senate chair and benefits guru Bob Anderson reported that the pension became "slightly uncompetitive" with comparison universities when employee contributions hit 5%.  At the 2013-14 rate of 6.5%, they are "definitely uncompetitive." So the solution to the uncompetitive salaries--the pension--has now become part of the problem.  (The same thing has happened to retiree health benefits, as UC contribution to current employee health costs was also cut from 89% to 70% of total cost over time.)

The state of UC's salary scales is even worse than that of actual salaries.  The reason is that 2/3rd of general campus faculty are off-scale.  The only way to keep a competitive individual salary is to be off scale, and if you didn't get hired with a large off-scale increment then in general you need to go on the job market, get an offer with a higher salary from a university that is good enough for UC to want to match, and get a salary match in return. 

This situation creates a "loyalty penalty" in which faculty who serve the institution more than they serve their own careers are in effect punished for service with lower salaries.  In addition, when faculty play the market, administrators need a bigger war chest to retain them.  They grow their reserves by keeping allocated lines unfilled and by failing to put any new salary money into fixing the scales.  One of the reasons fixing the scales overall has not been a priority is because many executive vice chancellors have opposed it, on the plausible grounds that the fix would come out of their campus funds and reduce their funds for faculty retention and related needs.

Prof. Anderson pointed out that when the University stopped contributing to the pension, it was engaging in hidden deficit spending. Employees were incurring $1.5 billion in annual service credit, a third of that tied to state funding. So at the 1:2 employee:employer ratio, UC artificially suppressed its state funding need by at least $333 million a year. 

The same can be said about salaries.  The university needs enthusiastically self-overworking loyalists to function at a high level.  The avoidance of a two-speed faculty has over decades increased both equity and efficiency, and in particular helped shrink gender-based pay gaps. The new practice of having negative to zero overall net pay increases establishes a two- or three-class structure within the faculty, with attendant operational and equity problems.  And it perversely allows the University to lowball its real state funding need in a way that insures correct state funding will never be there.

The salary scales need to be fixed, loyalist pay brought back into line with comparison schools, and faculty in this way encouraged to put more rather than less time developing the university overall.  The only way to fix scales (and the pension) is to get state funding back to normal levels.  But no one is making the case clearly enough that UC, without renewed investment, is still on the verge of being permanently downgraded as a university.

Salaries and scales are one of those issues where conventional wisdom is wrong, and where you need deep experience to understand why.  Pay gaps will be along the new president's major challenges, and I hope the issue will be presented correctly to her.