Changing Universities

Jerry Brown’s recently released plan for education has a few good vague ideas sprinkled amongst some very bad notions. Starting with the good, Brown does recognize the problem of increasing tuition due to the decrease in state funding: “Recent state budgets have raised tuition drastically, reduced the number of new students--as well transfers from community colleges--to CSUC, cut class sections so that students cannot get basic classes they need, and driven good professors to other states. Students are dropping out because of high costs and the extended time needed to finish. California’s historic public university research base is declining.” Not only does Brown stress that the reductions in state funding have led to higher tuitions and fewer classes, but he also laments the loss of professors due to budget reductions.

Is first solution to this problem is to following the current governor and demand that money being spent on prisons is transferred to higher education: “We must also reverse the decades long trend of transferring state support from higher education to prisons. We can do this without sacrificing public safety. For example, as Attorney General, I recently blocked a proposed $8 billion prison hospital expansion—which was unnecessarily expensive and which would have added substantially to our state’s deficit. By relentlessly pursuing similar cost savings, we can channel needed funds to our higher education system.” The problem with this solution is that it is hard to imagine how it can take effect without changing the Three Strikes law and major drug decriminalization.

The next solution that Brown proposes should scare all of us. Like the UC upper administration, Brown endorses online education as a solution to many of high ed’s fiscal problems: “ The introduction of online learning and the use of new technologies should be explored to the fullest, as well as extended University programs. Technology can increase educational productivity, expand access to higher learning, and reduce costs.” Brown’s take on distance education recycles all of the questionable premises that drive the current UC initiative. In this naïve assessment, Brown thinks that access can be increased and costs deceased by some magical form of high-tech efficiencies. I have already written why the result of this process may be to increase costs, produce more work for faculty, and lower the quality and reputation of the university’s education.
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The other great fantasy solution that Brown copies from the UC Commission on the Future of the University is to increase the number of transfer students: “Transfer courses should be closely aligned with, and accepted by, the CSUC and UC systems. For example, transfer students are often forced to take redundant courses to graduate from the CSUC system even though they have completed equivalent coursework in community college.” As I have previously argued, increasing the number of transfer students will only decrease the funding of the university since most of the UC’s profit is made from lower-division, high-enrollment courses that transfer students do not have to take. Of course since Brown, like most of the UC administrators, does not actually understand how the UC makes its money, all he can do is propose unrealistic and unhelpful suggestions. However, we must keep in mind that the other candidate is actually much worse. In other words, we face another election of holding our collective noses while we vote.

Check out this great video by professor Eva von Dassow from U. of Minessota. No, that is not me in drag, but she could easily be speaking about the UC system. She discusses how a small reduction in state funds is being used to justify major changes in the allocation of resources. Like the UC system, activites that make money are being supported, while basic educational and research activities are being starved. In her video, she makes the following important observation: "those programs engaged in the production of knowledge that is readily turned into the money are the targets of investment while the rest are to be downsized into an efficient credit and degree factory.” She also mentions that the university’s revenue has actually gone up, but still they are making dire cuts and forcing faculty and workers to do more for less.

In an interview with Inside Higher Education, von Dassow adds that the new budget cuts "leaves undiminished the numbers of vice presidents, not to mention the salaries of coaches. No, these highly-paid positions are not to be reduced. Rather, the university must shed faculty.” In the UC’s case, the loss of faculty is happening covertly by not replacing retiring professors and not rehiring lecturers; meanwhile the number of administraors keeps going up as the cost of administration increases. Even with recent efforts at administrative efficeincy, the university shows where its values are by continuing to hire more high-level, high-paid bureaucrats.

In response to von Dassow’s comments, a university spokesperson told Inside Higher Ed, “"Professor von Dassow's perspective is one of many faculty perspectives at the University of Minnesota. We certainly appreciate her taking the time to express it. The University Senate overwhelmingly supported the president's plan for temporary pay cuts and his operating budget was unanimously supported by our Board of Regents." Doesn’t this sound familiar: yes, the university values the input of respected faculty members, but sorry, the regents and the official committees are the only ones that really matter, and they really like what we are doing.

As I have been arguing in this blog, the next big fight will be over online education, and here, we will see if the faculty in the UC system have any power or values. The UC administration has decided to simply bypass the faculty senates by taking control of the online initiative. This plan, which seems modest at first, will give upper-management the ability to control who teaches, what gets taught, and how it is taught. In fact, Dean Edley has argued that an “army of graduate student instructors” will man the courses, which will be initially funded by outside private sources. The next step will be to expand the project for online degrees, and at that point, there will be no difference between education and mass marketing.

I ask faculty to speak loudly against this administrative takeover. The question is not so much whether the quality of the education will go down (it will) or that the university will generate extra funds (it won’t), the question is who will determine the structure and content of our classes and what will these changes say about our values and interests.

One of the most annoying parts of any UC Regents meeting is the constant, time-consuming ritual of self-praise. Near the start of the meeting on July 13th, Chairman Gould announced that he would like to praise the board for their successful effort at turning anger away from Oakland and aiming it directly at Sacramento. In other words, the head regent wanted to make sure that people blamed the state and not the regents or the Office of the President for any of the UC’s problems.

Gould later responded directly to my public comment concerning the university’s loss of $23 billion in investments during 2008-09. He flatly said, “Over the last twenty years, our investments have outperformed our peers.” Not only is this statement completely false, but it reveals the defensive and misguided nature of the regents’ thinking.

Another great example of defensive group thinking occurred during the discussion of UC admission statistics. After stating that the system ended up with 2,000 more transfer students than they wanted, a regent exclaimed that this high rate of transfers shows that the Master Plan is still working. No one questioned why none of the admission targets were met, but the VP of Budget did warn that this level of over-enrollment means that the UC system now has 15,000 students that are not being funded by the state.

A very uncomfortable moment occurred when the ethnic breakdown of new admits was being discussed. On one of the charts, it showed that the percentages of new freshman who are Asian American, Latino/Chicano, African American, and American Indian have all gone up; however, next to Caucasian, there was no arrow. A regent asked why the percentage of white students didn’t also go up? I thought to myself, doesn’t he realize that you can’t have the percentage of all of the groups go up; after all, some group has to go down. Yet, in the delusional thinking of the regents, they should be able to increase every group, while they commit themselves to decreasing undergraduate enrollments.
One regent even ventured that the result of increasing student fees was that there was more financial aid available, and so there are now even more low-income students. No one stated the obvious that someone must be losing out.

Of course, the magic bullet presented at this meeting to solve both the budget problems and diversity issues was online education. In Dean Edley’s showy presentation on how the UC can use online courses to democratize elite higher education, he claimed that digital education is the new civil rights issue, and he ended his presentation with a slide stating “Si Se Puede.” I am sure that Cesar Chavez used this slogan to tell his people that they would soon have access to a high-cost, low quality educational option.

After Edley’s presentation, there was a press conference, and I asked him how UC is going to offer high-quality online education to low-income students if these are they very students who do not have broadband, fancy computers, and the needed software. He replied that the UC would have to provide students with new computers and broadband access, but it would only cost a small drop in the bucket.

Edley also announced that he has been going around with the governor asking private donors to support the pilot program that he hopes to roll out this Fall. I asked him if he was afraid that the donor’s might have a different agenda than the University of California, and he assured me that none of the gifts will come with any strings attached. I didn’t get to ask him about regent Blum’s business interests in online education, but it is clear that the regents are feeling defensive concerning recent media exposure of possible conflicts of interests.

One of the central ways that the regents and UCOP are trying to polish their public image is by showing how they will save money through administrative efficiencies. In a major move, the regents granted President Yudof the power to force campuses to adopt common systems and practices. It was clear that the Chancellors in the audience were not happy about their sudden loss of power, but they had to suck it up as the regents extended Yudof’s executive reach.


Here is my final conclusion; since the regents have no understanding or interest in actual education, they turn their attention to other areas like new community outreach programs, online education, green technologies, and diversity issues. Not once, during two long days of discussions, did I hear anyone touch on the subject of providing high quality education and research. It is clear that the faculty, students, and unions have to change the conversation and interupt the love affair between the regents and the Office of the President.

Throughout the year, faculty, students, and employees have been meeting at UCLA to discus the UC fiscal crisis and the Commission on the Future of the University. We decided to form an Alternative Commission because the official commission did not have any union leaders, librarians, and lecturers as members, and the working groups had very little student representation.

One of the first activities of the Alternative Commission was to create and distribute a survey regarding the official commission’s recommendations and other related issues. So far, over 1,000 people have responded to the survey, and we will present the findings on July 15th at the UC Regents meeting in San Francisco. A full copy of the report on the survey can be accessed here.

A major finding of the survey was that most of the students have very little knowledge or understanding about the creation and role of the commission. Moreover, when we outlined the central commission recommendations, most of the students and faculty gave these solutions very low ratings. In fact, we asked people to grade the commission recommendations, and we compiled the following results:

1) The lowest rated recommendation was to reduce the teaching staff by 10%. The vast majority of responses rated this proposal as an F.

2) The second most unpopular idea was to eliminate some majors and to get rid of majors that are duplicated on different campuses. Once again, almost everyone gave this recommendation an F rating.

3) Another idea that did not garner much support was the proposal to schedule yearly fee increases of 10-15%. It is important to note that many people feel that the UC does need to do something about its finances, but students and faculty resist the idea of making students continue to pay for the decrease in state funding.

4) Responders also rejected the notion of different fees for each campus, and there was a strong desire expressed to maintain the unity and equality of the system by holding onto a single fee structure.

5) We also asked people about the idea of having more online courses, and once again, the vast majority of responses were strongly against this recommendation. Many people wrote comments on this idea, and they stated that the move to online education could wind up costing the university more money, while lowering the prestige and quality of UC instruction.

6) We also asked people about the idea of increasing professional fees by 15%, and while this recommendation did receive some positive support, most people felt it would hurt the students who did not pursue the most profitable occupations.

7) Another recommendation that did receive some positive support was the idea of increasing the number of out-of-state students. It is important to note that the people who did support this move wanted to make sure that the number of in-state students also increased.

8) Finally, the recommendation that received the highest support, somewhere in the D+ range, was the notion of three-year degrees. Most people thought that this was a strange idea since so many students can not graduate in four years, but some thought the three-year degree idea showed promise if it could be done correctly.

The key to the future of the University of California relies on our ability to answer several major questions: 1) How much does it cost to educate each graduate and undergraduate student each year?; 2) How much money is lost or gained by externally funded research; 3) How much will it cost to fund the pension and retiree healthcare?; 4) How much revenue is unrestricted and can be shared between units?; 5) How much waste is there in the system?; 6) Is there a way of improving educational quality and decreasing costs?; and 7) Can the UC pursue a more stable and effective investment strategy? While some of these questions are touched on by the Commission on the Future of the University, most of these essential issues are ignored or misrepresented.

On the positive side, the university has opened up the question of cutting waste and excess by proposing to save $500 million through some vague process of centralization and cost reduction. However, these proposals do not directly address the question of the increased number of administrators and the rapid rise in their compensation packages. In fact, during the time of our “fiscal crisis,” people at the top have increased their earnings, while everyone else lost money.

A hopeful move by the Commission is to look at the rate the university charges external research grants for indirect costs. The commission claims that many of these grants are losing money and that the university should be more aggressive in bargaining for a higher rate of support from external sources. What no one knows is which grants make money and which ones lose; moreover, due to the abstract way of calculating indirect costs, it may be impossible to determine the profitability of most research projects. There is also the question of whether the university wants to base its research decisions on economic criteria.

One reason why this issue of grants is so important is that many faculty members in the humanities and social sciences feel that their budgets are being robbed to pay for expensive scientific research projects. One again, due to the decentralized nature of the UC budget, no one knows if externally funded research is being subsidized by high-enrollment undergraduate courses. Yet, what we do know is that money generated by undergraduate instruction is going somewhere other than instructional budgets.

This question of undergraduate instruction brings us to the unanswered question of how much does it actually cost to educate undergraduate and graduate students. Since there has been no effort made to answer this question, many of the Commission’s recommendation are based on unclear assumptions. For instance, the UCOP appears to be pushing for a decrease in undergrad enrollment and an increase in graduate enrollment, but they have never studied what this change would cost. The Commission has also pushed for more transfer students and three-year degrees, but it is unclear if these programs will save or cost money.

According to my studies of UC salaries, class sizes, and course loads, the university makes a large profit on each undergraduate student and loses money on each graduate student, and thus it would be economic suicide to decrease undergraduates, while increasing the number of graduates. Even if one believes that the key to the future of the UC is to focus on graduate education, one should have some idea about the costs of this move, and yet no one is basing their recommendations on actual numbers or facts.

The speculative nature of the Commission and the Office of the President tells us that we are a long way from budgetary transparency, and the main reason for this lack of transparency is that the university has to simultaneously tell its bond raters that it is in great fiscal health, while it tells everyone else that it is deep in a fiscal crisis. By claiming a large budgetary hole, the university can impose drastic cost-cutting measures, like furloughs, layoffs, and increased class sizes; meanwhile, it increases its assets by diversifying its revenue streams.

Like most research universities in America, since 1980, the UC has made up for its loss of state funding by increasing tuition and bringing in more funds from research, services, and investments. One of the problems with this transformation is that universities claim that they cannot share the profits of the non-state-funded units with the state- and tuition- funded instructional budgets. The result of this budgetary system is that money is drained from educating undergraduates in order to support supposedly profitable units, and making matters even more complicated, is the fact the universities often invest their endowments, pensions, and operating cash in risky investment vehicles.

If we look at the amount of debt the UC has recently taken on ($13.2 billion) and if we account for all of the UC’s investments in the stock market, hedge funds, real estate, private equity, and securities ($65 billion as of March 2010), we see that its yearly budget of $20 billion is dwarfed by its financial stakes of $78 billion, yet none of these statistics have been presented to the working groups of the Commission. Instead, the university has reiterated dire predictions concerning the cost of the pension plan and retiree healthcare. In one of the their graphs presented to the Commission, they estimate how much it would cost the university to increase its current pension contributions of 4% of salary to 22% by the year 2019. This increase could overwhelm the entire system, so the UC has added that it plans to save $310 million a year by restructuring post-retirement benefits; as far as I can tell, this is the first mention of estimating the costs of changing retiree healthcare.

Since all of the members of the Commission’s working groups were given presentations on the UC budget by the Office of the President, we can be sure that driving the Commission’s recommendations is the idea that the university has to cut educational costs to make up for the decrease in state support and the increase in retirement costs. At no point were the Commission members briefed on the UC’s investments, debt, or actual instructional costs. As Aristotle argued, if you start off with faulty premises, there is no way you can arrive at correct conclusions.

The state assembly and senate have responded to the governor’s request to increase the funding for the UC system by $305 million. While the assembly supports the increase, the senate has stated that they will only endorse the augmentation if the state brings in at least $2 billion in new General Fund revenues above the May Revise level. In other words, unless the state has a major increase in revenue, the senate will try to block the new money.

The assembly has also supported additional funding for the UC system so that the scheduled student fee increase of 15% can be brought down to 5%. So far, the senate has not decided on this fee decrease, which would cost the state $200 million.

Finally, in response to the UC’s request that the state fund the employer contributions for the pension, the assembly supports the governor’s idea that general fund allocations can be used for the pension. However, the senate decided to reject this new language. It looks like we are in for a long summer battle over the state budget.

I have a Huffington Post article on how several schools in New England have followed the same high-risk investment strategy that the UC has pursued for the last several years. According to the Tellus Institute’s study of Haravard, Dartmouth, Brandeis, MIT, Boston University, and Boston College, by moving their investments from more stable assets to volatile gambles (private equity, real estate, and hedge funds), these universities have produced a growing income inequality at their campuses. Moreover, since they have now been forced to stop ambitious expansion projects, the surrounding communities have been devastated.

An important lesson that the University of California should learn from this analysis is that the investment strategies of hired traders should be closely monitored; this study also shows that the trustees and regents of these wealthy institutions often have a huge conflict of interest. Since many of the people overseeing universities now come from the world of speculative finance, they are unlikely to shift money into more stable forms of investments. Moreover, due to the tax-exempt status of these schools, they are more prone to engage in high-risk trading.

Another issue discussed by the Tellus report is that since these schools pay very little taxes on their huge real estate holdings, they end up impoverishing their home towns and cities. Furthermore, all of these schools continue to increase their huge income disparities as money flows to the top, and low-paid workers see their salaries stagnate.

While this study does not look at pension investments, most of their finding can be applied to the UC retirement situation, and the central lesson is that there needs to be more faculty and employee oversight over risky investment strategies that cater to the interests of wealthy trustees and regents. As the stock market continues its rollercoaster ride, universities are motivated to seek out high-risk investments in order to make up for past losses; this is truly a recipe for disaster.

Using Jeffrey Bergamini’s excellent compensation database, we can examine salary information just released by the UC system. Between Jan. 1 2009 and Dec. 31 2009, the total number of employees listed as having regular employment (excluding graduate and undergraduate student workers and other casual employees) went down by 1,180, but the total gross pay for the system went up $257 million. If we include student employees and other “casual employees” into the mix, in 2009 we saw 3,822 fewer jobs. However, the number of people making over $200,000 went up by 200, and the 3,843 people making over 200K had a collective gross pay of $1.088 billion for an increase of $63 million over the previous year.

This initial reading of the compensation information tells us that during the UC “Budget fiscal crisis,” the university did reduce the number of low-wage employees, as well as cut their total compensation, while the number of high earners actually went up. This growing income inequality has now been coupled with a decrease in work for the lowest-paid employees. Moreover, the imposition of the furlough/salary reduction program did not reduce the total budget; instead it shifted wealth to the wealthiest.

Last summer, I wrote to the federal government to file a complaint regarding how the state of California was using federal stimulus dollars. My concern was that federal recovery money (ARRA) dedicated to higher education was being spent by the state for other purposes. Moreover, I argued that the state was failing to follow the federal mandate of protecting jobs.

On May 27th, I received the following response from the feds:
“This is in response to the complaint that you submitted to the U.S. Department of Education’s (Department) Office of the Inspector General’s Hotline on July 11, 2009. Your complaint indicated that California reduced its support for higher education upon receiving Federal stimulus funds. You further indicated that the University of California used the State’s reduction in support to justify a “fiscal emergency” that would “allow the UC President to impose furloughs, salary reductions, and layoffs.” The Department encourages public universities to use funds awarded under the State Fiscal Stabilization Fund (SFSF) program to avert layoffs and maintain essential educational services. We recognize that some States are reducing their support for education after receiving SFSF funds. Please be assured that the Department is thoroughly reviewing State financial data to ensure that each State meets the statutory maintenance-of-effort provisions. We will continue to monitor California’s support for education to ensure that the State is complying with those provisions. While we appreciate the concerns that you have expressed, the information you provided does not indicate any violation of the applicable statutory requirements.”

I guess I should be happy that I got a response to my inquiry, but the larger question remains of what the state and the UC did with the ARRA money. It still remains unclear how much ARRA money actually made it to the campuses, and I have asked the state auditor to follow the money trail. To be continued . . .

Throughout this academic year, I have been arguing that while the state may have cut the UC’s total $20 billion budget by $600 million in the last two years, the university lost over $23 billion in its investment portfolio during the same time period. In fact, there has been a huge outcry over the reduction of state funds, but no one has questioned UC’s investment losses. It appears that people assume that since everyone lost money during the global fiscal meltdown, we cannot hold the university responsible for its investment decisions. However, a new study concerning the pension losses at six New England universities should make us re-open the question of how the UC lost so much money.

According to a new report by the Tellus Institute, Harvard, Dartmouth, MIT, Boston College, Boston University and Brandeis University all embarked on a high risk investment strategy that has now resulted in reduced endowments, budget cuts, delayed construction projects, and job eliminations. Like the UC, these universities all followed Yale University's investment chief, David Swensen’s endowment model of relying on alternative assets such as commodities, real estate and private equity.

While this report only looks at the six New England schools, its findings can also be applied to many universities, including the University of California. As I have written, the UC also copied Swensen’s strategy of moving money from stable securities to high return areas. In fact, the UC is still following this advice, which is evident in the following statement from Moody’s regarding the university’s investments: ““The long-term targets for the endowment pool would bring alternative assets (including hedge funds, real estate and private equity) to 35% of the total, with domestic and international equity accounting for another 45% of total assets.” Instead of shying away from the high-risk Yale investment model, the UC is increasing its exposure to these volatile assets.

Like the UC, one of the driving forces behind these risky investments is the role of trustees or regents with conflicting business interests. According to a Bloomberg Businessweek article ,“The investment committee at Dartmouth, in Hanover, New Hampshire, included more than six trustees whose firms oversaw more than $100 million in investments for its fund over the last five years, the report said. Stephen Mandel, who is relinquishing his post as chairman of the school’s investment committee to lead the board later this year, originally managed $10 million for the school at his firm Lone Pine Capital LLC. . . . Other trustees who manage money for Dartmouth include Leon Black, with at least $40 million in his private-equity firm Apollo Global Management LLC, and William Helman, a partner at venture capital company Greylock Partners, the report said. Helman, who will take over the committee’s helm from Mandel, has received $10 million from the endowment.” These types of conflict of interest are evident in the UC system since many of the regents have major holdings in private equity, real estate, and construction.

As the UC union coalition told state senator Darrell Steinberg during Charlene Zettel’s conformation to be the next UC regent, we need to have employees on the pension board to make sure that the university’s investment decisions are not guided by the personal business interests of individual regents. Moreover, we need a full investigation into how the UC lost $23 billion during the global fiscal meltdown.

As we come to the end of this academic year, it is important to look back at some of the accomplishments of the student-faculty-union movement in the UC system. Since I am most familiar with the UCLA situation, I want to highlight some of our recent success, and what we might want to do in the future.

First of all, it is clear that our protests have had a profound effect not only in California but around the world. According to the governor’s chief of staff, it was the protests at UCLA during the November regents meeting that persuaded him to increase the funding for higher education. These protests were covered all over the globe, and many students have written to us saying that our actions helped to motivate them to get involved in fighting their own systems.

One of the targets of the UCLA actions was to reverse the layoffs of 67 continuing appointment lecturers at the College of Arts and Sciences. After several protests, union grievances, and private negotiations, all of these lecturers have been rehired. This means that many classes will not be cancelled next year, and students will be able to get the courses they need to graduate in a timely fashion.

Another important victory is that our coalition of students, faculty, and unions helped to put together a slate of graduate students to run for student government, and all of our candidates won. The new Public Education Party (PEP) will be a strong advocate for access, affordability, and quality at UCLA. In fact, the new GSA president has been an active participant in our protests, and he has used his legal expertise to make sure that students were protected during our actions.

While our protests did not result in stopping the fee increases, we are confident that we can build on our other successes to push for a freezing of fee increases next year. We also intend to keep the pressure on the university to increase student diversity and to provide funding for undocumented students.

In order to help shape our agenda for next year, we held an open Alternative Commission on the Future of the University at UCLA. One of the results of this meeting was to formulate a new vision for a more democratic university. We plan to continue to work on our vision and present it to the public. So far, we have concentrated on asking students if they endorse the Commission’s recommendations to move classes online and to create three-year degrees. We have also surveyed students to see what they think about multi-year fee increases, accepting more out-of-state students, differential fees, and eliminating majors. We hope to continue these research efforts and report our findings in the future.

Perhaps the biggest lesson of the year is that people can make a difference, and it is important to fight for the system you want. Please join us this week at the regents meeting in San Francisco as we make our voices heard again.

A recent Chronicle of Higher Education article, “U. of California Considers Online Classes, or Even Degrees: Proposal for virtual courses challenges beliefs about what an elite university is—and isn't,” outlines the first real effect of the Commission on the Future of the University. According to the Chronicle, “Administrators hope the online plan will ultimately expand revenue and access for students at the same time. But the plan starts with a relatively modest experiment that aims to create online versions of roughly 25 high-demand lower-level "gateway courses." A preliminary list includes such staples as Calculus 1 and Freshman Composition.” In its effort to downsize undergraduate education, and hopefully turn a profit, the university hopes to place high-demand courses online.

While the initial project appears to be modest, this is only the first step: “UC hopes to put out a request for proposals in the fall, says Daniel Greenstein, vice provost for academic planning, programs, and coordination. Professors will compete for grants to build the classes, deliver them to students, and participate in evaluating them. Courses might be taught as soon as 2011.” In other words, faculty will be motivated to sacrifice the future of their own departments in the quest of landing a grant to re-design their classes for the Web. In fact, the UC plans to offer a great deal of cash for faculty willing to enter the digital future: “The university plans to spend about $250,000 on each course. It hopes to raise the money from external sources like foundations or major donors.” One has to wonder why the university does not simply use the $6 million it plans to raise on funding existing programs; moreover, we have to examine what kind of deals does the UC plan to offer private and corporate sponsors of these new programs. Will Apple be able to fund a new iCourse, which would require students to purchase Apple products?

We also have to question what the turn to online education will do to the quality of instruction and the reputation of the UC system. As the Chronicle article reports, most elite universities have not pursued online courses because they are afraid of losing their elite status. After all, what differentiates the University of California from the University of Phoenix is the fact that in the UC system, students are brought to the same place to study with expert faculty and researchers. Furthermore, once courses are moved online, the value of a UC degree will be downgraded.

As someone whose specialization is the use of new media for the teaching of writing, I can attest that online writing courses actually increase the amount of work for the faculty. Also, due to the high cost of technology, staffing, equipment, and facilities, these programs end up costing a huge amount of money. Moreover, online education casualizes the academic labor force as it hurts student retention rates.

None of these factors seem to affect Berkeley’s Law School dean Christopher Edley Jr. who argues that, “"Somebody is going to figure out how to deliver online education for credit and for degrees in the quality sector—i.e., in the elite sector. . . I think it ought to be us—not MIT, not Columbia, not Caltech, certainly not Stanford." Perhaps Edley should spend some time pondering why the other elite institutions are not going down this path; however, he seems intent on forcing online education down the throats of resisting faculty and students.

In a very telling moment in the Chronicle article, we find the following passage: “Building a collection of online classes could help alleviate bottlenecks and speed up students' paths to graduation. But supporters hope to use the pilot program to persuade faculty members to back a far-reaching expansion of online instruction that would offer associate degrees entirely online, and, ultimately, a bachelor's degree.” We can read this statement as positing that the grants will offer faculty a large amount of money to design their classes for the Web, and once the faculty have bought into this process, the move will be to transfer as much of the instruction online as possible. Let’s hope the UC faculty resist these bribes—I mean grants.

On May 4th from 5-7 at Humanities 135, faculty, workers, and students will meet together for a public forum to discuss an alternative Commission for the Future of the University. The first hour will consist of presentations outlining specific recommendations, while the second hour will revolve around a democratic selection of the top suggestions. After this meeting, we will present our recommendations to the media and the Office of the President.

The central topics will be enrollment targets, student fees, online education, pension contributions, graduate education, diversity goals, summer instruction, language requirements, budget planning, and funding models.

Speakers will include members from the newly elected Graduate Student Association government, Toby Higbie (History, UCSB), Katherine King (Comparative Literature), Bob Samuels (UC-AFT), Teresa Avendado (AFSCME), Ali Cruz (Law Student), Holly Craig-Wehrle (Undergrad), and a representative of UPTE.

For a discussion of the commission's recommendations, click here and for UC-AFT alternative proposals, click here.

Please come and add your voice to the democratization of the university.

Moody’s has rated the University of California’s bonds as aA1, and the university’s finances have been defined as stable. However, the high rating comes with the following warning: “The broadest pledge of revenues backing the University's various debt securities, General Revenues include tuition and other student generated fees, indirect cost recoveries, investment income and other revenues excluding state appropriations and gross revenues of the Medical Centers. The security features of the General Revenue Bonds is fairly weak, with no reserve fund, a rate covenant that requires revenues sufficient to pay debt service, the ability to issue senior debt, and the ability of the University to add and remove revenues as long as an event of default has not occurred. However, we expect the University to closely protect its market access and the strength of its broadest and highest rated security pledge.” According to this assessment, the UC can spend student fees, indirect costs from grants, and investment profits, but it cannot use state funds or revenues from the medical centers to back its debt. The raters also point out that the bonds do not have sufficient funds to service the debt, but they are confident that the university can protect its market access.

Part of the UC’s market access concerns the use of credit default swaps and other complicated financial derivatives: “The University has two swaps related to two series of variable rate bonds under its Medical Center Pooled Revenue Bond pledge, both of which are floating to fixed rate agreements. Only one of the swaps requires the University to post collateral under certain circumstances. The fair value of the agreements was negative $48 million at the end of FY2009.” While the UC is losing money on its swap, it is unclear how many other similar arrangements it is currently holding.

One of the main strengths of the UC’s finances continues to be its access to unrestricted funds that can be used for any purpose: “Sizeable balance sheet that remains highly liquid, with $3.5 billion of unrestricted financial resources ($5.9 billion excluding post-retirement health liabilities) and active treasury management monitoring a short-term investment pool exceeding $10 billion.” As I have previously stressed, while the university likes to claim that it has limited access to unrestricted funds, it is clear that it can use close to $6 billion according to its own purposes. Moreover, the retiree healthcare liability now moves $2.4 billion from unrestricted funds to restricted funds, but the university is really only spending a tenth of that amount on retiree healthcare, and there is no sign that they are actually saving $2.4 billion in a separate account dedicated to the healthcare of retirees.

One concern that Moody’s signals is the high rate of debt the university has taken on: “Significant capital needs likely to result in rising borrowing levels; debt outstanding has grown from $8.3 billion in FY2006 to over $13.2 billion in FY2009 and including new borrowings since the end of the fiscal year, a 56% increase.” This debt requires a huge amount of funds to service, and it unclear why the university finds it necessary to borrow so much money. Furthermore, the more the UC borrows, the more it has to make its decisions based on what the bond raters tell them since a high bond rating results in a lower interest rate, which reduces the cost of borrowing money.

Like the IMF, the bond raters hint to the UC that a source of financial weakness is their reliance on the state and the high level of unionized labor: “high susceptibility to regulatory and government pay or changes, coupled with unique stresses on California healthcare, including unionized labor.” In this seemingly neutral economic assessment, we find a bias against state regulation, unions, healthcare, and state funding.

Moody’s also slips into their analysis the idea that the university should increase the number of students coming from outside of the state: “In-state demand is so strong that UC does little recruiting of freshman from out-of-state. Moody's views this as an untapped strategic asset because UC could easily increase its student demand further if it followed national recruiting practices similar to most peer universities.” Not only does Moody’s think that the university should accept more out-of-state students, but it should spend more money marketing and recruiting them.

It is interesting to note that while the bond raters indicate that the UC needs to wean itself off of the unstable support for instruction from the state, they believe the UC will continue to profit from the money it gets from the federal government to do research: “The UC system collectively represents a vital part of the nation's research infrastructure, as evidenced by its status as the largest university recipient of federal R&D spending in the country. Total grants and contract revenue in FY2009 exceeded $4.5 billion, with research expenditures exceeding $3.7 billion. Grant and contract revenue has grown consistently in recent years, and given the University's prominent research position we expect it to benefit from a spike in federal research funding provided by the federal stimulus bill.” According to this analysis, research grants brought in an $800 million profit last year, and this amount may go up due to the federal stimulus. Hidden in this analysis is the idea that state-funded instruction is unstable, but federally funded grants are a growth market. The reality of the situation is that we do not know if grants make or lose money, and they are an even more unstable source of funding than state support.

Another major threat to the financial health of the university that is highlighted by the bond raters is the pension and retiree healthcare liabilities. These future projections make it look like the university is currently running a deficit when it is still showing a healthy surplus: “UC had generated an average operating margin exceeding 4% through FY2007. Beginning in FY2008, the University was required to report expenses associated with its post-retirement healthcare benefit plans leading to rising operating deficits based on Moody's approach to calculating public university operating margins. In FY2008, the margin was negative 3.1% with the deficit rising to 6.1% in FY2009. Operating cash flow margin, adjusting for the non-cash portion of the post-retirement health expenses, was 11% and 9% respectively. The deficits reflect $1.35 billion and $1.50 billion in expenses for retiree health benefits respectively in each year compared to less than $300 million of actual cash contributions to the plan. The University's retirement health and pension plans represent a significant and growing liability and expense of the System. We believe the University will need to take significant steps to either curtail the benefits or improve ongoing funding of the costs in order to sustain its long-term credit quality.” This complicated passage means that on paper it looks like the UC has a deficit, but that is because they are declaring a $2.85 billion pension and retiree healthcare liability, while they are actually only spending $300 million. Also, Moody’s is pushing the university to either curtail benefits and/or increase the funding for the pension and retiree healthcare, and if the university does not do this, the UC is threatened with a lower credit rating.

While it is necessary for the university to fund the cost of its pension and healthcare for retirees, the question is how much is needed and how does the projected liability affect current operations and the campaign to downsize benefits. Also, instead of simply reducing its profits by declaring a huge liability, shouldn’t the UC use some of its net revenue for future benefits?

Moody’s not only tells the UC, in subtle and not so subtle ways, how to spend its money, but it also pushes a risky mode of investment: “The long-term targets for the endowment pool would bring alternative assets (including hedge funds, real estate and private equity) to 35% of the total, with domestic and international equity accounting for another 45% of total assets.” While the move to increase investments in hedge funds, real estate, and private equity could result in a major reduction of endowment wealth, Moody’s often shows a preference for this type of investment strategy.

Not only do the bond raters want the UC to invest in volatile assets, but they also encourage the university to take on even more debt: “With expendable financial resources covering pro-forma debt by 0.8 times (resources as of end of FY2009 and debt as of current issue), and debt service consuming 4.1% of operating expenses, we believe the University retains additional debt capacity at the current rating level.” Like a pusher telling a junkie that he should increase his dosage, Moody’s neutral report appears to promote the very things that helped to cause the global fiscal meltdown: high debt, easy credit, and creative accounting.

In a recent New York Times article, “The Long Haul Degree,” Patricia Cohen outlines many of the hard realities facing graduate students in Humanities programs at American research universities. She begins by pointing to the huge amount of time it takes doctoral students to complete their degrees: “Medical students receive an M.D. in four. But for graduate students in the humanities, it takes, on average, more than nine years to complete a degree.” Not only does it take these students a very long time to complete their studies, but Cohen adds that, “they could spend another nine years, or more, looking for a tenure-track teaching job at a college or university — without ever finding one.”

This is what we call the job crisis in the humanities: it takes students along time to get their degrees, and when they do earn their doctorates, the reward is often unemployment or underemployment. Some of the causes for this sorry state are discussed by Cohen: “Doctoral students are expected not only to master a wide swath of material to pass general and oral exams, but to produce a nearly book-length dissertation of original research that, depending on the subject, may ultimately sit on a shelf as undisturbed as the Epsom salts at the back of the medicine chest. These students must earn their keep by patching together a mix of grants and wages for helping to teach undergraduate courses — a job that eats into research time.” In other words, students are not only supposed to produce original work, but they also have to support their studies by teaching undergrad courses.

One of the results of the system that forces grad students to spend most of their time instructing undergraduates is that many doctoral students never actually complete their degrees, and the ones who do finish often end up with large loans and no job prospects: “About half who enter a humanities doctoral program drop out along the way. The average student receiving a Ph.D. today is 35 years old, $23,000 in debt and facing a historically bad job market. Adjunct jobs — with year-to-year contracts, no benefits and no security — may be the only option.”

One thing that Cohen does not examine is the fact that because so many grad students are teaching undergraduate courses, there is not reason to hire professors with doctorates to teach undergrad classes. In other terms, grad students unknowingly produce their own future unemployment.

One would think that universities would realize that the current system exploits grad students and trains them for jobs that don’t exist, but instead of reducing the number of doctoral students and increasing the number of professors with PhDs, universities are continuing to hire people off of the tenure track as they accept more graduate students into their doctoral programs.

Making matters worse is the fact that the high-enrollment classes taught in humanities programs are often staffed by part-time faculty and graduate students, and so while the number of students in these courses continues to increase, the large number of enrollees does not result in a need to hire more professors: “At the same time, the practice of hiring off-tenure teachers is growing. According to a new survey of humanities departments by the American Academy of Arts and Sciences, half of the faculty members in English and foreign languages — more than any other department — are not on a tenure track. Part of the reason for the large number is that freshman composition classes, which are often required, are taught by those departments, and adjuncts.” Since non-tenured faculty and grad students are teaching the required courses with the highest student demand, it is clear that the same universities that are training doctoral students are engaging in hiring practices designed to reduce the need to hire people with doctorates.

As absurd as it seems, the institutions that are in charge of credentialing new Ph.Ds argue on a daily basis that these degrees are not needed. Since universities continue to place in the classroom people without degrees, expertise, or experience, they send a clear message to students, administrators, and stakeholders that one of the central products of a research university, doctoral degrees, is worthless.

It is also important to stress that it costs at least four times more to educate a graduate student than an undergraduate student because grad students are taught in small classes staffed by the highest-paid professors. Moreover, the use of grad students to teach the small sections attached to large lecture classes actually inflates the cost of undergraduate instruction. In short, grad students are very costly to universities, and yet, these institutions continue to fight for more graduate students. We must ask why universities appear to be working against the best interests of their students and their own bottom-line.

One answer that Cohen provides for the continued desire to recruit more grad students in the humanities is that these students allow professors to concentrate on their favorite areas of research: “If enrollment drops too low, there may not be enough students to justify courses in specialized areas.” According to this logic, if humanities programs reduce their number of doctoral students, there will not be enough students for the graduate faculty to teach. For example, if you do not continue to bring in more doctoral students interested in studying Chaucer, the Chaucer specialist will have nothing to do.
Of course, the Chaucer specialist could teach an undergrad writing course or general literature course, but then the professor would not be concentrating on his or her area of research. Universities thus have to accept people into their graduate programs in order to give the research professors students to teach.

Cohen argues that the other major reason for universities desiring to bring in more graduate students in fields that provide a clear path to underemployment is that doctoral students bring prestige: “Doctoral programs bring prestige to a university and help retain faculty members who want to mentor the next generation of scholars. They also provide the staff for courses offered to first- and second-year undergraduates — a task many tenured faculty members resist.” It turns out that the education of graduate students has virtually nothing to do with the students or their education; instead, departments want to increase their prestige by accepting students with high GRE scores and stellar past academic records. Furthermore, professors need the grad students to teach the undergrad courses the professors do not want to teach.

It should be clear at this point that this system is totally messed up, but how can we fix this complicated problem? One possible solution is to restrict the number of courses graduate students can teach, while we fund students out of grants. This regulation might not only improve the quality of undergraduate instruction, but it also could help to provide jobs for students once they earn their doctorates.

Another way of saving money and improving the quality of instruction is to accept more undergraduates and reduce the number of new graduate students. Since it costs so much more to educate grad students compared to undergrads, it makes sense to reverse this current tendency of replacing undergrad enrollments with graduate enrollments.

To make these graduate programs more accountable and transparent, they should be ranked on how many of their students complete their degrees and how long it takes to earn their doctorates. Ranking agencies and guide books should also look at how many doctoral students get jobs in their chosen field and how much debt that have when they graduate.

While the University of California is a huge system, and many things can go wrong and right, there does appear to be an anti-employee culture that is evident in the large legal bills that the UC funds each month. Not only does the UC system has its own army of lawyers, but it also contracts out a great deal of legal work, and during these times of fiscal “crisis,” we must look at how the university spends its money.

In the minutes to the January 2010 Regents Meeting, you find the following listings of NEW LITIGATION AND ARBITRATION PROCEEDINGS for the two-moth period of 10/13/09 – 12/14/09:

Nature of Dispute Alleged by Plaintiff Employment Cases
Discrimination (sexual orientation), harassment, and retaliation
Discrimination (age), wrongful termination, and retaliation, withholding of wages
Retaliation, violation of due process and negligence
Breach of contract
Discrimination (sex), harassment, retaliation and constructive termination
Wrongful termination in violation of public policy
Violations of whistleblower protection act, Labor Code, and due process rights
Retaliation
Discrimination (age), wrongful termination, retaliation
Wrongful termination, whistleblower, health and safety violation

Professional Liability Cases
Medical malpractice, loss of consortium
Wrongful death, medical negligence, elder abuse
Medical malpractice, wrongful death Medical malpractice
Medical negligence Medical malpractice
Medical malpractice, general negligence, intentional tort, and loss of consortium
Medical malpractice
Medical negligence and loss of consortium Professional and general negligence
Negligence and battery
Personal injury, medical malpractice
Medical negligence, lack of informed consent
Professional and medical negligence
Medical malpractice
Personal injury, general negligence
Medical malpractice, negligent hiring supervision and retention
Medical malpractice and loss of consortium

Other Cases
Dangerous property liability, negligence
Violation of due process under Fifth and Fourteenth Amendments
Class action for alleged disclosure of confidential medical information
Negligence, violations of statute and right to privacy, battery, emotional distress
Breach of agreement, unjust enrichment, and recovery of money paid (lawsuit filed on behalf of the Regents against Angelika Dimoka and Paul Pavlou)
Breach of contract, conversion, money had and received

Public Employment Relations Board (“PERB”) Unfair Practices Alleged by Charging Party
University engaged in bad faith bargaining regarding temporary layoffs. Santa Cruz Office of Labor Relations indicates the issues have been resolved and the temporary layoffs rescinded, and dismissal is pending.

University retaliated against a Clerical and Allied Services Bargaining Unit employee for exercising her Weingarten Rights and failed to provide notice of placement of the employee on investigatory leave.

University enacted unilateral changes to the binding terms of its agreement with the union and engaged in direct dealing with represented employees prior to the adoption
of the Regents’ furlough/salary reduction plan.

University engaged in bad faith bargaining - union to enter into the furlough program agreement. University failed to give union notice prior to laying off represented employee and also failed to discuss layoff alternatives.

University engaged in direct dealing with represented employees prior to its adoption of the Regents’ furlough/salary reduction plan. Also, the University unilaterally and in bad
faith imposed unilateral changes that constituted a retaliatory rolling lockout and failed as required by the terms of its contract with the union, to mitigate or explore alternatives to the Plan prior to implementation.

University unilaterally changed its contract with the union by assigning unit work performed by an Administrative Analyst III in the clerical services unit to an employee
outside the unit. The University also retaliated against the same employee for performing union duties and attempted to interfere with the employee’s union rights through coercion of other union members.

University laid off a Computer Resource Specialist I in the technical services unit, in direct retaliation for his participation in protected union activities and altered the
status quo of the contract by attempting to reorganize the Information Technology Department without negotiating the changes prior to implementation.

University failed and refused to bargain specific aspects of the Regents’ furlough/salary reduction plan.

University violated the status quo by not providing notice or bargaining the involuntary
transfer of an administrative assistant to a newly-created position and retaliated against the employee for exercising his union rights.

UCB Supervisor refused to remove references to a senior museum scientist’s use of union
representation in a resolved grievance from the employee’s performance evaluation.

The main reason why UC faculty and employees should question the current claims concerning the underfunding of the pension plan and retiree healthcare is that these accounting predictions are based on a whole series of economic guesses. In order to determine the future funding and liability of the plan, the accountants have to look into the future and estimate how well the UC’s investments will do, who is going to retire, what salaries will look like down the road, the number of employees getting benefits, and the cost of healthcare premiums, among other major variables. In the recent past, the actuaries have been wrong on predicting most of these variables, and so while we should restart contributions, we should not be scared into accepting a high level of employee contributions, and we should stop the process of changing the benefits for present and future employees.

Currently, UC has over $35 billion in the pension plan, and last year, it paid out $1.5 billion. It was a huge mistake to stop contributions in 1990, and so it is good to go with the current policy of 4% from the employer and 2% from the employee; however, it is unclear if we need to contribute much more, and dire predictions based on projected liabilities do not help anyone. What we should be arguing for is shared governance over the investments.

In response to the recent study done by a couple of Stanford grad students about CalPERS, CalSTIRS, and UCRP, CalPERS has made the following observations: 1) even with the recent stock losses, over the long haul, the plans have all averaged higher than the 7.5% rate of return, and the Stanford model uses a very low rate of 4.4%; 2) all of the future predictions are tainted by the current low interest rate that is sure to go up, which would help increase income from the bonds that are in UCRP; 3) most pension plans remain healthy by being funded at 80%; UCRP is still at 95%.

As Dean Baker has written, people are simply exaggerating the bad health of the Californian pension plans in order call for their abolition. In this context, it is strange than no one in the UC is calling for the capping of special executive pension payouts. Did you know that if Yudof stays for at least 4 years, he is guaranteed a yearly pension of over $250,000. Capping pension payouts at some level, like $125,000, as many other plans do, would save a ton of money.

In an article for the Huffington Post, I show that a new accounting rule from 2004 might have been a Republican ploy to bust unions, pensions, and public institutions by having them declare on their books, all of their future healthcare liability. The UC faculty and staff should not buy into this conservative attempt to undermine our interests.