Last week, University of California President Janet Napolitano (pictured) and UC regents generated positive headlines with their decision to reduce tuition for in-state students – the first cut since 1999-2000 – as well as their success in getting a 4 percent funding hike from the state Legislature and Gov. Jerry Brown.

The announcement that total annual in-state charges would drop from $12,630 to $12,370 – a 0.5 percent reduction – was framed as reflecting both UC’s relative fiscal health and a truce between UC leaders and UC student activists.

Nevertheless, the UC system continues to have a murky financial future, with billions in unmet infrastructure needs and underfunded pension liabilities. And while some past UC presidents worked hard to establish strong relationships with other state leaders, Napolitano appears to have relatively few allies in the state Capitol, with many lawmakers still upset with the former Arizona governor over her office’s interference with an audit the Legislature had ordered. As for the governor, he has complained for years that UC is too quick to seek higher state aid or higher tuition and has never engaged in meaningful belt-tightening.

Against this backdrop, chances for a major increase in state funding seems a long shot – though that may change with a new governor in January.

Yet the need for such increased aid – or the billions that could be raised with future tuition hikes – is plain, many UC leaders believe.

In January, UC Berkeley Chancellor Carol Christ made a presentation to regents that amounted to a plea for much more funding. Christ said her campus had a $700 million backlog of needed maintenance alone. The San Francisco Chronicle reported that every campus except for recently opened UC Merced had at least $100 million in maintenance needs, topped by Berkeley, followed by UCLA at $677 million.

20 years of not funding pensions backfires

But Christ and other UC leaders face an even more daunting challenge in paying for pensions, especially given the coming wave of retirements in UC’s aging workforce. That’s because UC’s estimated $15 billion in unfunded pension liabilities is far bigger than it would have been were it not for the decision of UC officials to contribute nothing to the pension fund from 1990 to 2010.

UC’s pension system has more than 80 percent in projected funding for its long-term liabilities and is in significantly better shape than CalPERS or CalSTRS. Nonetheless, a September analysis by the Los Angeles Times noted how the 20-year pension payment holiday had backfired on UC. The analysis detailed how the steadily growing cost of retirement benefits was reducing funds available for “core fund” basic expenses. As of 2016, more than 5,400 retirees from the UC system made pensions of $100,000 or more.

Under pressure from the Brown administration, Napolitano’s office has taken some actions to rein in pension costs. UC employees hired beginning in July 2016 have a cap on how much of their final pay can be used to determine pensions. Earlier this year, regents also approved a plan to allow new hires to choose between having a defined-benefit pension or a 401(k)-style account.

But the plan’s fate is unclear after it faced strong objections from Assemblyman Kevin McCarty, D-Sacramento, and government unions.

Brown wants to force officials at each of the CCC’s 114 campuses to prioritize their 2.1 million students completing their degrees and vocational certificates. He hopes to do this by tying a portion of state funding – perhaps as much as $3 billion, or 20 percent, of the system budget – both to student performance and to campuses’ ability to help the progress of students who come from poor families or have other life obstacles. Funding has historically been driven primarily by the much simpler metric of total enrollment.

The twist that has upset many community college officials, however, is that the governor wants the new funding formula in place in a little more than two months – on July 1, at the start of the next fiscal year. Given the history of some community colleges doing much worse on student “completion” than others, this could mean they face immediate budget cuts. This would play havoc with planning and affect students adversely, college officials have warned.

The EdSource website reported last week that two lawmakers with key roles in community college budgeting appear to share the fear that the Brown administration’s plan is being prematurely fast-tracked. State Sen. Anthony J. Portantino, D-La Cañada Flintridge, who chairs an education budget subcommittee, said campuses had raised “valid concerns.” Assemblyman Kevin D-McCarty, D-Sacramento, who chairs the education budget subcommittee in his chamber, was even more bluntly skeptical, saying if lawmakers don’t like what they hear from the governor’s office and CCC in coming weeks, they may “nix the plan altogether.”

LAO: Past efforts to speed up graduation a flop

But while Brown’s hope for a quick adoption of his reforms may be stymied, his hope for change may pay off after he leaves office. That’s because momentum has been building for years behind the idea of expecting community colleges to do much more to prod students to meet their goals and move on. The administration of Gov. Arnold Schwarzenegger was also impatient with CCC’s record in his final years in office. Past legislative leaders ordered the creation of a “Student Success” task force and backed other initiatives to improve degree and certificate completion rates.

But a February report by the nonpartisan, respected Legislative Analyst’s Office found little evidence this approach was working.

“Using the most recent data available, community colleges have made little progress with respect to program completion,” the LAO wrote. “The six‑year completion rate for the most recent cohort (students who began college in 2010‑11) is 48 percent, 1 percentage point lower than the completion rate for the 2006‑07 cohort (49 percent).”

These numbers may disappoint California elected officials, but many states would like to have them. In December, the National Student Clearinghouse released its annual report on college completion rates. It found that over the most recent six-year span for which information was available, 38 percent of students at two-year colleges who had begun their studies in 2011 completed a degree or certificate.

“Lower-income students … are able to many times, through our great programs in California, get help to pay for tuition. But they’re still graduating with a tremendous amount of debt,” said Assemblyman Kevin McCarty, D-Sacramento.

The plan, unveiled earlier this month, would cover not just tuition but living expenses as well, making it different from other similar proposals in states like New York.

“California is taking the boldest step in the nation for making college debt-free,” Assembly Speaker Anthony Rendon, D-Paramount, said in a recent press conference.

The cost for the program would come at a price tag of $1.6 billion per year, phased in over five years, and would be paid for using money from the state’s General Fund, lawmakers say.

Proponents say existing tax revenues will cover the cost, but other projections to provide universal college came in at a much higher cost of $3.3 billion annually.

Some lawmakers are skeptical of the effectiveness of the plan, especially as California confronts a wide range of other issues like infrastructure and entitlement spending.

“I think it’s well intentioned,” Republican Assemblyman Rocky Chavez said of the plan. “But I don’t think it recognizes the economic reality or really addresses the challenges we have to address.”

Additionally, the plan comes at a time when the effectiveness of Cal State schools is being called into question due to poor graduation rates.

For example, under 20 percent of full-time CSU freshmen graduate in four years, much less than the 34 percent national average for public universities.

The “Degrees Not Debt” program would affect around 400,000 students at UC and Cal State institutions.

It’s just one of over a dozen student-aid related bills already proposed in Sacramento this year alone to offset the cost of college, as the average student loan debt per graduate in the Golden State is $22,191.

For example, Assembly Democrats last month pushed forward a plan that would grant in-state tuition for individuals in the state as refugees.

Currently, around 60 percent of Cal State students and about half of University of California and community college students already have their tuition fully covered by existing grants and aid programs.

Student aid and college reform has come into increasing focus, partly spurred by former Democratic Bernie Sanders’ push to make all at public universities tuition-free.

The perceived retaliation came two months after the West Covina Democrat was asked to step down by the bill’s sponsor amid domestic violence allegations (that he’s denied) surfaced and after being placed under a temporary restraining order from his wife.

Background

The bill, SB1166, was a priority of the Legislative Women’s Caucus and especially its chairwoman, Sen. Hannah-Beth Jackson, who had called for Hernández to step down along with other members of the women’s caucus.

The bill previously passed three Senate committees and the Senate floor along party lines, making it a measure widely supported by Democrats.

Outside the Capitol, it was supported by women’s rights activists like Sandra Fluke, who made national news in 2012 after being called a “slut” and “prostitute” by Rush Limbaugh for advocating for women’s access to birth control at a Congressional hearing while a law student at Georgetown University.

Join me & my fellow #StrongerCA coalition mbrs to urge @Roger_Hernandez stand w/#CA families & supprt @SenHannahBeth #SB1166 #NewParentLeave

— Sandra Fluke (@SandraFluke) June 22, 2016

Another group, the Equal Rights Advocates, which describes themselves as “civil rights champions, fighting since 1974 to expand and protect the opportunities of all women and girls,” also urged support earlier in the day.

.@Roger_Hernandez we urge your 'aye' vote on #SB1166 in Assm. Labor today! All new parents & children need bonding time. #StrongerCA

— EqualRightsAdvocates (@EqualRightsAdv) June 22, 2016

Abstain = No

There were other liberal activists and groups tweeting support, but when the bill came up for a vote in the Assembly Labor and Employment Committee, four of the seven members abstained from voting, including Hernández, the chairman.

Bill was priority of@CaWomensCaucus Jackson had called on committee chair @Roger_Hernandez to step down following domestic abuse accusations

— Katie Orr (@1KatieOrr) June 22, 2016

Hernandez gave no indication at the hearing as to why he abstained from voting, and his office didn’t immediately respond to requests for comment later in the day from CalWatchdog.

.@Roger_Hernandez did not comment on the bill or explain way he abstained during committee hearing.

— Katie Orr (@1KatieOrr) June 22, 2016

How others “voted”

The other members who abstained were Democratic Assemblymen Kansen Chu of San Jose, Patrick O’Donnell of Long Beach and Eric Linder, a Republican from Corona.

Chu and O’Donnell’s offices did not immediately respond to requests for comment from CalWatchdog. A spokesman for Linder told CalWatchdog that Linder supported expanding family leave and the main thrust of the bill, but had concerns over certain provisions.

Democrats Tony Thurmond of Richmond and Kevin McCarty of Sacramento voted in favor of the measure, while Republican Jim Patterson of Fresno voted against. 

Hmm. An all-male committee kills a bill that was priority of the women's caucus. #SB1166 @1KatieOrr @SenHannahBeth

— Laurel Rosenhall (@LaurelRosenhall) June 22, 2016

.@Roger_Hernandez, abstained on #SB1166, preserving the right for employers to threaten new parents with termination if they take #paidleave

— jenya cassidy (@oneunionmom) June 23, 2016

Since the domestic violence allegations surfaced, Speaker Anthony Rendon, D-Paramount, has chosen not to take action against Hernández, including removing him from the Labor and Employment chairmanship. Rendon did not immediately respond to requests for comment about the hearing. 

Allegations

Hernández’s wife, Baldwin Park City Councilmember Susan Rubio, previously accused him of assaulting her 20 times over a three-year period. In divorce court last month, Rubio detailed eight alleged incidents that included being choked with a belt, being beat with a broom while on the ground and being threatened with a knife after having been accused of an affair. 

No charges have been filed against Hernández.

Hernández is termed out of the Assembly. He had hoped to win a seat in Congress held by fellow-Democrat Grace Napolitano, but failed to advance from the primary. Hernández recently blamed his primary failure on Rubio. 

Past allegations

Hernández has been accused of wrongdoing before. In 2012, an ex-girlfriend accused him of domestic violence, although charges were never filed due to insufficient evidence. 

That same year, Hernández was arrested for drunk driving in a state vehicle, but was acquitted by a jury on one charge, while the jury was hung on another. 

And in 2015, allegations of political money laundering against Hernández were dropped by the Fair Political Practices Commission after two key witnesses were unable to testify — one had serious medical issues while the other had passed away. 

Official Portrait – Chancellor Linda Katehi | Flickr, courtesy of UC Davis

Two state lawmakers took to Twitter on Thursday and joined the growing chorus of Democratic legislators who are calling for the resignation of UC Davis Chancellor Linda P.B. Katehi after a series of unflattering stories by The Sacramento Bee.

On Wednesday, The Sacramento Bee reported that the university paid consultants at least $175,000 to scrub the Internet of negative postings about the pepper-spraying of students in 2011, in an effort to improve the school’s and the chancellor’s reputations.

The Bee also reported that between 2009 and 2015, the school’s strategic communications budget increased from $2.93 million to $5.47 million.

In response, Democratic Assemblymembers Freddie Rodriguez of Pomona and Mike Gatto of Los Angeles took to Twitter to condemn Katehi and demand her resignation.

.@ucdavis don't spend millions to cover up a bad reputation. Invest in students. Time for Katehi to resign. https://t.co/Fodn4fNV7V

— Freddie Rodriguez (@AsmRodriguez52) April 14, 2016

Spend millions on PR while student costs soar? It is time for Katehi to resign. @dianalambert

— Mike Gatto (@mikegatto) April 14, 2016

Other incidents

In March, it was reported that Katehi, who receives $424,360 annually as chancellor, earned an additional $420,000 between 2012 and 2014 as a board member for textbook publisher John Wiley & Sons.

Katehi had also came under fire in March for violating University of California policy by accepting a $70,000 per-year seat on the board of DeVry, a for-profit university.

Katehi has since stepped down from DeVry board and pledged $200,000 in John Wiley & Sons stock to a scholarship fund. And she apologized.

But those actions weren’t enough and Democratic Assemblymembers Luis Alejo of Watsonville, Lorena Gonzalez of San Diego, Kevin McCarty of Sacramento and Evan Low of Campbell had called for her resignation, who Gatto and Rodriguez have now joined.

In Katehi’s defense

UC Davis spokesperson Dana Topousis would not say whether Katehi intended to step down (which likely means the answer is “no”). In a statement responding to only the most recent article from The Sacramento Bee, Topousis defended the overall cost of communications.

Here is the entire statement:

“Communicating the value of UC Davis is an essential element of our campus’s education, research, and larger public service mission. Increased investment in social media and communications strategy has heightened the profile of the university to good effect.

“As part of this overall communications strategy, it is important that the excellent work underway at UC Davis with respect to educating the next generation of students, pursuing groundbreaking research, and providing important services to the State is not lost during a campus crisis, including the crisis that ensued following the extremely regrettable incident when police pepper-sprayed student protesters in 2011. Communication efforts during this time were part of the campus’s strategic communication strategy. In fact, one of the main objectives during this time was to train staff on how to effectively use digital media to improve engagement with our stakeholders.

“Communicating the value of UC Davis is among the many reasons why our campus was able to increase its endowment to $1 billion last year, garner more than $700 million in research grants, and attract the highest caliber of students and faculty from around the country, with a record number of student applications this year.

“Most of the growth in the communications budget is tied to raising the visibility of our College of Agricultural and Environmental Sciences and the School of Veterinary Medicine, both rated the best in the nation.

“In a 2014 Chronicle of Higher Education Report titled, “Higher Ed Marketing Comes of Age,” the mean amount that universities spend on marketing was reported as $3.7 million, with the highest at $25 million. We believe UC Davis compares favorably with other institutions of higher learning. Communications spending represents a small fraction of the $4.3 billion operating budget of UC Davis.”

“Brown wants to combine three state-funded early education programs, strip their requirements and let each local school district decide how to best spend the money,” Capital Public Radio reported. “But there’s a catch: districts must prioritize low-income and at-risk four-year-olds.”

Michael Cohen, Brown’s finance director, told CPR that negotiations over the details will happen at the right time. “It’s important to set up the structure and get consensus on what the program will look like,” he said. “And then at that point, it will become an annual budget decision about what amount of funding makes sense.”

Continued conflict

The disagreement deepens a conflict that intensified among California Democrats late last year. In October, Brown gave his left wing fits when he shot down a big preschool bill that had even drawn support from some Sacramento Republicans. “The Preschool for All Act (AB47), authored by Assemblyman Kevin McCarty, D-Sacramento, passed with bipartisan support, but failed to get backing from Brown,” as EdSource reported at the time. “The bill would have set a deadline of June 30, 2018 for granting all low-income 4-year-olds access to transitional kindergarten or state preschool. It was meant to firm up a promise made in last year’s legislation (SB837) that set the eventual goal of providing pre-kindergarten schooling for all low-income 4-year-olds. Because of that previous commitment, Brown said in his veto message that the bill was unnecessary and that future preschool funding should be addressed in the budget-setting process.”

Contrary to Brown’s wishes, the bill merely presumed that future funding would materialize in the years to come. To his irritation, estimates of its total cost “varied greatly, ranging between $147 million and $240 million, depending on how many children are placed in full-day vs. half-day programs,” as EdSource added.

A two-front battle

But Brown’s adversaries got their revenge when he released his latest budget. As the Washington Post reported, Chris Hoene, executive director of the California Budget & Policy Center called the budget a “missed opportunity to use the state’s strong revenues to boost key public investments that help individuals and families advance, such as child care and preschool, welfare-to-work services, affordable housing, and higher education.” At the same time, the Post noted, the California branch of the Children’s Defense Fund said Brown was “using the threat of future recession to justify not making critical investments of our most vulnerable children today.”

The governor’s block grant proposal, which would allocate over a billion and a half dollars to early learning, aggrieved activists who have demanded that the state use its recent surpluses to restore education spending to pre-Great Recession levels. “During the recession the state cut early education by over $1 billion, which amounted to almost 100,000 lost preschool seats. In recent budget years some of those cuts have been restored, but spending on early care is nowhere near 2008 levels when the budget was about $3.2 billion,” as Southern California Public Radio noted.

Meanwhile, however, Brown also incurred the wrath of education reformers, including some fellow Democrats, who have grown increasingly frustrated with the inability of the state’s teachers unions to deliver a satisfactory level of education to all students enrolled in public schools. “As Democrats pull back from holding educators accountable for results, they risk alienating old allies as well,” UC Berkeley education professor Bruce Fuller wrote in the Sacramento Bee. “California parents lost a tool this month when Gov. Jerry Brown trashed a well-known achievement index, pleasing union chiefs while infuriating civil rights advocates who can no longer pinpoint listless campuses.”

However, the Legislative Analyst’s Office surveyed 50 school districts around the state, including the 11 largest, and warned in a January report that not one had proper safeguards to prevent diversion of funds. In Los Angeles Unified, among other districts, the local teachers’ union last summer pointed specifically to new, incoming LCFF dollars as a kitty to tap for pay raises.

In coming months, this issue is likely to emerge as a point of contention in Sacramento because of concerns raised by the California Legislative Black Caucus about State Board of Education rules governing how LCFF funds are used. Here are three of the caucus’ main points:

— Any authority for the use of supplemental or concentration grants to schoolwide and districtwide expenditures must clearly link the services to demonstrated effectiveness in increasing student achievement and closing achievement gaps, and demonstrate that the expenditures are proven effective for “concentrations” of unduplicated children in schools in the district where concentrations exist.

— The terms “most effective” or “effective” should be defined, and at a minimum be tied to demonstrated effectiveness in meeting the “student achievement” goal and closing any persistent achievement gaps or deficiencies as it relates to the unduplicated students, and not just a generic reference to the state priority areas.

— The proposed regulations also do not provide the Board or county superintendents clear standards by which districts must explicitly demonstrate or explain, at a minimum, how expenditures of supplement and concentration grant funds will support services that will actually improve the academic achievement of unduplicated students or close persistent academic achievement gaps.

These concerns are from Assemblywoman Shirley Weber’s remarks to the State Board of Education at its Jan. 16 meeting on behalf of the Black Caucus.

Dan Walters wrote a Feb. 26 column in the Sacramento Bee noting that a “broad coalition of civil rights and education reform groups” had expressed worry about the LCFF not being implemented according to the goals cited in 2013 upon its passage. But this effort seems likely to be much stronger with the aid of state lawmakers.

The Black Caucus has 12 members — Weber, Reginald Byron Jones-Sawyer Sr., Sebastian Ridley-Thomas, Cheryl R. Brown, Autumn Burke, Jim Cooper, Mike Gipson, Christopher Holden, Kevin McCarty and Tony Thurmond in the Assembly, and Isadore Hall III and Holly J. Mitchell in the Senate.

According to the Los Angeles Times, “Neither the governor nor the California Legislature has the authority to force the UC regents to rescind the tuition increase.” However, the tuition hike is not included in the January budget proposal of Gov. Jerry Brown, himself also a regent, for fiscal year 2015-16, which begins on July 1.

Chaired by Assemblyman Kevin McCarty, D-Sacramento, the hearing flunked the UC system for wasteful and deceptive spending practices. A video of the hearing is here.

UC’s overall spending has grown by 40 percent to $26.9 billion since 2007, according to a report prepared for the Feb. 18 meeting. UC’s expenditures for instruction grew by 27 percent to $6.9 billion.

Yet during that same period:

• Undergraduate enrollment by California residents increased just 4 percent.
• Overall enrollment, including graduate and out-of-state students, increased 15 percent to more than 248,000 students.
• Inflation increased about 12 percent.
• The Higher Education Price Index, which measures the costs of goods and services typically purchased by U.S. colleges, increased about 18 percent.

Tuition increase

To help pay for UC’s spending increase, tuition increased 84 percent between 2007 and 2011. In Nov. 2014, the UC Board of Regents increased tuition and fees an additional 5 percent annually over the next five years to $15,564 from the current $12,192, pending legislative approval. The compounded increase is 28 percent.

Much of that tuition is supported by state taxpayers in the form of Cal Grants, which have increased from $295 million in 2007 to $882 million currently.

Some of the biggest cost drivers are employee salaries and benefits, retiree benefits and an increase in the hiring of administrators, according to the report:

• “The number of highly paid UC employees has grown significantly. Nearly 6,000 UC employees earn gross pay of $200,000 or more. [T]he number of these employees has grown by almost 100 percent during that period, and overall pay to this group amounted to $1.8 billion in 2013.
• “[A]dministrative staff, both in academics and other areas, grew far faster than faculty and faster than overall staff growth.” Tenure-track faculty increased just 3 percent from 2007-14, while senior management ballooned 32 percent and academic administrators grew by 19 percent.
• UC believes its faculty members are underpaid in comparison with other universities. On average, UC’s full professors receive $150,455, associate professors make $98,804 and assistant professors get $91,155.
• Pension benefits for more than 61,700 retirees and survivors total about $1.3 billion in the current year.
• Employee health care costs grew between 8 percent and 11 percent annually from 2007 to 2012. Cost increases have slowed since then, but are expected to rise 6 percent this year. In addition, UC spent more than $263 million on retiree health benefits in 2014. The current unfunded liability for retiree health care is $14 billion.

The UC spending boost, tuition hikes and requests for more state government funding have created pushback in Sacramento. Gov. Jerry Brown and Assembly Speaker Toni Atkins, D-San Diego, are both UC regents and voted against the tuition hikes in November.

Brown has offered a 4 percent increase ($119.5 million) in General Fund support for UC. But only if there is no tuition hike, out-of-state enrollment doesn’t increase and UC begins to rein in costs. Brown and UC President Janet Napolitano have been meeting to work out their differences, with a report expected at the UC Board of Regents‘ meeting March 17-19.

Focus on students

At the start of the subcommittee hearing, Atkins emphasized the need for UC to get its spending in order.

“I announced in December that we would be looking at every aspect of the University of California’s budget,” Atkins said. “Every dollar appropriated [should be] spent for the intended purpose and in the right way. We will have open public hearings that are student-focused, looking at how much it really costs to educate students at UC and how we maximize UC’s acceptance of California students. No Californian should be priced out of UC.

“The state must do our best to make higher education a top budget priority. UC must do its part and become more efficient, enroll more Californians and not place increases on the backs of California students. Today marks the start of an overdue journey – a journey that will continue throughout the budget process for as long as it takes.”

Most of the testimony from witnesses at the meeting, with the exception of the UC representative, contended UC is not spending its money wisely or transparently. Paul Golaszewski, principal fiscal and policy analyst at the Legislative Analyst’s Office, led off by taking issue with UC’s contention that its professors are underpaid.

“We looked at data on faculty recruitment and retention over a number of years and concluded that it appeared that at the salary levels and the compensation levels they were offering, they had a very low turnover rate for faculty, something like 2 percent a year,” Golaszewski said. “It appeared that they were still able to get the types of faculty that they needed.”

He told the committee that it’s hard to know exactly what UC professors are doing to earn their salaries.

“Faculty workload data is much more difficult to come by,” he said. “We do have data on the student-to-faculty ratio. But that’s not telling you how much faculty are teaching. The University doesn’t track that data, the federal government doesn’t track that data. So that’s an area you might want to drill down and get a better understanding moving on.”

Undergraduates

Charles Schwartz, a retired UC Berkeley physics professor, has spent years analyzing and critiquing UC’s budgeting practices. His analysis concludes that UC spends an average of $7,500 per student on undergraduate instruction.

“They are charging undergraduates [tuition that is] almost twice what it actually costs them to provide undergraduate education,” said Schwartz. “That doesn’t sound right. What we face here is not just a UC habit of bad accounting, but a longstanding disease that infects all universities in this country. And this grossly distorts any discussion about student tuition, which is a big thing. People talk about it, but nobody says the truth about what’s going on.

“If you do not acknowledge the cost of that, and go about hiding that cost on the tuition bills of undergrads, this is not right. The challenge I bring to you is what can be done about it. The first thing you have to do must be to resolve the conflict between what I say about UC’s cost structure and what the president’s [Napolitano’s] office says it is. You need to find out which one of us is to be believed.”

AFSCME research director

Claudia Preparata, research director for American Federation of State, County and Municipal Employees, Local 3299, accused UC of having bloated management and hiding its cost. AFSCME represents 22,000 workers at UC campuses and medical centers.

“While we support more state investment, it needs to be tied to improved transparency and accountability for how UC spends its money,” said Preparata. “This is particularly true for UC executive compensation and the growth of middle management, both of which have come at a real cost to our employees, students and taxpayers. The lack of transparency obscures a redirection of money that used to fund instruction and other student services to [now] increasingly funding six- to seven-figure salaries and a growing army of middle managers.

“The numbers speak for themselves. In 2008 just 293 UC employees received gross pay in excess of $400,000 at a total cost of just $160 million. By 2013, after years of budget cuts and tuition hikes, 793 employees received these paychecks at a total cost of $452 million. During the same time period the cost of extra perks that 250 of UC’s highest paid employees receive – including housing, car allowances, moving costs and cash bonuses – swelled from $17 million to $24 million per year.

“We welcome the Legislature’s increased scrutiny of UC spending alongside a reinvestment in higher education. We believe the scrutiny should not be limited to the explosion of executive compensation, middle management, but also extend to policy directives that have paved the way for decentralizing financial decision making, eliminating transparency and enabling campus administrators to squander scarce resources, including outsourcing of UC career jobs to the lowest bidder with no accountability.”

‘Complex budget’

“It’s a very, very complex budget,” said Nathan Brostrom, the UC executive vice chancellor-chief financial officer. He believes UC has been a good steward of its funds. He described how UC has improved its pension system, which had been neglected during the financial crisis.

“First, we started contributions and dramatically increased them,” Brostrom said. “In 2009-10 we contributed zero as a university. This last year we contributed $1.3 billion – 14 percent of our employer contributions. That also couples with 8 percent from each employee. Second, we introduced a new pension tier, which increased the retirement age from 50 to 55 and the maximum age factor from 60 to 65. Finally, we also undertook internal borrowing, $2.7 billion, which has helped leverage and shore up the pension system.

“As a result, we have achieved some good results. We are now 87 percent funded, up from the mid-70s just a couple years ago. But we are bearing this entirely on our own. We don’t get any funding from the state for it, unlike any other state agency or the Cal State system.”

Aggressive efforts have also been taken to rein in health-benefit costs, he said. A new system called UC Care “is centered around our own medical centers to curb the costs and keep it in house,” he said. “We also undertook family member eligibility verification. As a result, we were able to contain the costs to 2.3 percent last year and 5 percent this year. And we are forecasting a 5 percent annual increase going forward.”

UC is also ensuring the continuation of in-state enrollment growth of 1 percent per year, or about 2,200 students, at a cost of about $22 million annually, said Brostrom.

Student-faculty ratio

One area that the UC has fallen behind in, due to a lack of funding, is the student-faculty ratio, he said. The ratio has increased to 21:1 from about 19:1 a decade ago.

“We really have not been hiring to replace the faculty members who are either leaving or retiring,” he said. “So there’s a fairly sizable amount that needs to go into new faculty hires. We also want to reinvest in instructional infrastructure, classroom technology and other instructional equipment.”

Brostrom concluded his presentation on an upbeat note. “Something we are most proud of is we are a world class university with very hard working, high achieving students, but we remain accessible to all Californians,” he said. “That’s something we not only maintained but enhanced during the budget crisis.”

Asked about the progress of Brown and Napolitano’s committee meetings, Brostrom said, “It’s been a very constructive process. We’ve been able to hear from experts both within the university and across higher education on different models and ideas. I think there will be things that will be constructive and helpful for the university to serve more Californians. Things that may help us reduce the time to [complete a] degree or increase streamlining of transfers. They may not all lead to cost reductions, but will provide more access to UC for all Californians.”

During the public comments portion of the meeting, numerous students complained about the high cost of tuition. They said it’s forced some students to become homeless, skip meals or work longer hours at a job, shortchanging their studies.

The subcommittee’s next hearing in early March will go into more detail on the UC budget, said committee Chairman McCarty.

Last week, in the lawsuit targeting the arena deal orchestrated by Mayor Kevin Johnson, a former NBA star, Sacramento Superior Court Judge Eugene Balonon had issued a tentative order on the depositions. But he said he would deliberate a little longer on the case law before issuing a final ruling.

The judge's order issued Tuesday supports petitioners’ requests that they be allowed to depose McCarty and Rhinehart.

The plaintiffs are a group of citizens known as STOP (Sacramento Taxpayers Opposed to Pork) who are fighting the arena subsidy deal. According to the lawsuit filed by STOP, the city subsidy is actually $338 million — not the $258 million the city claims.

STOP has tried to get the details of the arena deal and purchase of the Sacramento Kings to be made public.

'Undiscoverable, privileged' information?

The attorney for the defendants insisted in court and in legal filings that the information the petitioners seek from McCarty and Rhinehart is “undiscoverable, privileged information.”

“The court disagrees,” wrote Judge Balanon. “Defendants have not met their burden in asserting this privilege as to Councilman McCarty.”

An order protecting Rhinehart from being deposed was also denied by the judge.

Deposition notices were sent to city officials in September. But according to the plaintiff's attorney, Patrick Soluri, the mayor and city officials have engaged in various avoidance tactics, including filing numerous objections to deposition notices, rolling demurrers, and refusing to comply with a court order directing them to reschedule a further hearing. Soluri said these were stall tactics designed solely to delay the inevitable discovery until after the city’s expected formal approval of the arena in April.

“Defendants request for a stay of all discovery pending a ruling on another demur is DENIED,” the judge wrote in Tuesday's ruling.

Following the hearing last Thursday, Sacramento Bee columnist Marcos Breton ridiculed the lawsuit.

“Did you hear about the 'secret deal' between the city of Sacramento and the Kings? It’s supposedly a backroom, off-the-books, under-the-radar, 'sweetener' that was cooked up secretly between city officials and Kings owners. It would secretly provide hidden subsidies from the city to the Kings for the purpose of secretly making the Kings owners financially whole for 'overpaying' to buy one of the worst franchises in the NBA.”

essay to buyToday Breton may be eating crow for lunch. He's openly championed the arena deal and mocked anyone opposed to it.

Councilman McCarty has consistently opposed the arena deal. He sent a letter to City Manager John Shirey and the news media last February, challenging the use of public money for an arena, questioning whether the city would get a return on its investment and asking who would be accountable if revenues don't meet expenses.

Ballot initiative on subsidy

Beyond the legal challenge to the city’s deal, there is also a ballot initiative petition to require a public vote on any public subsidy for a professional sports franchise.  The petition signatures are currently being counted.

However, it appears Mayor Johnson and the City Council will attempt to moot the result of that vote by pushing up their approvals of the arena prior to the June vote that would thereafter require voter approval.  Approval of the deal and related bond sales were previously scheduled for summer or fall 2014.

See recent CalWatchdog stories covering the Sacramento arena deal here, here, here  and here.

And go here for all of the CalWatchdog stories on the arena deal.