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Monday, September 25, 2017

L.A. Times: University Of California Is Handing Out Generous Pensions, And Students Are Paying The Price With Higher Tuition

University of California (2015)Los Angeles Times, UC Is Handing Out Generous Pensions, and Students Are Paying the Price With Higher Tuition:

As parents and students start writing checks for the first in-state tuition hike in seven years at the University of California, they hope the extra money will buy a better education.

But a big chunk of that new money — perhaps tens of millions of dollars — will go to pay for the faculty’s increasingly generous retirements.

Last year, more than 5,400 UC retirees received pensions over $100,000. Someone without a pension would need savings between $2 million and $3 million to guarantee a similar income in retirement.

The number of UC retirees collecting six-figure pensions has increased 60% since 2012, a Times analysis of university data shows. Nearly three dozen received pensions in excess of $300,000 last year, four times as many as in 2012. Among those joining the top echelon was former UC President Mark Yudof, who worked at the university for only seven years — including one year on paid sabbatical and another in which he taught one class per semester.

The average UC pension for people who retired after 30 years is $88,000, the data show.

The soaring outlays, generous salaries and the UC’s failure to contribute to the pension fund for two decades have left the retirement system deep in the red. Last year, there was a $15-billion gap between the amount on hand and the amount it owes to current and future retirees, according to the university’s most recent annual valuation. ...

UC’s pension problem, while not unique, is distinctly self-inflicted. In 1990, administrators there stopped making contributions for 20 years, even as their investments foundered, leaving a jaw-dropping bill for the next generation — which has now arrived. ...

The top 10 pension recipients in 2016 include nine scholars and scientists who spent decades at the university: doctors who taught at the medical schools and treated patients at the teaching hospitals, a Nobel Prize-winning cancer researcher and a physicist who oversaw America’s nuclear weapons stockpile.

The exception is Yudof, who receives a $357,000 pension after working only seven years. Under the standard formula — 2.5% of the highest salary times the number of years worked — Yudof’s pension would be just over $45,000 per year, according to data provided by the university.

But Yudof negotiated a separate, more lucrative retirement deal for himself when he left his job as chancellor of the University of Texas to become UC president in 2008. “That’s the way it works in the real world,” Yudof said in a recent interview with The Times.

The deal guaranteed him a $30,000 pension if he lasted a year. Two years would get him $60,000. It went up in similar increments until the seventh year, when it topped out at $350,000.

Yudof stepped down as president after five years, citing health reasons. Under the terms of his deal, his pension would have been $230,000. But he didn’t immediately leave the university payroll.

First, he collected his $546,000 president’s salary during a paid “sabbatical year” offered to former senior administrators so they can prepare to go back to teaching. The next year he continued to collect his salary while teaching one class per semester, bringing his tenure to seven years and securing the maximum $350,000 pension. In 2016 he got the standard 2% cost-of-living raise, resulting in his $357,000 pension.

Asked if he was worth all the money, Yudof said it would be more appropriate to ask the members of the university’s Board of Regents, who agreed to the deal. ...

As the university struggles to deal with the problem, Napolitano’s office has become a jealous guardian of pension information.

In December, the nonprofit California Policy Center sent a public records request to UC for an update of a 2014 spreadsheet listing pension payments to the university’s retirees. A school administrator responded with an email saying UC had provided the previous spreadsheet as a “courtesy” and was no longer willing to do so.

When the nonprofit pressed — the information is indisputably public under the law, and other California government agencies routinely provide pension data without delay — the administrator sent an email claiming that the employee who created the 2014 spreadsheet had since retired and nobody could find the query he had used to extract the information from a larger database.

“They lost the computer program? That’s not my problem,” said Craig P. Alexander, a Dana Point attorney representing the nonprofit. The university finally turned the pension data over in May, but only after the Alexander threatened to sue.

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

http://taxprof.typepad.com/taxprof_blog/2017/09/la-times-university-of-california-is-handing-out-generous-pensions-and-students-are-paying-the-price.html

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Comments

If the UCs were required to report the costs of their pensions using the accrual method, this would not be as much of a problem. As I understand it, however, they report these costs on the cash method. This means that they can attract faculty by promising very large future payments without showing any current hit against net revenues at all. This is not financially prudent.

Posted by: Theodore Seto | Sep 25, 2017 2:12:30 PM

And the kids on UC campus are all wound up about Milo speaking? Sheesh, talk about getting fleeced.

Posted by: Anon | Sep 25, 2017 9:03:04 PM

Social justice is easier when you're rich.

Posted by: mike livingston | Sep 26, 2017 4:04:18 AM

So let me get this straight. A group of highly trained people forego certain employment benefits (i.e. large salary now) to get benefit of future benefits (i.e. large pension), and now conservatives dont like the free market?

LOL, hypocrites

Posted by: Anon | Sep 26, 2017 9:38:07 AM

Next you're going to tell me that water is wet and that Obamacare is a house of cards.

Posted by: Anon | Sep 26, 2017 10:34:49 AM