Wednesday, June 19

If approved, proposed budget would increase state funding to UC system by $90 million

The University of California could see an ongoing increase of $90 million in state funding if Gov. Jerry Brown’s budget proposal, released last week, is enacted.

The increase in funding is contingent upon a tax measure proposed by Brown last month. If passed by voters in November, the measure would enact an income tax surcharge on the state’s highest earners and a half-cent sales tax boost, generating about $7 billion in extra revenue for the state’s education and public safety programs, according to the governor’s office.

If the proposed revenue boosts are not passed, the UC will face an additional $200 million “trigger” cut, Brown said in a press conference last week. Last month the state passed down a $100 million trigger cut to the UC.

The proposed tax hikes would have to clear several hurdles before becoming a reality.

Last year Brown pushed for a special election on a tax extension package to help avoid trigger cuts to higher education. The plan failed to pass the legislature by four votes.

His new measure would need more than 500,000 signatures to be placed on the ballot in November.

If the tax measure reaches the ballot, voters would have to pass the package of revenue hikes by a simple majority.

“We are pleased to see that the governor is making a move toward funding higher education but it is far too early to know what the UC’s budget will look like for the upcoming fiscal year,” said UC spokeswoman Dianne Klein.

Student Regent Alfredo Mireles said he is cautiously optimistic on the governor’s budget proposal and tax hike initiative.

“It’s much better than it could have been. What (the UC Board of Regents) can do is show our gratitude by supporting the governor’s tax measures, continue to make the case to the governor and the legislature on why we need the money,” Mireles said.

At this point, the UC Office of the President doesn’t know how they would handle the hypothetical trigger cut if the tax hikes aren’t enacted, Klein said.

Funding the retirement plan

The $90 million increase from the current year can also be used to help fund the struggling UC retirement plan, according to Brown’s budget proposal.

The UC retirement plan covers all UC employees who work at least half-time for a year or more. The plan provides monthly benefits for tens of thousands of recipients every year.

As of July, the retirement fund faced a shortfall of around $10 billion.

“We applaud … (the governor’s) recognition that, after a 20-year hiatus, the state has a responsibility to resume paying for a portion of retirement costs,” Patrick Lenz, UC vice president for budget and capital resources, said in a statement.

In 1990, the Regents decided to stop contributions from UC and employees’ salaries to the retirement plan after building up a considerable surplus, according to the 2010 Task Force Report on UC retirement. For 20 years, the university maintained the fund through profitable investments alone, according to the report.

But in 2007, the global economic downfall hurt university investments and the Regents decided to resume employer and employee contributions, Mireles said.

The state, however, continued to not pay into the plan, he said.

UC and employees started to pay a part of their paycheck into the fund in 2010. Since then, there have been two approved hikes to the contribution rates. By July 2013, UC contributions will rise to 12 percent and employees will be paying 6.5 percent of their salaries.

UC officials have been asking the state to contribute into the retirement plan for several years, Klein said.

“We’ve argued for many years that the state should pay their share of the pension plan as they do for California State University and community college employees,” Klein said.

California State University and community college employees’ retirement benefits are covered under the California Public Employees’ Retirement System, or CalPERS, which provides for most California state employees. The UC, however, operates on a different system for its employees.

Although the governor’s proposed budget addresses funding for the UC retirement plan, the $90 million increase is not restricted for the retirement plan or a formal contribution to the plan.

“Is the governor funding (the UC retirement) plan? Or is this just a base increase? I think it’s more of the latter,” said Steve Boilard, the managing principal analyst for education at the Legislative Analyst’s Office. “The overall theme for the UC is to grant the university more autonomy to determine what they do with their money.”

Mireles said the struggling retirement fund is an issue for students.

He said the increase in funds, which will likely be used to help fund the plan, may otherwise have gone to academics.

“Money from the UC’s base fund going into the retirement plan is money that doesn’t go into education, to classrooms, to adding sections,” Mireles said. “When you have a limited amount of resources, that’s just how it is.”

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