State senator pushes UC to institute shared governance of employee pensions
By Joanne Hou
Sep. 26, 2007 10:12 pm
Two weeks ago, both the California Senate and California Assembly passed the Senate Concurrent Resolution 52, calling for the University of California to give workers shared governance of the UC’s pension plan.
Shared governance would allow UC employees who participate in the pension fund to share in the governing authority along with the regents to make decisions regarding the funds.
The resolution calls on the university to change its policies to allow for this joint governance, but it is not a binding resolution and cannot force these changes.
It is up to the UC Board of Regents to decide whether to change the governing structure of the pension plan, called the University of California Retirement Plan, to be in line with the resolution.
The regents are still discussing a course of action.
“We are evaluating what we need to do to be in line with the Senate Resolution,” said Nicole Savickas, a spokeswoman for the UC Office of the President.
At present, the regents are the only officials who have authority over decisions regarding the pension plan. Employees of the UC who participate in the plan do not have any governing power.
“We hope that the regents would grant shared governance of the pension plan so that workers and retirees would have a real say (in the pension plan),” said Adam Keigwin, a spokesman for State Sen. Leland Yee (D-San Francisco/San Mateo), sponsor of resolution.
Student Regent D’Artagnan Scorza said the UC is a consensus organization, which makes decisions through mutual agreement instead of unilateral action.
“The UC is founded on the principle of shared governance. … We must utilize consensus to best serve the needs of the University of California,” Scorza said.
Other pension plans such as the pension plans of the California State University system and the California community college system have members of their respective employees participate in the decision-making of the pension plans, according to a statement from Yee’s office.
“Every other state agency has shared governance of the pension plans. We don’t see why UC workers shouldn’t have a voice (in their plan),” Keigwin said.
Savickas said, however, that the UC does take into consideration the opinions of the UC employees by having employees sit on the University of California Retirement System Advisory Board.
The advisory board advises and brings ideas to the president of the university regarding pension plans.
Two of the nine members on the advisory board are UC employees.
The other members include four members appointed by the president of the university, the treasurer of the regents, and two faculty members elected by the UC-wide Academic Senate.
According to the resolution, retirement plans with shared governance are “generally financially healthier and have proven to be far more secure than unilaterally managed plans.”
Yee’s office contends that under their unilateral management of the pension fund, the regents have made decisions that have harmed it financially.
Keigwin said that about 10 years ago, the regents contracted the day-to-day management of the pension fund from financial professionals employed by the UC to outside managers and since then the returns of the fund has suffered.
In 1995, when the fund was managed in-house, the investment returns for the fund was 26.2 percent, but in 2000, after the management went to outside parties, the return was 12.8 percent, Keigwin said.
However, Savickas maintains that the UC pension system is strong, with a return in the past fiscal year of 19.1 percent.
Other state employee pension plans such as the California Public Employees’ Retirement System had a 19.1 percent return, and the California State Teachers’ Retirement System had a return of 21 percent.
“Our pension plan is considered a gold standard by most,” Savickas said.
Yee’s office also said that when the UC contracted the management of the fund to outside sources, the new managers and consultants of the fund had connections to the regents.
Keigwin said that some of these outside consultants had been family, friends and business partners of two members of the investment advisory committee that advises the regents on investment decisions. This is different from the UC Retirement System Advisory Board.
The statement from Yee’s office cited a San Francisco Chronicle article, which said that an investment advisory committee member’s former business partner and daughter managed hundreds of millions of UC funds. Another member of the board also had ties to companies that were given management duties for the funds.
Savickas said there is no conflict of interest in these instances because the investment advisory committee has no authority to select external managers of the funds. The regents are the ones who make that decision.
Keigwin said that having shared governance would help to reduce these possible conflict of interest issues because the employees would also have a say in these decisions.
If the regents do not change the governing structure of the pension plan, Keigwin said that a there could a campaign to alter the constitution of the UC to allow California voters to decide on shared governance. This campaign could come in January when the California legislature reconvenes.
Still, Keigwin said a campaign is costly and not preferable if the regents would take action on their own.
“It’s in everyone’s best interest to avoid doing (a campaign),” Keigwin said.