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UC to offset pension and healthcare costs with pay raise

By Emily Liu

April 2, 2014 2:38 a.m.

To mitigate rising pension and healthcare costs, University of California staff and faculty who are not represented by unions will receive a 3 percent pay raise starting July 1 this year, according to recent announcements by UC President Janet Napolitano.

Officials have acknowledged that the University’s pension liabilities pose the greatest threat to the system’s financial sustainability, a realization that prompted a series of pension reforms beginning in 2010. As pension costs rose for the University, both the UC and its employees were required to pay more into their pensions.

In contrast, UC employees who are represented by unions have negotiated contracts in the past year that include pay increases while maintaining a uniform pension system.

“Pension costs are always rising, especially as more employees from the baby boomer generation near retirement age, so we need to raise pay to offset these higher costs and maintain the competitiveness of pay at our University,” said Brooke Converse, a UC spokeswoman.

The UC also instituted the pay increase to offset increasing healthcare costs for employees. Recent changes to healthcare plans allow employees to pay less in some healthcare plans, but the plans would provide less coverage.

Some faculty said they don’t think the pay increase is enough to offset their growing pension costs.

“It’s kind of a symbolic increase,” said UCLA history professor Norton Wise. “(The) increase is nice but not really sufficient to address the problem.

The pay raise, which excludes resident doctors and unrepresented librarians, will cost the UC an additional $117.2 million.

Part of the cost will be covered by increased payments to the UC from state general funds, according to the University’s 2014-2015 budget of operations.The remaining cost will likely be covered by each campus, said UCLA spokesman Ricardo Vazquez in an email statement.

UCLA will decide which funding sources it will use to pay for its employee’s raises after the state budget is finalized, Vazquez added.

This will be the third pay increase for UC faculty and staff since the 2008 recession. Previously, UC faculty received a 3 percent pay raise in 2011 and a 2 percent pay raise in 2013.

Many faculty and staff said they welcome the increase because salaries at the UC have been low and pension contributions have been rising.

“We welcome any attempt to increase salaries across the system, and the presence of it acknowledges that UC salaries are significantly lower than that of its comparator institutions,” said James Vernon, a history professor at UC Berkeley and co-chair of the UC Berkeley Faculty Association, who has been a vocal advocate for faculty interests.

Partly due to decreased state funding in the past twelve years, pay at the UC is currently 11.2 percent lower than that of other similar institutions and will likely continue to remain low despite recent pay increases, according to the 2014 budget report.

“It’s important that while everybody supports and welcomes the pay rise, nobody should get carried away because we’re essentially just treading water,” Vernon said.

Faculty said they are also unhappy with the pension increases because they believe they affect various faculty groups differently.

Under a new two-tier pension system that came into effect last year, faculty are divided into two groups – those hired before and after July 2013. Faculty hired before July 2013 have seen their pension contribution rates rise from 0 percent in 2009 to its current 6.5 percent. Their contributions will rise further to 8 percent this upcoming July. Those hired after July 2013 instead have a fixed pension rate of 7 percent.

Together with the new minimum retirement age of 55 years old and the raised retirement age for maximum pension of 65 years old, faculty who have joined the UC since 2013 will pay lower pensions in the long term than faculty who have worked in the UC longer, said Dianne Klein, UC spokeswoman.

“The two-track pension system threatens to increase inequity between different faculty groups in ways we think are divisive and unhelpful,” Vernon said.

Lower salaries, coupled with rising pension contributions, have affected faculty retention rates and its ability to hire new faculty, Converse said. In recent years, more faculty have left the system than been recruited, and the University is struggling to retain high-quality faculty.

As state contributions to the University’s pension fund are still lacking, the University implemented all the changes to best manage liabilities, Klein said.

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