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Natalie Delgadillo: State needs to accept responsibility, contribute to UCRP

By Natalie Delgadillo

Jan. 16, 2015 10:35 am

For 20 years, the University of California and the state legislature folded their hands in their lap and slowly allowed one of the major financial structures of the University to sink into insolvency.

Rather incomprehensibly, both stopped all contributions to the University of California Retirement Plan in 1990, driving the UC’s vast pension plan, which covers more than 60,000 retired employees, into a hole it is still struggling to get out of.

While the UC continues to point fingers at the state and take little responsibility for the poor decision to stop contributions to the plan for so long, it has also begun to pony up and do its part. Borne of pure necessity, the UC is taking measures to ensure the solvency of UCRP, restarting contributions and borrowing money from itself to funnel into the pension plan.

In order to avoid creating a continued drain on University finances and prevent the potential collapse of the UC’s pension system, it’s time for the state to own its mistakes and fulfill its obligation to UCRP.

So far, the state has refused to do that – it has contributed very little to the ballooning debt since consistent contributions stopped in 1990, and has never come close to the University’s request for 30 percent of funding.

The legislature’s continuous refusal is particularly incomprehensible considering that there is dedicated state legislation meant to help pay down debts just like this one. In 2014, the state passed Proposition 2, which both augments the state’s rainy day fund and requires that until 2030, 50 percent of the money in the fund is used to pay down debts like state-level pension plans. Proposition 2 was heavily backed by Governor Jerry Brown, who has consistently advocated for the existence of a rainy day fund and for the reduction of state debts. And yet it seems that UCRP’s large unfunded liability is not a priority for Brown or the legislature.

Using funds from Prop 2 would allow the state to contribute its fair share to the UC’s pension program without putting undue strain on the general fund. Refusing even to begin a conversation about restarting state contributions to the plan when Prop 2’s existence so clearly lends itself to the reduction of this huge burden betrays the state’s unwillingness to fund UC expenditures even when their obligation is obvious.

Because of that unwillingness, the UC has had to try to fix a shared mistake all on its own. After several measures by the UC to boost UCRP’s account, the plan is now 87 percent funded, said Nathan Brostrom, the UC’s Chief Financial Officer. But even at that improved number, the pension plan remains $12 billion in the red.

The UC should not be left to grapple with that drastic lack of funding on its own. The state has consistently shirked its responsibility to fund the University of California Retirement Program in the same way it funds other state-level pension programs, including CalPERS, the California State University pension program. Their contention has been that the UC’s pension program is autonomous and the state has no control over the level of benefits it doles out.

But the logic here is flawed; the state helped fund UCRP before 1990. The UC and its pension plan were no less autonomous during the decades that the state made consistent contributions to UCRP, so using that fact as an excuse to keep funding at zero is nonsensical. The state’s reason for cutting funding in the first place had nothing to do with autonomy, but with the fact that UCRP was overfunded at that time and the state was going through a fiscal downturn.

Ultimately, the legislature should keep in mind one basic fact: public institutions and public debts are the responsibility of the state.

The University of California is a public institution. It owes a large public debt partially because the state stopped funding that debt for two decades. The UC has taken responsibility for its part in bringing that debt under control. But now, the state owes it to the University and the public at large to make its own contribution.

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