Archive for January, 2009

UC pensions: worker revolt

January 29, 2009

A labor union is launching an initiative drive to shift control of the UC retirement system, the third largest public pension system in the state, from the UC regents to a new 13-member board with a majority of employee representatives.

A spokesman said the union representing 20,000 UC hospital and service workers will announce the hiring of a political consultant for the initiative campaign next week. That’s also when UC regents are scheduled to consider a plan to have employees contribute to the pension system for the first time in 18 years.

The end of a remarkable contribution “holiday,“ in which neither UC nor its employees paid into the pension fund for nearly two decades, has triggered a smoldering battle since UC said three years ago that contributions will have to be restarted to bolster a very successful investment portfolio.

The American Federation of State, County and Municipal Employees, AFL-CIO Local 3299, contends that the University of California has the only public pension system in the state without direct employee representation. Two legislative attempts to give employees power in decisions about their pension system have failed.

The union says the regents switch in 2000 from in-house management of investments to “privatization” with expensive outside firms has resulted in poor performance. The union points to newspapers reports that several firms connected to regents were selected to manage some investments.

The UC administration says it has offered to strengthen employee representation on a pension advisory committee. And UC says the switch in investment management gave the pension system modern industry-standard practices and more earnings, not less.

“This is one of the best pension funds in the country,” said Paul Schwartz, a UC spokesman. “People would be hard pressed to find any other pension fund that has performed as well.”

UC also has warned that the union’s proposed board could “politicize” the pension system and make it difficult to offer benefit packages needed to attract top talent, harming UC education quality.

A provision in the state constitution gives unusual power and independence to the 26-member board of UC regents. The governor appoints 18 regents. Seven are holders of various offices, including the governor. One is a student chosen by the regents.

Article IX, Section 9 says “the university shall be entirely independent of all political and sectarian influence and kept free therefrom in the appointment of its regents and in the administration of its affairs.”

As with any proposed initiative, a big question is whether the sponsor has the ability to gather the signatures of enough registered voters to place the measure on the ballot — in this case 694,354 by a deadline of June 8.

“We are working on it,” said William Schlitz, political/communications director for AFSCME Local 3299. “It’s a constitutional amendment, so it’s a little higher threshold. We are confident we can get there.”

Schlitz said polling shows public support for the initiative, which is backed by the union’s international affiliate. He said the union plans to announce the hiring next week of a political consultant, possibly including a signature-gathering firm.

“It’s just a matter of time,” said Schlitz. “The workers will get shared governance. Whoever you talk to, Democrats or Republicans, they all think it should be done.”

Schlitz said the board proposed by the initiative is loosely modeled after the board that governs the giant California Public Employees Retirement System, which covers about half of all state and local government workers in California.

The new 13-member board created by the initiative would have three members appointed by the regents, three elected politicians (lieutenant governor, Assembly speaker, superintendent of public instruction), and seven employee members elected by their peers: one UC retiree, three UC faculty or staff members, one UC faculty member, one UC nonacademic staff member, and one UC union member.

The proposal to restart pension contributions was one of the reasons that 9,000 UC nurses represented by the California Nurses Association planned a one-day strike in 2005, later blocked by the courts.

The nurses said UC wanted them to begin contributing 8 percent of their salary to the pension fund. Now UC, delayed by years of state budget deficits, is considering restarting pension contributions with a scaled-down plan.

During the 18-year pension contribution holiday, UC has continued to require that employees put 2 percent of their salary into a 401(k)-style individual investment retirement plan, separate from pensions with a guaranteed monthly check.

The regents are scheduled to consider a proposal next Thursday that would, for most employees, shift the 2 percent employee 401(k) contribution to the pension fund. UC would contribute 4 percent of payroll to the pension fund.

But it’s far short of what the regents wanted. Their plan was to redirect the 2 percent contribution from employees, but with a hefty 9.5 percent contribution from UC costing the state $228 million in the first year.

The new state budget proposed by Gov. Arnold Schwarzenegger this month only contained $20 million for a UC pension contribution, enough for a 4 percent UC contribution in the final quarter of the new fiscal year beginning July 1.

So, the Regents are scheduled to consider a plan to restart pension contributions on or around April 15, 2010, for the last quarter of the fiscal year. After that, it’s not clear what would happen if, as expected, state budget woes continue.

The UC pension system investment portfolio was valued at 154 percent of the amount needed for future obligations in 2000, when investments were switched to outside managers.

By last June, the value of the portfolio, $42 billion, had dropped to 103 percent of needed funding. After the stock market crash last fall, when many pension portfolios lost nearly a third of their value, some think the funding level could be around 80 percent.

The sagging portfolio, and reports that several investment managers were connected to regents, were mentioned by Sen. Leland Yee, D-San Francisco, when he introduced legislation in 2007 calling for workers to share in UC pension governance.

UC responded to passage of Yee’s SCR 52 by proposing a remodeled pension advisory committee that would have an expanded oversight role and include union members.

“It’s an advisory board,” said the union’s Schlitz. “We want shared governance like every other worker in the state of California has.”

Legislation last year, ACA 5 by Assemblyman Anthony Portantino, D-La Canada-Flintridge, would have created the 13-member board sought by the union. But the bill failed in the Assembly, facing strong opposition from UC.

“I respectfully regret to inform you that it is our conclusion that ACA 5 would cause grave harm to the University of California and that we must vigorously oppose this measure,” a UC official said in a letter to Portantino.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Posted 29 Jan 08

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