State Assembly Votes to Withhold UC Funding as Result of Costly Regents Retirement Plan

The State Assembly Subcommittee on Education voted last Tuesday to withhold $171 million in funding from the University of California until UC Regents rescinds their new series of retirement benefits for executives and faculty, which will cost more than $500 million over the next 15 years.

The benefits stem from a plan proposed by UC Regents President Janet Napolitano in March, which proposed a new 401k option for UC employees. Under the new 401k plan, starting July 1, UC would provide an additional $7,400 per year in employer contributions to employees with annual salaries over $265,000, as opposed to the the current state-required defined benefit plan.

Additionally, UC employees are eligible for Napolitano’s 401k plan after one year of employment, while employees are only eligible for the state-required plan after five years of employment.

Members of UC’s largest union, AFSCME Local 3299, argue that Napolitano’s plan allows highly-paid UC employees to circumvent the state-required benefit plan, which could hurt the retirement plans of lower-paid UC faculty and exacerbate the divide between UC executives and lower-paid faculty.

“What UC has done is akin to a health insurance company incentivizing its healthiest participants to bail out of a plan that also helps people who happen to get sick, leaving the most vulnerable individuals behind to face ever-increasing costs and fewer benefits,” said AFSCME Local 3299 President Kathryn Lybarger in a statement. “Worse, in this case, it enables UC’s executives to circumvent the expressed wishes of State Legislative leaders, at a cost of more than $500 million over the next 15 years.”

According to UC payroll data, from 2004 to 2014, the number of UC employees earning more than $265,000 annually has increased from 629 employees to 3,343 employees, at a cost of over $1 billion. As UC tuition has nearly doubled over the same period, the State Assembly has raised concerns over California tax money subsidizing the growth of UC’s executives.

“The Legislature is deeply troubled by not only the cost of UC’s new 401k plan, but by what appears to be an effort to circumvent the terms of the 2015 Budget Act,” said Assembly Budget Education Subcommittee Chair Kevin McCarty in a statement. “State taxpayers should not be expected to subsidize the destruction of UC’s defined benefit plan, nor the enrichment of UC’s growing executive class.”