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Heart Surgery For UC

news1Regents spare classes—for now—and drain staff healthcare surpluses instead

Gov. Jerry Brown announced a $100 million mid-year cut to the 10-campus University of California system in December, just as UC Santa Cruz staff and students left for winter break. UCSC's share of the cut is $6.5 million, but no classes will be affected through the end of the current school year.

This narrow miss was accomplished by the UC regents’ decision to instead borrow from a surplus in the UC employee healthcare trust fund. Campus staff, however, fears this solution could make matters worse in the long run.

The UC Office of the President (UCOP) say they are absorbing the costs even though the surplus exists to guard against premium increases by insurance companies. There were no union representatives involved in the decision because current benefits to active and retired employees will not immediately change. Although this made the move legal, it irritated UCSC staff, including American Federation of Teachers representative and librarian at McHenry Library Ken Lyons.

“I have not heard about any union consultation on this,” he says. “Their timing on this was opportune, that it was announced just before school got out.”

The UCOP currently pays 70 to 75 percent of employee healthcare premiums. The regents’ decision drained nearly the entire surplus.

“[The UC's pattern has been that] we get paid less in salary on the promise that we will get more in benefits in the long run,” says Lyons. “That is increasingly not the case.”

Steve Montiel, director of media relations at UCOP, is not worried that rate increases in the near future would put benefits at risk. His statement is based on a view of the entire state, but insurance plans for staff at different campuses vary greatly.

Santa Cruz has no university hospital and there are very few plan options for staff to choose from, resulting in UCSC employees facing some of the highest premiums in the state. In the 2010-11 school year, they were charged with choosing to pay twice the 2009-10 price for the most popular plan or switching to one with higher out-of-pocket costs.

“My premiums went up about 80 percent last year alone,” says retired community studies professor and former UCSC teachers' union president Mike Rotkin. “They went up 50 percent for single people and, if you have children on your plan, it doubled.”

Rotkin doesn't favor moving money out of healthcare funds to save in the short term. He compares that thinking to the budgeting techniques of former Gov. Arnold Schwarzenegger, who borrowed billions to cover up deficits for most of his time in office, which built up most of the debt the state is now dealing with.

“It's a typical UC shell game, where the money on paper is being moved around,” he says. “Nothing really is being cut. They will have to make a decision later about where to really cut $100 million out of their budget, and that is going to [be] a lot bloodier than what is going on here.”

Because the UC system has no plan devised for next year, UC Vice President For Budget Patrick Lenz says UCOP hopes that at least some of the $750 million Gov. Brown and legislators cut this year will be restored.

UCOP dropped much of $650 million in cuts Brown signed last summer on the shoulders of the 10 campuses across the state. Last month's vote by the regents is their attempt to tackle the $100 million mid-year cut without affecting students and teachers.

“It is a permanent cut in our budget at this point, but if it is at all possible we would like to see this be a one-time cut,” Lenz says. “If this is a permanent cut we will not be able to continue to do this.”

The potential for increased funds depends largely on a series of ballot initiatives voters will decide on in November. Brown said earlier this month that if voters turn down his initiatives, which include sales taxes and raising taxes on the wealthy, more cuts to education would be inevitable. If passed, his proposals could raise an estimated $6.9 billion.

Lenz believes all five of the initiatives Gov. Brown wants put on the ballot are likely to fail. If they don't pass, the UC system will face at least $200 million in additional cuts for the 2012-13 school year. UCOP says the chances of success would rise if the different initiatives were combined into one proposal.

“We need to continue to be very vocal in Sacramento,” says Lenz. “We must protect instruction in the class at all costs, but these cuts can't be done entirely by administrative efficiencies.”

UCOP claims they have cut one-third of the staff at their Oakland offices. Lyons however, says that many of those positions have in fact been moved to campuses where the individual schools must pay the salaries.

“When you go to the building in Oakland, there are a lot of empty offices, but a lot of those people left and ended up at UC Berkeley with pay increases,” says Lyons.

Lyons and Rotkin are tired of hearing that cuts must be made because of vanishing government funds. They point to California Senate Bill 79 passed in 2011 that allows the UC and CSU system to loan money to the state. Since SB79 went into effect, the UC has loaned $1 billion to the state at a 1.5 percent annual interest rate. This is nearly triple what they earn on other investments.

“UC constantly claims they have a $20 billion budget system wide, but the campuses are only one part of their network. They have hospitals that make huge profits, and labs that make money from patents,” says Lyons. “They claim that the state has put us in such a bad position, but then they are lending to the state.”

Lenz says they are investigating all options for increasing funding for campuses, including further tuition hikes and increased class sizes. Tuition now tops state contributions to the UC for the first time.

In a Jan. 10 teleconference with students, staff and interested California residents, Lenz didn't mention moving funds from other sectors of the UC system to help the struggling campuses.

It is all about priorities, according to Rotkin. He retired in December after fighting for several years to keep his position in the endangered community studies department. He made the decision that he is unwilling to go through the same fight next year when his job is sure to be on the chopping block again.

“They put money into patent programs and hospitals that are profitable and [are] thinking like a corporation rather than a university,” says Rotkin. “Instead of thinking about what would be good for quality of life and making school affordable to the middle class, they are thinking they can have students pay for it with student loans for the rest of their lives.”

Rotkin believes that those who pitch ideas like using healthcare funds to cover short-term debt have more long-term motives. It is an effort to put health coverage in a weaker financial position in the future so that faculty unions and other employees will have to negotiate cuts, he says.

“It's been a long-term Republican plot to de-fund programs by requiring local governments to account for benefits as if every employee is retiring tomorrow. That is ridiculous,” says Rotkin. “The same is happening with the UC. They act as if everyone is going to go to the doctor tomorrow.” 

Photo: Keana Parker

Comments (1)Add Comment
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written by Bill Smallman, January 24, 2012
I think most people are fed up with hearing about any money woes, especially from UCSC. They want to sprawl into the forest for 3000 new students. Where is that money coming from? And this will help force the issue of building a desal plant for water that costs 4-5 times more. They raised rates 32%, and again last year + have plenty of over 200K salaries. I think they have been over-subsidized and need to exist within their means from the money they get from tuition and hospitals and cancel the expansion. We don't have the water, and we don't want to pay for desal water.

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