Public Comment

New: The Dire State of the University of California Pension Fund

By the Berkeley Faculty Association
Monday April 12, 2010 - 05:20:00 PM

A new report from the Berkeley Faculty Association calls attention to the enormous unfunded liabilities facing the University of California Retirement Plan (UCRP) - estimated to reach $18 billion by 2013 if no action is taken. The long term financial viability of UCRP is now in question and the future pensions of current employees are at risk. 

The pension deficit is the result of years of neglect, after the state and the university stopped making regular employer contributions in the early 1990s. It was made worse by the financial crisis of 2008-09. In addition, two-thirds of UC salaries are paid by Federal and other non-state funds, and these contributions have been missing as well. 

The University is restarting its contributions on April 15th, 2010 and will be gradually ramping up its share over the coming years. But the state so far refuses to contribute its rightful share – unlike its role in the Public Employee Retirement System (PERS). 

"It is good news that the university now recognizes its responsibility to make regular employer contributions to UCRS," said Professor Christine Rosen, co-author of the report, "but the current plan is a recipe for disaster." 

One problem is that the university is ramping up its contributions too slowly. "Each dollar we don't pay in now increases the need for more future contributions," said Rosen. 

Another problem is that the university will be asking employees to contribute a larger percentage of their salaries than ever before and is pushing the financial responsibility for contributions back on departments and research units, most of which do not have the funds. The result will be severe layoffs and program cuts. 

And, finally, UC students are paying for the restart through fee increases. 

The problem started with the recession and fiscal crisis of the early 1990s, when the state began looking for ways to cut expenditures. Then the stock market took off, and it seemed like easy money. "Letting the markets take care of the pension fund sounded like a great idea back in the boom years," said Professor Richard Walker, Vice-Chair of the BFA, "but it was part of the delusional thinking that drove bubble finance. The university was (and still is) not immune to such illusions." 

Now, in the midst of an even worse crisis, the state is refusing to pick up its share of the employer contribution, forcing UC to generate all the funds for the restart of the employer contribution by itself. The pension fund mess is thus just another facet of the overall fiscal crisis and political impasses of the state of California. 

Professor Rosen observed, "For too long Californians have been incited to maximize their short term gain, without taking into account their long term interests. They have been encouraged to equate taxes with evil and to see state government as a bureaucracy filled with paper pushers throttling the free market. People have lost the ability to see the connection between the state, taxes, and the many public services they enjoy - including this superb university. We’ve got to change this." 

BFA is working to alert the faculty at the university about the pension crisis, and it will do everything possible to educate people about the good UC does and how important public funding is to its survival. 

This commentary was issued as a press release by the Berkeley Faculty Association, a voluntary representative organization of University of California, Berkeley faculty and affiliate of the American Association of University Professors (AAUP). For more information, go to