Editorial: State must be contractually obligated to contribute to UC pension fund

Gov. Jerry Brown and University of California President Janet Napolitano agreed in the May budget revision last year that the UC would restructure its retirement plan to be more sustainable and the state would allocate $436 million over the next three years to the UC’s pension fund.

In the state budget released last Thursday, Brown kept his promise and funneled $171 million into the UC’s pension fund this year. However, to ensure the security of UC workers, the state must be contractually obligated to pay the amount Brown promised to allocate to the pension while ensuring that funding extends beyond the three years.

Much of the UC’s financial woes can be attributed to its abysmal pension situation. The UC pension system has $7.8 billion in unfunded liabilities. In July 2014, the UC borrowed $700 million to fund this debt, bringing it to a whopping grand total of $2.7 billion. Perhaps most pertinent to students is the fact that the pension kerfuffle and the financial instability it causes could become fodder for a future tuition increase.

A large part of the blame goes to the University of California Retirement Plan’s contribution holiday that began in 1990, the last year the state contributed to the pension fund. In a 2006 interview Randy Scott, the then-UC Executive Director of Human Resources, Benefits Policy and Program Design, said the holiday was the longest “of any pension plan in the history of the United States.”

The holiday continued for four more years, ending in 2010.

So, while the promised money is a welcome respite from the piling debt, no formal contract binds this agreement. Given the state of the UCRP, this is especially worrying. The UC is one of the largest employers in the state and its employees are currently buying into an uncertain security.

Although the UC likely created this mess for itself when the contribution holiday began in 1990, it can’t solve it without the help of the state. Ensuring that the state government assists in the recovery beyond Brown’s tenure is necessary to avoid an unmitigated financial disaster, which could lead to bankruptcy.

So while $436 million from the state will certainly help the UC start to recover from its pension fund fiasco, it still represents only a tiny fraction of the unfunded liabilities and debt held by the UC.

The state in no way needs to cover the UC’s debts outright, but it must provide enough to help set the UC on a course to permanent recovery. The pension problem has been deferred long enough, and waiting any longer would only exacerbate what has turned into a decades-long dilemma.

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