A decision made nearly 20 years ago to stop paying into the University of California’s pension program is coming back to haunt the university in the form of a potential $20 billion deficit, pitting UC officials and faculty against each other as they struggle to create a new pension model.
The decision, made in 1990 during a period of similar state budget woes, combined with the current sinking economy has eroded the pension program’s value to the point that, without immediate change to the fund’s management, the university will owe billions in benefits that it cannot afford to pay.
Though contributions to the fund resumed in April, a report released Friday by a university task force recommends the UC increase contributions while decreasing benefits to prevent insolvency of the program – a proposal sharply criticized by university employees who contend it would render the system uncompetitive.
“(The 1990 decision) was a serious error, and we’re facing the cost of it now,” said Robert Anderson, a UC Berkeley professor and member of the Post-Employment Benefits Task Force. “Unfortunately … again the state budget is in very bad shape, and the decline in the stock market means instead of gradually increasing the funding, we have to do it in a big bang that is very painful to the university budget.”
The vast problem now facing the UC began in 1990 with the decision by the UC Board of Regents to stop paying into the system altogether. With California struggling to bridge billion-dollar deficits during that recession, both UC and state leaders decided to save money by ceasing payments, instead banking on the assumption that the program – which had been so well managed in previous decades that it was significantly overfunded – would continue to pay for the thousands of pensions.
Read the full story at the Daily Californian.
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