One administrator talks to the faculty ...

... two administrators talk to each other; three administrators form a club. Or so the story goes. It seems a common trend among mature organizations that management tends to be top-heavy, and the University of California is not that far behind the curve.

According to a posting over at Changing Universities,

In 2008, there were 397 administrators in the over 200k club making a total of $109 million, and in 2006, the same group had 214 members for a collective gross pay of $58.8 million. This group and its collective salaries, then, almost doubled in just two years. If you want to know where the UC money has been going, this is a great place to start.

Why, why on earth did UC have to double the number of administrators in the two year 2006-08?

Let's get one point across: UC's mission is teaching and research, and that is carried out by the faculty with support from the staff — in the classrooms, the labs and the departments. That's where the rubber meets the road, as they say. Administrative bloat is not only expensive, it actually interferes with UC's mission.

Giving the profession a bad name

This is a bit belated, but well worth commenting on. First, the facts: a group of UCI faculty from the School of Humanities have signed an opinion piece calling for the exploration of

viable alternatives, which range from levies on the state’s petroleum production and closing corporate tax loopholes to, yes, raising state income taxes, which are among the lowest in the country.

The full text of the letter is available courtesy of the OC Register. As you will notice if you follow the link, the proposal has raised a veritable barrage of criticism, much of it admittedly wide of the mark.

But the point is different. Beside being obviously oblivious of California's political climate, the esteemed colleagues are clearly misinformed. California's personal income tax rate is among the highest, not lowest in the country, as one can easily check. And the reason is well known: thanks to Proposition 13, California has to rely on income and capital gains taxes, as well as the highly regressive sales tax (also quite high). And while it has been often pointed out how intrinsically unfair Prop. 13 turned out to be (with young couples paying property taxes several times higher than those of their older and more affluent neighbors), it has also resulted in cash flow for the State that is extremely subject to the vagaries of the economic cycle, whence the current disaster.

All of this is well known and not at all difficult to find out. Why the Irvine colleagues never bothered to check their facts, it is indeed hard to understand. The whole thing just confirms prejudices and stereotypes about academics — how aloof, privileged and uncaring they are. In sum, the whole letter was just stupid not well thought-out.

The esteemed colleagues could have instead insisted on the oil severance tax (which they do mention), or repealing Prop. 13 while keeping protections for families and individuals (e.g., repeal the part about commercial properties, or second homes, and especially repeal the part about the 2/3 majority requirement). But advocating an increase in income taxes solely for the purpose of supporting the University, with no mention of the plight of the poor, the sick and the disabled was unconscionable.

The future of the university

Very interesting debate over at Remaking the University between Chris Newfield and David Hollinger concerning the different models for the future of the UC. Under the heading "Should Berkeley be Michigan?" we have the outlines of a proposal coming (not surprisingly) from a group of Berkeley faculty.

The proposal calls for increased enrollment of out-of-state students (who pay much higher tuition than CA residents) up to 20% of total enrollment at UCB. The proposal also unequivocally calls for some sort of privatization on the Michigan model for the top tier UC campuses UCB, UCLA and perhaps UCSD). There might indeed be something to be said for the idea to let the flagships go.

But one of the points made by Newfield is one ought to be careful what one wishes for — because one might get it. In particular, once you start charging higher tuition you lose the price advantage over the privates and then you have to start competing with Duke, Stanford, etc., at the level of their student facilities and other (expensive) amenities. And of course, as a bit of a counterpoint, there is always the chance that education might be the next bubble to pop. When tightening credit markets, people might decide that taking out a loan for $30K to $50K a year for four years might not be the wisest thing to do. If that were the case, this privatizatuon scheme might well turn out to be the higher-ed equivalent of CDSs and CMOs.

It's all arbitrage

The news of the day is that the University of California is lending the State of California about $200M. This is because, not unsurprisingly, the University has a better credit rating than the State and so it can borrow money more cheaply.

In order to keep a number of construction projects (mostly in the medical sciences) at various UC campus moving along, the University has borrowed $200M on the bond market. The money is then immediately loaned that back to the State at a 3.2% interest rate — higher of course than that which the money was borrowed — so that the State can, in turn, give the money back to UC for those projects (huh?).

Besides: (i) the preeminent role of the medical and health sciences in this story (they seem to be the real winners in the whole UC budget debacle); (ii) the circuitousness of the whole plan (why can't UC just borrow money for those projects?); and (iii) the fact that UC is going to turn a profit on this, there is still one more question looming.

When asked about the loan yesterday in Santa Barbara, Yudof replied: "It's all arbitrage," meaning that UC is taking advantage of an inbalance in interest rates to turn a profit. But of course, as any first-year economics student would know, and unless UCOP thinks investors are stupid, the net effect of this ruse will be just to decrease the University's credit rating correspondingly. After all, the University is taking more risk by lending the money to the State than the 3.2% rate of return on that loan warrants, because otherwise the State could have just borrowed the money itself.

The net result will be to make future loans that the University might want to take out more expensive. This kind of wooly-headed thinking that seems to enjoy a lot currency at UCOP will not help solve the University's problems.

The Economist on the California Dream

That left-leaning and subversive publication, The Economist, has an article on the decline of the finest public system of higher education in the world, aptly titled — Before the Fall.

Rumor has it ...

... that employees at some UC Medical Centers will be spared salary cuts, in spite of not being on outside grants. These would be clinical employees, whose salaries are supposedly funded through the fees paid by patients and their insurance companies.

If true, this might help explain the discrepancy between the announced $200M in savings and the projected $500M yielded by the salary cuts: $300M in cuts at UCMC's would simpl never take place.

Can anybody confirm the rumors?

Would you buy a used car from this man?

The way the University of California is managing its financial resources and implementing the salary cuts and furloughs approved by the Regents appears increasingly shady and underhanded.

There are some questions that the California Professor would like to see answered. These are simple, straightforward questions that should have simple, straightforward answers.

1. Why are the salary cuts calculated on the base salary instead of total compensation?
2. The salary cuts will generate upwards of $500M in savings for the university, i.e., more than $300M above the advertised $200M to offset decreased state funding. Where is that extra money going?
3. According to Moody's latest Bond Rating for UC, the University has between 5 and 6 billion of "unrestricted financial resources" on their balance sheet. Why is that money not being used to offset decreased state funding?