University of Calif. faces mounting pension costs

Associated Press Modified: June 19, 2012 at 8:15 pm •  Published: June 19, 2012

SAN FRANCISCO (AP) — The cost of pensions and retiree health benefits are soaring at the University of California, increasing pressure to raise tuition and cut academic programs at one of the nation's leading public college systems.

The 10-campus system is confronting mounting bills for employee retirement benefits even as it grapples with unprecedented cuts in state funding that have led to sharp tuition hikes, staff reductions and angry student protests.

The UC system, including medical centers and national laboratories, is scrambling to shore up its pension fund as it prepares for a wave of retirements and tackles a roughly $10 billion unfunded liability.

The UC Retirement Plan's huge deficit was created by investment losses during the global economic crisis — and the nearly two decades when campuses, employees and the state did not contribute any money toward pensions.

"The regents made a serious error and the Legislature made a serious error by not putting money aside for 19 years while accumulating this obligation," said Robert Anderson, a UC Berkeley economist who chairs the system's Academic Senate. "Now we have to pay for it."

The UC system faces spiraling pension costs for 56,000 current retirees and another 116,000 employees nearing retirement.

As of May, there were 2,129 UC retirees drawing annual pensions of more than $100,000, 57 with pensions exceeding $200,000 and three with pensions greater than $300,000, according to data obtained by The Associated Press through a state Public Records Act request.

The number of UC retirees collecting six-figure pensions has increased by 30 percent over the past two years, according to California Foundation for Fiscal Responsibility, an advocacy group that has analyzed UC pension data.

"UC's pensions are of a huge concern to future students" because the university will likely be forced to raise tuition to pay for them, said Marcia Fritz, the foundation's president.

Topping the list of UC pensioners is Marcus Marvin, a retired professor of dentistry and public health at UCLA, who receives an annual pension of $337,000.

If UC President Mark Yudof, 67, serves for seven years, he would receive an annual pension of $350,000 — in addition to regular benefits he accrues through the UC Retirement Plan, according to university documents.

The university caps employee pensions at the IRS limit of $250,000, but that ceiling does not apply to the "supplemental retirement benefits" promised to Yudof.

In the coming year, the university is expected to contribute about $240 million to its retirement fund from a roughly $6 billion core operating budget. That amount is expected to more than double to about $500 million annually by 2015-16, according to UC officials.

The university also faces skyrocketing costs for its retiree health care benefits.

The unfunded liability for its retiree health program was $14.6 billion in July 2011. UC is expected to spend $270 million on retiree health care this year, and that amount is expected to rise significantly over the next several years, according to UC documents.

While UC seeks to pay its retirement bills, the system is wrestling with the loss of $750 million in state funding this past year. And it could lose another $250 million in the coming academic year if voters reject Gov. Jerry Brown's tax initiative in November.

To offset state cuts over the past three years, UC has repeatedly raised tuition, cut academic programs and student services, reduced its workforce, and increased enrollment of out-of-state students who pay three times more than California residents.

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