The University of California, which dodged funding its public pension contributions for two decades, is again dodging paying cash by borrowing the money to make pension payments.
The Calpensions blog reported that the University of California Retirement Plan (UCRP) has quietly borrowed $4.1 billion since 2011 from mostly internal funds since the UC was forced to start making pension payments iafter a 20-year “contribution holiday” that started in 1990.
With required funding jumping to 14 percent of pay in 2016, the UC intends to borrow another $2.3 billion over the next three years to continue dodging cash payments.
Breitbart News reported that the UC’s first Government Accounting Standards Board-compliant audited financial balance sheet this year revealed that its unfunded pension liability is $15.141 billion, if the UC makes a $7.25 percent annual investment return for each of the next 30 years. The UC has also acknowledged that it has an unfunded retiree health liability of $21.719 billion.
The UCRP has a dicey reputation for projecting its public employee liabilities. With UCRP claiming in 1990 that it was over-funded at 137 percent of the assets to retirement plan liabilities, the UC Regents quietly chose to take a pension contribution “holiday” that curtailed both the employer and employee pension contributions for the next two decades.
The UC also copied then-Governor Gray Davis’s infamous 1999 California Public Employee Retirement System pension spike, after he received over $5 million from public employee unions for his 1998 election. The spike allowed public employees to retire 5 years earlier and more than doubled their monthly pension payments after 25 years on the job.
The UC also engaged in executive feather-bedding, as the number of UC managers has skyrocketed by 308 percent since the start of the pension holiday 25 years ago, despite the number of UC employees only growing by 62 percent. About 19 percent of UC academic faculty won the right to another pension spike after they started receiving extra salary stipends with the creation of the management title, “Senior Professionals.” But the biggest spikes went to 67 percent of all upper “Administrators,” who received stipends as “campus managers,” according to a study by UC Professor Emeritus Charles Schwartz.
New UC employees seem to be increasingly worried that the UC will default on its spiked pensions before they can retire. When the UC offered new hires the option of a 401(k)-style retirement plan versus a defined benefit pension, fewer than 20 percent of new hires were expected to sign-up for it. But about 35 percent of the 6,411 UC new hires since the option was launched 10 months have chosen the 401(k), instead of the lifetime defined-benefit pension, according to Calpensions.