October 7th Teaching Materials

•Michael O'Hare's (UCB) welcome letter to his students this Fall: 

•"Budget curriculum" composed by the Graduate Student Organizing Committee at UCSC,

•Position paper on "Restoring California Higher Education by the Council of University of California Faculty Associations:  
        
• SAVE/BFA's Principles for Evaluating Operational Excellence

•Dick Walker's article on the economic and political crisis of California:

Berkeley Faculty Association Head Calls on Regents to Audit Use of Ed Fees

I am Christine Rosen, the Secretary of the Council of UC Faculty Association (CUCFA). As Bob Meister just said we are requesting that you conduct an audit to determine whether the Office of the President is violating its own rules by using student educational fees to for debt service on its construction bonds.

As part of this audit, we would also like to request that you audit UCOP’s assertion that this debt is actually being paid out of the revenues generated by the revenue generating programs that are housed in the new buildings. We question whether most of these programs can generate enough revenue to service this debt. To give you an example of why we are concerned:

Berkeley is in the process of constructing a $136 M Student Athlete High Performance Center and is about to begin a much larger $321 M renovation of the football stadium. The Department of Intercollegiate Athletics (DIA) is the revenue generating entity responsible for repaying the $457 M debt. Assuming a 4.8% interest rate, it will have to pay out $22M a year.

However, the DIA operates at a large multimillion dollar loss every year. A faculty group looking into the matter has discovered for the most recent 5-year period for which the DIA has released detailed data (2003-08), its cost to campus has been at least $10 million every year - except for 2007-08 for which the cost was $7.4 million [Note 1]; and that for the most recent fiscal year (2008-09), the cost to the campus is expected to be a record high of approximately $13.5 million [Note 2].  The $22M debt service burden is going to come on top of this ongoing loss, creating at least a $33M shortfall per year. The faculty have heard that DIA needs to sell at least half a billion dollars worth of expensive skyboxes to generate the money to cover these costs. We question whether it will be able to sell enough to generate revenues of $33 M a year. Even if by some miracle it can do this, we want to know how the interest on $136 M debt incurred to construct the high performance athlete training center will be paid off during the years before the renovations to the football stadium are completed. Where will this money come from?

This is just one example of a revenue generating program that seems unlikely to generate the surplus funds needed to pay off the university’s debt. We suspect that many of the revenue generating programs assigned responsibility for paying off construction debt are incapable of shouldering the entire debt service burden placed them. Please audit all such projects to determine what level of debt service the Regents can realistically expect such revenue generating programs to generate for this purpose.

In addition, please audit the revenue flows that the Regents can realistically expect extramural research grants to generate to contribute to the general revenues that UCOP is pledging as collateral for its construction debt and/or that it may be using to service this debt. We doubt that it is capable of generating enough revenue to relieve the university of the need to divert funds from student educational fees for this purpose.

Finally, let me tell you why conducting these audits is important. If in fact UCOP is diverting revenues from student educational fees to pay for debt service, this diversion is coming on top of the recent, devastating state budget cuts to instruction. So it is coming at a great cost to our students as well as to our capacity to maintain the university’s reputation as a world class institution. It is part of the reason why departments have had to slash course offering, increase class size, cut back on funding for Graduate Student Instructors and graders faculty need to support their ability to teach gigantic classes effectively. It’s part of the reason why students restrooms are being cleaned even less than in the past and are in increasingly horrible, unsanitary shape and why garbage is not getting collected and why departments are pulling out faculty phone service. It has to be recognized that it helped necessitate the furloughs and layoffs that have demoralized faculty and staff and undermined UC’s ability to retain its best faculty.

We’re told that the new buildings are an investment in UC’s long term future as a world class university. That may be, but in an era of financial crisis, diverting funds from student fees for this purpose means we are disinvesting in our students and our faculty – which is an even more serious threat to the university’s future.

***
Note 1: Computed from UC Berkeley Senate CAPRA estimates and DIA financial statements as shown on: http://budgetcrisis.berkeley.edu/?page_id=16
Note 2: The DIA has not provided detailed financial information for the 2008-2009 fiscal year; only this estimate.

Indirect Cost Distribution Table for UC

Notes:

• following an agreement between UCOP and the state in the 1960s and 1970s, about 1/3 of indirect cost recovery funds (ICR) is repainted as state general funds, and becomes part of UCOP's general distribution of "state" funds to the campuses.
• another 20% goes to "off-the-top" expenses, which may normally contribute towards paying actual facilities and administration costs, as ICR is designed to do.
• another third goes to "opportunity funds," which become discretionary monies divided up at the campuses.
• UC has created a complicated trickle-down system for ICR in which nearly all of it winds up in disretionary funds (which in practice includes 19900 and 19933 monies).  This makes it very hard to say how much ICR is returned to the actual projects that generated it - or even to "research" in general.
• Some significant share of lab ICR is likely to wind up in recruitment and retention packages.  One lab is shorted in order to set up a new one down the hall, or in another building.  To put the point melodramatically, ICR has come to function as a reverse Ponzi scheme in which the ICR of existing labs is skimmed to set up new ones, which will in turn become underfunded in order to set up still newer labs.
  
• this is a distribution table only.  It does not answer the question of whether  (ICR) is sufficient to cover actual indirect costs of research. There is in fact always an ICR shortfall.  The reverse Ponzi does contribute to a growth in gross research revenues, which are important for rankings, state legislators, donors - as well as the actual production of new knowledge!  But they should not be taken to represent net income growth.
• Garamendi funds: In 1990, legislation authored by then state Senator John Garamendi authorized the University to issue, with state approval, “Garamendi bonds” for construction and maintenance of research facilities.  The University can use up to 100 % of the indirect cost recovery that results from new research, conducted in or as a result of the new facility, to finance and maintain the facility built with the Garamendi bonds. Each campus retains 100 % of the reimbursement received for projects that meet the conditions of this legislation. This funding is not a fixed proportion of the indirect cost recovery, but varies from year to year, and from campus to campus, depending on the number of projects being funded.