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University of California: non-profit or corporate money maker?

Fact Finding Report reveals truth behind UC “budget crisis�
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As valued resources continue to be cut, low-wage workers continue to work without promotion or wage increase, and student tuition continues to rise, a very basic question takes president: where is our money going? A recent article by Dick Meister (International Labor Communications Association) claims that millions of these dollars are in fact being “extorted� from the UC, its students, and its low-wage workers by upper-tier wage earners. Meister states, “Despite UC’s serious financial troubles, those who run the university’s teaching hospitals recently got bonuses of up to $82,000 each on top of their handsome six-figure salaries.� The trend, thus, extends power to those already at the top of the corporate hierarchy, while leaving those at the bottom virtually helpless to improve their situation. Meister continues by explaining that, “With virtually no public notice, the 65 top executives at UC’s five hospitals were granted bonuses averaging $36,000 last fall - almost $2.5 million in all. Eleven executives got more than $50,000 each.� Meister concludes, “Kessler and the university’s other administrators eagerly embrace the values of corporate America, which gives the greatest rewards and greatest credit to those at the top, and does so at the expense of lower-level employees whose pay and benefits they invariably try to limit. Although they are operating a non-profit institution of higher learning, they act as if UC was a profit-seeking corporation and, like corporate executives, they will serve only if the price is right.�


1.Last year alone, the University diverted $20 million intended for clerical wage increases, choosing to spend the money on other purposes or add the money to UC reserves. (McKay Decision, pp. 5-6 & 15-16).

In 2003-04, the University had $20 million in “non-State� money (money from sources other than the State) earmarked toward clerical wages. The cash-strapped State of California was unable to kick in an additional $10 million (which, when combined with the $20 million in non-State money earmarked for clerical increases, would have permitted the University to provide an across-the-board six-percent wage increase for all clericals). UC used this as excuse to take its $20 million in non-State money and divert it away from clerical wage increases. (McKay Decision, pages 5-6 & 15-16). This $20 million includes money earned by the University on research contracts, grants and other such funding sources that build in a particular percentage increase each year for wages. Yet, the University took that money and did not spend it on wage increases.

Another way of putting it: UC clerical wages are 1/3 funded by the State, and that funding source has not come up for several years. However, clerical wages are 2/3 funded by many other revenues sources that have been skyrocketing (including medical center revenues, which fund the wages of approximately 4000 clericals). Yet UC refuses to look at all of its available resources in determining a fair wage offer instead taking advantage of the State’ fiscal crisis by using frozen State funding as an excuse to offer no wage increases.


2. UC Makes a Huge Profit Every Year, Partially at the Expense of Its Employees

“There is no question that the University is in a position afford a wage increase for the clerical employees... Ultimately, the University may or may not prevail in its refusal to provide a wage increase to clerical employees, but the University’s claim that it does not have the money to spend on them is not supported by the evidence.� (McKay Decision, pages 18 & 19).

UC tells the public that it is having a fiscal crisis. Nothing could be further from the truth. As Arbitrator McKay found, in 2003-04 alone the University had a net income (revenues minus expenses) of $786 million. In the corporate world, this would be termed “annual profit.� But because UC is a nonprofit, UC calls it simply “annual net income� – the excess revenue taken in during the year but not spent. This was the best bottom-line number UC has ever had, according to data presented at factfinding. But previous years were also quite profitable for UC. For instance, in 2002-03, UC had a net income of $559 million. (McKay Decision, p. 8).

These profit figures are calculated after taking into account the fact that UC spent between 2 and 2.5 billion dollars on capital projects each of the last two years. In other words, even after spending extraordinary sums on construction, UC is still netting a very high profit.

While UC undoubtedly has many important items to spend its money on, Arbitrator McKay noted that the University’s chief witness on financial matters admitted under oath that he did not predict any change in UC’s pattern of taking in many millions of dollars more than it spends each year. (McKay Decision, page 8).

One of many contributing reasons that UC made such an extraordinary profit last year: it declined to spend the $20 million in non-State money earmarked for clerical wages, mentioned above. Of course, had it spent that money for the intended purposes of clerical and service worker wage increases, UC still would have had an extremely healthy profit of $766 million. But, in the utmost irony, Arbitrator McKay’s report leads us to understand how UC actually does better financially in years such as 2003-04, in which it uses the State’s fiscal crisis as an excuse to withhold wage increases.


3. UC Pays Its Clericals Far, Far Less Than CSU and Other Comparable Employers

As Arbitrator McKay found, “clerical employees are among the lowest paid employees working in the University system.� (McKay Decision, page 9).

But the most shocking wage disparities are found hen UC is compared to comparable employers. McKay notes that even UC thinks its clericals are paid at below market wages. (McKay Decision, page 9). And the gaps are even greater than UC acknowledges -– McKay found that when assistant positions at UC are compared to comparable positions at CSU, UC clericals “earned approximately 22.7% less.� (McKay Decision, page 10). McKay also found that for library assistants the wage gap is even more egregious –- 33%. (McKay Decision, page 10).

The fact that UC pays clericals wages that are so much lower than wages at CSU is especially troubling because CSU is 72% state funded, while UC is less than 15% state funded (McKay Decision, page 5), meaning that the State’s fiscal crisis has led to very real cuts in CSU’s overall available revenues, unlike the situation at UC.

McKay also explained how clericals are falling further and further behind –- while the cost of living has increased 26.3% in the past 7 years, clerical pay ranges have gone up by only 9.5% in the same time period. (McKay Decision, page 9).

You can learn more about this by reading the 50-page factfinding report and/or the seven-page summary at www.cueunion.org

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"If I crossed the picket line my ancestors would rise up and strike me dead. Cesar Chavez, Emma Goldman, Lucy Parsons, Phillip Vera Cruz, Martin Luther King Jr. and others sacrificed too much for us to become scabs.�

- Paul Ortiz

Professor Community Studies
 
 


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