For nearly 20 years, the University of California has boasted one of the most successful self-sustaining pension plans in American higher education. Maintained solely by surplus investment earnings since December 1990, the UC system’s retirement fund has swelled significantly throughout the last two decades, hitting a peak value of nearly $48 billion in 2007 and supporting roughly 115,000 pension recipients. Throughout this period, university employees have had the luxury of not paying a dime into this sizable benefit fund.
Unfortunately, like so many other university ventures that have faltered under the shortcomings of the current national economic climate, this once-bloated retirement fund has taken a major blow, dipping nearly $6 billion in just one year and yielding an understandable degree of concern from university officials. As a result, the UC Board of Regents voted last week to reinstate employee contributions to the fund, mandating a 2 percent annual employee contribution ‘mdash; a move that has many at the university decrying the regents’ alleged financial mismanagement.
This is an unfair accusation on the part of these employees, who fail to take into account the overall decline in profitability of university investments in 2008. The sudden turnaround in profits has affected a large number of university investments, including the UC endowment fund, which had lost an estimated $1 billion as of November 2008 and which continues to decline. University officials, who for the last 20 years have ensured the retirement fund’s success through savvy financial dealings and well-placed long-term investments, should not be blamed for the effects of an unpredictable economic downturn.
Additionally, many university employees have begun demanding greater representation on the retirement plan governing board, the administrative body responsible for overseeing these investments. Although such a request might appear warranted given the now-vested interest of these employees in monitoring these funds, practicality must take precedence over perceived fairness in this situation. The already-bloated nature of the university’s plethora of advisory committees and oversight boards suggests that perhaps the university should forfeit such symbolic employee representation and leave fund handling to the experts.