UC secret funds sparks bill to curb autonomy

May 07, 2017

The revelation that the University of California president’s office kept $175 million in secret funds and paid executives and staff extra-fat salaries has led state lawmakers to wag their fingers furiously at UC leaders in recent days.

Some held a hearing. Others called for subpoenas. One proposed a new law.

But unlike California State University — where lawmakers can order changes to how CSU does business — UC is largely immune to the wishes of the Legislature.

Why? Because 138 years ago,
state leaders transformed UC into its own, separate branch of state government “equal and coordinate with the Legislature, the judiciary and the executive,” as California Attorney General Edmund G. “Pat” Brown characterized Article IX, Section 9 of the state Constitution in 1957.

UC secret funds sparks bill to curb autonomy

May 7, 2017 Updated: May 8, 2017 11:16am
In this Wednesday, Jan. 25, 2017 file photo, University of California President Janet Napolitano attends a University of California Board of Regents meeting, in San Francisco. Photo: Marcio Jose Sanchez, Associated Press
Photo: Marcio Jose Sanchez, Associated Press
In this Wednesday, Jan. 25, 2017 file photo, University of California President Janet Napolitano attends a University of California Board of Regents meeting, in San Francisco.

The revelation that the University of California president’s office kept $175 million in secret funds and paid executives and staff extra-fat salaries has led state lawmakers to wag their fingers furiously at UC leaders in recent days.

Some held a hearing. Others called for subpoenas. One proposed a new law.

But unlike California State University — where lawmakers can order changes to how CSU does business — UC is largely immune to the wishes of the Legislature.

 

Why? Because 138 years ago, state leaders transformed UC into its own, separate branch of state government “equal and coordinate with the Legislature, the judiciary and the executive,” as California Attorney General Edmund G. “Pat” Brown characterized Article IX, Section 9 of the state Constitution in 1957.

 

The 1879 voter-approved revision of the California Constitution declared the university a “public trust” and gave its governing Board of Regents near total autonomy. The idea was to shield UC from the “hands of the Legislature,” backers said at the time.

But in return, many in the Legislature have been ticked off at UC and its self-governance ever since — especially at times like this, when university officials behave in ways lawmakers don’t like.

“The autonomy from more than 100 years ago is a worn-out strategy that doesn’t work anymore,” said state Sen. Cathleen Galgiani, D-Stockton, who is proposing a constitutional amendment that would punish UC whenever it pays administrators too much.

Galgiani said she has long been frustrated by the regents’ “tone deaf” decisions to raise pay while cutting student services, and to give highly paid administrators even more money. But she said it was state auditor Elaine Howle’s probe of UC President Janet Napolitano’s office, released April 25, that prompted her to introduce her bill last week.

Howle’s audit found, among other things, that Napolitano’s office paid its executives and administrative staff “significantly more than their public sector counterparts” and said the office “could save millions of dollars in salary costs” by paying salaries comparable to what their counterparts at CSU and other government agencies earn. The auditor also discovered that employees are often given raises without taking on additional responsibilities.

Galgiani’s bill to rein in the university is one of many such efforts by lawmakers and governors over the years to get around UC’s hard shell of autonomy and take aim at its soft underbelly.

The weapon is money.

The $32.5 billion university — with 10 campuses, five medical centers, three national laboratories and one just-audited Oakland headquarters — gets a tenth of its budget from California’s general fund, or $3.4 billion. (Most other revenue comes from medical centers, government contracts, sales and student fees.)

Last year alone, lawmakers introduced at least 14 bills in an attempt to get UC to change policies. As usual, many of last year’s bills contained the threat of reduced funding to UC if it didn’t comply.

Just one of the bills survived and became law.

Among the bills that died was one that would have withheld state funds from UC unless it stopped admitting out-of-state students using a lower academic threshold than for California residents — a practice uncovered in 2016 by another state audit.

Another bill would have forced UC to cap salaries at $500,000 a year or lose state funds.

The only one that became law required UC to support entrepreneurship activities — in exchange for an extra $2.2 million.

“The primary tool that the Legislature has to make sure UC is meeting (lawmakers’) priorities is through the budget process,” said Jason Constantouros, a higher education consultant with the state’s independent Legislative Analyst’s Office.

In May, for example, the regents are expected to limit out-of-state enrollment for the first time, despite the widely held view among university administrators that the higher-paying students benefit UC financially.

They are doing it — and enrolling an additional 2,500 state residents in the fall — after state lawmakers made those things a requirement for UC to get an additional $18.5 million in the 2016-17 state budget.

Not surprisingly, UC officials are fiercely protective of their autonomy and lobby lawmakers against the annual barrage of efforts to chip away at it.

So when Howle recommended in her audit of the UC president’s office that the Legislature take over its funding instead of allowing the president’s office to absorb money from the campuses — which the audit said it took too much of — UC officials objected.

Monica Lozano, chair of the 26-member appointed Board of Regents, told lawmakers at a hearing on the audit last week that “the best means to accountability is with the guidance of the regents.”

Napolitano’s spokeswoman, Dianne Klein, told The Chronicle: “For almost 150 years, we’ve had a degree of constitutional autonomy that has served the university very well. To give the Legislature direct control, we think, would be a mistake.”

John Douglass, a senior researcher at UC Berkeley’s Center for Studies in Higher Education, agreed. In a 2015 paper on the history of UC’s autonomy, the scholar concluded that self-governance — and steady funding by the state — have been the essential ingredients in creating “one of the world’s premier research universities.”

But none of that has stopped lawmakers from trying to step in.

If Galgiani’s proposed Constitutional amendment is approved by the Legislature, voters would then be asked to decide whether to prohibit UC from raising tuition and paying “substandard wages” to cleaning and maintenance workers in any year when more than 600 UC administrators earn a salary higher than the governor’s.

 

This year, Brown earns $190,103, according to the California Citizens Compensation Commission. Galgiani said that after peeling off all academic, medical and research employees, there remain 712 UC administrators who earn more than the governor.

When academic, medical and research employees are added back in, a Chronicle salary analysis of UC employees’ total compensation shows that 9,640 employees earned more than Brown’s gross salary of $182,791 in fiscal year 2015-16.

That’s a 63 percent increase from five years earlier, when 5,931 UC employees earned more than $173,987 — the governor’s salary then.

Given the history of such bills, Galgiani’s may have little chance of success.

Yet when Howle included 33 recommendations in her audit for how UC should reform the troubled financial practices of its president’s office — including “adjusting” the range of executive salaries and benefits — Napolitano said in her written response that most were “reasonable” but that she expected to analyze the impact of “narrowing our salary ranges before committing to doing so.”

Lozano, the regents chair, gave a slightly different answer when faced with state lawmakers in person last week. She said the president’s office “will be adopting all of the state recommendations.”

The state Constitution says it’s the regents’ choice.