SACRAMENTO — Marred by allegations of conflicts among fund managers, secretive decisions and poor investments, the $48 billion University of California Retirement System has been under fire for years. On Tuesday a lawmaker introduced a constitutional amendment proposal
that he said would help restore the system — by bringing UC employees to the table.
The proposal, Assembly Constitutional Amendment 5, would create a 13-member pension board that would be jointly governed by a mix of representatives from the faculty, staff, unions, retirees and the UC Board of Regents.
The UC pension system, which oversees the retirement funds of 160,000 employees and retirees, would be in line with other state pension systems, including California State Universities, California Community Colleges and the state government, that have employees on their retirement boards.
"This is an issue not only of fairness to UC workers and retirees," said Assemblyman Anthony Portantino, D-Pasadena, the author of the proposal, "but an issue of ensuring that this pension fund is properly managed."
A year ago, the Legislature sought, through a nonbinding resolution, to get the UC Board of Regents to establish a joint governing board on its own. The regents rebuffed the lawmakers, forcing proponents to take the difficult route of getting a two-thirds vote from both houses of the Legislature to put it on the ballot for voters to approve.
"They ignored us, and this is the hammer," said Adam Keigwin, communications director for state Sen. Leland Yee, D-San Francisco, who is the principal co-author of ACA 5. "The right thing would have been for them to listen to the resolution."
The University of California "strongly opposes" the legislation, said Wyatt Hume, provost and executive vice president of the UC system, in a June 19 letter to Portantino, adding that he thinks it would cause "grave harm" to UC's future.
The current pension plan, Hume wrote, is fully funded at more than 100 percent of its obligations, is managed by professionals who have produced "exceptional returns," and has not required employees to contribute to the fund for 17 years. UC employees, he added, already have a voice under the UCRS Advisory Board, which will soon add union-represented employees as a response to last year's legislative resolution.
Allowing employees to oversee their own retirement funds would create "serious conflict-of-interest issues," Hume wrote, and it could lead to the politicization of the retirement system and threaten the independence of the university's ability to run its retirement plan.
Proponents of the constitutional amendment said that while the plan is fully funded, its assets have taken a dramatic downturn in the last six years.
They point to examples of conflict of interest in which UC Retirement Plan investment advisers were reported to have undisclosed ties to investment managers with hundreds of millions of dollars in UCRP contracts.
And two years ago, the university tried unsuccessfully to force employees to pay 8 percent of their wages into the pension plan — an indicator of financial troubles.
"We're not saying we don't want to pay into it. We're saying, 'Why?' " said Lakesha Harrison, president of Local 3299 of the American Federation of State, County and Municipal Employees (AFSCME) and a licensed nurse at UCLA-Santa Monica. "UC is determining my future. I need to be a part of that. We all just want to help the pension plan."
An actuary, Venuti and Associates, hired by UC employees in 2006, questioned the UC Regents' management of the fund. The report found that the regents "did not have the benefit of projections and analyses that would constitute best practices for making this type decision" when the regents were considering restarting employee contributions.
Harrison noted that the UC Retirement Plan has had four chief investment officers since 2000, and that in 2007, three top UCRP investment professionals left, citing micromanagement by the UC treasurer and UC regents.
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