University of California regents approved controversial rollbacks in pension and retiree health benefits Monday, including raising the earliest retirement age for future employees to 55, to help plug huge financial gaps in the university's plans.
The changes now face tough bargaining with the unions that represent about half of UC's 115,000 employees. Labor leaders said they are most upset about UC creating a two-tier workforce and contend that the changes would disproportionately affect blue-collar laborers who tend to retire earlier and with more health problems than faculty.
Under the proposals, employees hired after July 2013 would see the minimum age for early retirement rise from 50 to 55 and the age to receive maximum benefits increase from 60 to 65. In addition, all employees would pay higher premiums for post-retirement health plans.
Officials blamed much of the problem on the fact that until this year, neither the university nor its employees had contributed to the pension funds for two decades because the accounts were believed to be overfunded.
UC President Mark G. Yudof noted that the 10-campus system could face a $21-billion shortfall in years ahead if no changes were made. He said Monday's actions "will go a long way in solving a major long-term challenge to the university's solvency." Even with the reductions, the plans for future employees would be among the most lucrative in the nation, he said.
But that did not appease UC's labor unions.
Monica Martinez, a certified nursing assistant at UCLA Medical Center for the last nine years, said her job involves a lot of physical labor, including lifting and moving patients. Martinez, who is 38 and is active with the American Federation of State, County and Municipal Employees union, said she does not think most people can perform the demanding work until age 65, when new employees would receive full benefits.
"It's devastating that they are not taking that into consideration," she said of the regents' decision.
The regents voted 14 to 3 for the retirement rollbacks, which echo agreements the state government reached in June with four unions, including the one representing California Highway Patrol officers. Among those voting against the changes was state Secretary of Education Bonnie Reiss, who said she thought the UC plan was too generous and would be unsustainable. The plan would involve some borrowing from other university funds.
In September, the regents adopted a plan to raise employees' contributions to the pension and retirement health plans over the next two years from the current 2% to 5% and to raise the university's contribution from 4% to 10%. Those are expected to go higher in the future.
On Monday, the board also endorsed a report from the UC Commission on the Future, a group of faculty, administrators and students that looked for reforms to help the university survive state budget cuts. Its recommendations include enrolling more out-of-state students, who pay higher tuition than Californians; pushing more students to graduate in three years; and creating additional online classes.
Regents Eddie Island and Odessa Johnson cast the only votes against the report, saying they opposed allowing UC's systemwide enrollment of out-of-state students to rise to 10% from the current 6%. They said they were worried that such a move would displace qualified Californians, particularly black and Latino students.