UCI Medical Center: Where Does the Money Go?

By Jessie Lee


Earlier in 2009, the UC Irvine Medical Center (UCIMC) received a $21-million gift aid to finish the final construction phase of its new UC Irvine Douglas Hospital. Initiated in 2005, the 7-story unit is expected to be completed by the end of 2011 with 424 beds, 15 high-tech and spacious operating rooms, 45 neonatal ICU’s and more. The total project totaled $555.9 million, the largest project in Orange County. While the UCIMC continues to expand and build up its state-of-the-art unit, UCI students are struggling for survival at the bottom of the UC system due to the ongoing budget crisis.

With the financial shortfall resulting in budget cuts, fewer services for students, programs eliminated, furloughs, and layoffs, there have been complaints from unions and critics that physicians are still paid enormously high compensations. They have expressed opinions in seeking assistance from UC medical centers. Among the protesting voices against UC's budgeting transparency is Charles Schwartz, Professor Emeritus of Physics at UC Berkeley. He is a vocal critic who provides organized information and concepts on the finance, secrecy, and governance on his blog University Probe. Schwartz has written about redirecting medical revenues and faculty bonus pay generated from UC medical schools to cover the financial shortage. Through e-mail, Schwartz was also able to answer a few questions and offer some more pointers on the issue of alternatives to financing the UC.

To understand the medical center’s perspective, I met John Murray, spokesperson for the UCI Medical Center (UCIMC), who generated a great deal of knowledge on how funds work in the institution, and about physician compensation amidst the financial crisis.

The following are issues relating to the UCIMC amidst the financial crisis:

• Medical revenues cover expenses, reimbursement shortages, physician compensation, and bonus pay for the SOM
• Management reorganization in the UCIMC eliminates vacant positions and reduces costs
• UC medical centers are exempt from the system-wide furlough program
• Critical disparity in remuneration for senior management group and staff physicians

Source of Money

The UCI Medical Center (UCIMC) is an enterprise operation, meaning that it is self-sustaining. The institution is funded mainly through service fees and patient care, according to John Murray. There are a few grants, but they constitute only a minor portion. In the fiscal year ending on June 30, 2008, the UC Irvine Medical Center Audit Report records total operating revenues at $526.4 million in which net patient service revenue contributed to $502.8 million. The remaining “Other operating revenue”, amounting to $23.6 million, comes from chiefly State Clinical Teaching Support (CTS) funds, referral lab, cafeteria and parking operations. Government-supported health insurance programs Medicare and Medi-Cal provide for almost half the net patient service revenue.

(Click to enlarge, or download full document from link below)

UCIMC Statements of Revenues, Expenses, and Changes in Net Assets for the Years Ended June 30, 2009 and 2008, page 16.

While UCIMC earned $584.3 million in total operating revenue, its total operating expenses amounted to $530 million. Much of the profit earned goes out to pay for expenses, to purchase new equipment or medical technology, to construct the new hospital, and to license their technicians, Murray said. He added that the medical center expands moderately with small business, generating more revenue for continued development with the help of government-issued hospital revenue bonds.


READ THE FULL UC IRVINE MEDICAL CENTER AUDITED 2008-2009 FINANCIAL REPORT HERE.


SEE MORE UC and UC MEDICAL CENTER AUDITED ANNUAL FINANCIAL STATEMENTS: http://www.universityofcalifornia.edu/finreports/


Medical Revenues Cover Reimbursement Shortages and SOM Bonus

In response to the budget cuts, critics have expressed the possibility of using medical center revenues to patch up the financial deficit. Charles Schwartz wrote that “some of that extra money at the Medical Centers should be on the table,” in referring to the $512 million UC-wide “Unrestricted Net Assets” for the end of the fiscal year 2008 (UniversityProbe.org).

The UCIMC counters that these revenues are often used to cover other “committed” fees. For one, insurance companies may debate paying for clinical service fees at the going rate. This problem exists even with government payors such as Medicare and Medi-Cal, as official documents have evaluated. Government auditors, contractors, and intermediaries may dispute on many issues, including the diagnosis, and clinical procedure. Thus, the medical center allocates a portion of its revenue to charity care, which is omitted from net patient service revenue. Charity care helps provide clinical services to uninsured patients at lower or no charge. They also cover differences from insurance reimbursements less than the actual cost of hospital fees. In the fiscal year ending June 30, 2009, UCIMC spent $81 million on charity care.

Each year, the medical center transfers a portion of its revenue to the university to “further education”, as hospital officials said. Another portion of these revenues were given to the UCI SOM, named Transactions with the University and University Affiliates. Part of it goes to pay physicians for their services, and after the expenses are deducted from that amount, the rest is called “health system support”. The excess is a bonus. The center transferred a little less than $75.3 million to the UCI School of Medicine (SOM) in the fiscal year 2009 for “academic and clinical support”, and the final health system support was reported as $53.4 million.

The UCIMC does not seem to have any additional money to contribute to the UC system. Sources show that the sum of charity care and SOM transfers is around $134.4 million. This number is surpasses their income from operations alone, stated in official 2009 fiscal year audit reports. Despite that, there is an imbalance in what this financial gift for the SOM is used for. This issue will be discussed further later in the article.


Effects of the Budget Cuts on the UCIMC

Despite the economical downturn, healthcare remains a necessity to the public. As the hospital seeks methods to “absorb the cuts internally,” no programs at the UCIMC have been cut, the PR said. By getting more juice out of every penny, the hospital has felt minimal impacts. There have been halts on salary raises, and job duties are redistributed due to hiring freezes, which is the key method of compensating for these cuts. The MC has also “winded down contracts” with consultants, a position that generally requires higher compensation than other employees. A majority of these consultants are in the information technology department. Although union members have claimed four layoffs from the medical center (read more about it in Sebastian Ontiveros and Emily Ma's report), the hospital stated that there have been no furloughs and layoffs among UCIMC employees.



UC Medical Centers Free From Furloughs

The UC Regents exempted medical centers from the regular furlough program. The rationalization behind this decision, as Murray explained, is because hospitals need to stay open for service to the community. Even if employees were furloughed, the institution would still need to hire other people to come in and do the job. If a furlough program were instigated to save $20 million, these positions would still need to be filled up. In essence, additional help would be needed, amounting to more expenditure. The PR said,

"On Thanksgiving holiday, it takes roughly $1 million to operate the medical center."

If you place these employees on furlough for 18 days, that would cost the institution $18 million. Furloughs would not be an efficient strategy to implement at medical centers.

While there have not been any furloughs, there has been restructuring in the management division. But whether or not the restructuring is driven by the financial cutbacks is undetermined. In March 2008, the Regents combined two positions into one: Chief Financial Officer – Medical Center and Associate Dean for Fiscal Affairs – School of Medicine. The gross pay for these positions in the year 2007 was $368,750.04 (Ronald L. King) and $201,056.67 (Mona M. C. Wapner), respectively. This reorganization resulted in one new position: Chief Financial Officer – Health Affairs, Irvine campus. Ronald L. King was given a 13% raise for this new position, earning $431,500 in base salary. (Numbers obtained from The Sacramento Bee and ucpay.globl.org). Slap on an additional $60,518 bonus pay, cited from official sources, and $492,018 is King’s total compensation in calendar year 2008 (Annual Report on Executive Compensation for Calendar Year 2008). As CFO – Health Affairs, King is responsible for overseeing the finance of UCIMC, the University Physicians & Surgeons, SOM, and also School of Nursing and Programs in Pharmaceutical Sciences and Public Health. UC Davis, UC Los Angeles, and UC San Francisco have all adapted a similar position, too.

Currently, the UCIMC has no Chief Financial Officer of its own or Chief Nursing Director. The responsibilities of these jobs are distributed among existing officials. In the case of the nursing division, nurse managers assume the extra duties of Chief Nursing Director.

Another reformation occurred in July 1, 2009, when Dr. David N. Bailey, former UCI Vice-Chancellor for Health Affairs, resigned. This position was then separated into two positions: Vice Chancellor of Health Sciences and Dean of the School of Medicine. Ralph V. Clayman is currently an Interim Dean of the SOM. Similarly, over at the UCIMC, Terry A. Belmont is an Interim CEO at the UCI Medical Center. Both are still awaiting announcement for the search of a permanent Dean/CEO.


Who is Responsible for Hospital Faculty Compensation?

As one institution, UCIMC has two employers. The UCI School of Medicine is accountable for compensating the hospital faculty, including physicians, RN’s, and Ph.D’s. On the other hand, the medical center itself compensates around 60% of the base pay of its 600 residents and fellows.

The compensation of physicians at the UCIMC is determined and distributed through the Health Sciences Compensation Plan (HSCP). As described in documents from the UCI School of Medicine (SOM)’s website, this plan is an organization of the SOM faculty that “hold a University appointment at 51% or greater, funded by the SOM”. Murray stated that HSCP compensates the base pay for these physicians working at the UCIMC. There are three factors affecting the amount:

1. Stipends from duties including teaching, assuming administrative/management offices such as Vice Chair, Division Chief, or departmental committees
2. Research grants, funded mostly by the government
3. On-call rates, and clinical practice, which are paid for separately through billing and insurance companies and managed by the University Physicians & Surgeons.

In addition to that, surgeries are mostly cash procedures, which increase cash compensation. The University Physician & Surgeons is another UCI faculty practice organization, formed in 2005. They manage “capitated contracts” and “oversee the entire clinical practice for UC Irvine’s faculty” (School of Medicine Timeline). Therefore, in correct terms, UC Irvine Healthcare, the clinical entity of UC Irvine Health Affairs, is made up of two parts, the UCIMC and the University Physicans & Surgeons.


Bonus Pay and High Compensations

Unions and critics say that money from medical centers could smooth out budgetary differences. Unexpectedly high compensations are one of the major aspects that has been criticized and attacked consequently after the budget setback. Charles Schwartz writes that, “[Yudof] chose not to mention that all the bonus income from the physician practice enterprise would be exempt from the paycuts” in University Probe. Through an e-mail Q&A with Schwartz, the professor concisely suggests that instead of compensating faculty bonus pay, the money should be used to cover budget holes. He refers to his previous essay "Financing the University - Part 7," which writes,

"If we were to take (or borrow) 15% of that bonus pay, to help preserve the core missions of UC, that would bring something like $100 million to the table."

("Budget Alternatives for the UC").

UC doctors and coaches are substantially the highest paid UC employees. The large compensations mostly result from a hefty “bonus pay” as several California newspapers show in a 2008 salary database they have compiled. These may be stipends for temporary office, merits, one-time relocation allowances, bonuses, and more. In the case of the medical center, official UCIMC salary guidelines regulate these bonuses to be paid for by the funds that remain from patient care professional fees after expenses have been met (Faculty Salary Guidelines).

Hospital officials commented that UC medical centers are under more scrutiny, because they are part of the UC system. As a public institution, many documents are required by law to be disclosed, whereas private clinics are not. In actuality, physicians’ salaries at UC Medical Centers are already lower than free market compensation levels. Many can easily ask for salaries 30% to 40% higher in private practice. To be willing to work at the UC medical center would require a more serious devotion to academia than the monetary compensation. The PR stressed that many administrators at the UCIMC are far from the top in the list of high salaries UC employees. The Dean of the School of Medicine, Ralph V. Clayman, is paid around 33% lower than the market average, Murray enumerated.

In 2008, Clayman’s compensation as “Professor-MedComp” in 2008 was $439,507.73. This number doesn’t make it to the top 50 in the UC system. UCI takes its first ranking at #49, with John Stuart Nelson raking in a meager $663,257.12, compared to #1 from UCLA, Ronald W. Busuttil with $1,776,403.71. In a separate category of “Executive Dean of School/College” on ucpay.globl.org, the highest paid UC faculty in 2008 was Gerald S. Levey of UCLA ($630,190.98). UCI enters the billboard at #23, with Thomas C. Cesario earning $397,274.97.

The total compensation for Gregory R. D. Evans, a clinical professor and plastic surgeon at UCIMC, in 2008 was $564,325 (ucpay.globl.org). Amidst the recessive economy, budget cuts, and financial deficits, how do physicians similar to Evans continue to receive these seemingly large compensations? According to the Association of American Medical Colleges (AAMC), the annual earnings for plastic surgeons ranges anywhere from $300,000 to $791,510. Aside from being a clinical professor, Evans is also the Chief of Aesthetic and Plastic Surgery Institute at the UCI Department of Surgery. Without considering demographics, geographic location, and the income effect, at $564,325 from the University of California, he is only roughly in the middle of that range.

Furthermore, Murray also emphasized that salary level does not determine a job’s value in society. He said the high bonus pay of plastic surgeons could simply reflect a trend in Orange County that people like to do plastic surgery.

An important fact is that while some management officials have been given raises ranging from 10%-25%, they may at the same time assume two titles at once. By eliminating one office, the Regents save tens of thousands of dollars. Nevertheless, this still brings to question the need for such raises and high compensations, especially among senior management administrators, during this time of budget deficit.

The UCOP’s website provides the 2009 Update of Total Remuneration Study for Campus and UCOP and Medical Centers, evaluated by Mercer and Hewitt. The companies compared UC medical centers to 12 national and 10 California academic medical centers including Johns Hopkins Hospital, Stanford Hospital, University of Michigan Medical Center, University of Virginia Medical Center, Kaiser North and South, Long Beach Memorial, and more.

The following graphs show the results of the study, highlighting a significant imbalance for staff physicians and senior management groups.

(Click on any of the images to enlarge picture; download link provided below)

(p. 61) Official study shows that all UC medical center employees are within 5% above or below market average for cash compensation, except for staff physicians, which are 18% below average.

Any comparative search on various faculty members with ucpay.globl.org will reveal a significant disproportioned income among physicians of different departments, and also with management officials.

(p. 62) Graph compares that health and welfare benefits for all medical center employees are all below the mean by 2-7%, except for senior management groups and professionals and support staff (PSS) that are 2% and 3% higher, respectively.

(p. 63) Documents show that retirement benefits for UC medical center employees are all significantly above market average but at the same time widely disparaging amongst groups (the lowest being 22% for nurses, and highest being 100% for senior management groups)

(p. 66) In general, besides staff physicians whom are down by 9%, all UC medical center employees are remunerated uniformly above market average by 4-6%.

READ THE COMPLETE DOCUMENT, titled “New Retirement Plan Ideas for New Hires and Related Collective Bargaining Issues”


Overall, medical benefits for UC medical center employees are “close to market median,” while retirement benefits are 66% higher than average. To conclude on compensation, official documents analyze that “cash compensation for many [UC] employee groups is below market, significantly so in many cases, but that UC’s benefits are currently ahead of market.” Total cash compensation for employees of UC medical centers is 2% below market average. There exists a large disparity between categories: Management and Senior Professionals (MSP) are 1% above average while Staff Physicians are lower than their average by 31%. Yet cash compensations are defined as base salary, which exclude one-time relocation allowances, stipends for additional temporary responsibilities, one-time bonuses, and etc. Remuneration reports do not take into account bonus pays, which are often over the top. This places bonus stipends in an overlooked territory.

Information observed from official online resources show that the medical center spends what it earns, and that they contribute their share in the UC system. But even after extensive research, it is still hard to fully understand the budget. There are broad categories in financial reports, such as “Other.” As one of the administrators in the SOM Dean’s Office said, “Even we don’t know the numbers.” Yet ultimately it is the unwillingness of the UCI School of Medicine to speak that provides the public more reason to look at the medical center with more skepticism.

The School of Medicine receives millions each year from its teaching hospital in support of education, but when that money is simply regurgitated as bonus compensation for executive administrators and chief physicians, to what extent does that really further education?

As the Regents continuously approve of raises: 32% tuition fees for students, and salary increases for UC executives and physicians, there is only one obvious fact. Students are a segregated sector from all other categories. Students and the system are put to the test when students can’t keep up with the large fee hikes. Financial capability will become another stratification in public higher education. How much should the rules of economics weigh in on public education?

California Community Colleges also in Hot Water

Dear Readers,

Education activist Helen Lecar wrote us in response to an article on the role of blogs in covering the crisis in higher education. Ms. Lecar writes that the budget disaster goes beyond the University of California and includes the state's community colleges -- long the entry point for many to postsecondary education and middle-class earnings -- and now also imperiled.

From Ms. Lecar:

Hi,

I just found your blog this AM, via the California Report and am delighted that you're working past at all the photo-op public media about student protests. The issue is, as you indicate, the long-term causes for the budget cuts and the wreckage they leave behind.

As a League of Women Voters activist on behalf of the California Community College System, however, I was disheartened to note the absence of any mention in the article of the even bigger calamity the 2-year colleges are facing. The same budget cuts, which are denying university admissions to thousands of qualified students, and re-directing them to the already overburdened, underfunded CC districts, are also excluding students altogether from the Master Plan's promise of universal access to higher ed.

There is now a strict, reduced cap on the number of full-time equivalent CC students the state will pay for, with devastating cuts to student services of all kinds. The end result is that the system-savvy, rejected university-eligible students, who know how to navigate the application process and fill out the forms early, are excluding by their sheer numbers the very students the CCs were set up to serve -- people who come late to higher ed, who need to retool their job skills, who were underserved in their K-12 years, who are newcomers to the US and the English language, who are trying to better their lives and learn their way into the middle class.

As Benjamin Franklin noted, "We must all hang together or we will all hang separately." Please keep your readers, and your students, aware that the cuts to education affect everyone, K-20, and indeed will destroy the future of the economy of the state if the current legislative pigheadedness is not reversed.

Helene Lecar

What About the Workers?

by Jason Chung

When we hear about budget cuts, the first thing that comes to our minds is the students and how many of them will soon be unable to afford their UC education thanks to the recent 32 percent hike in tuition. But what about the workers? The campus custodians? The food and service staff? The gardeners? These contract workers are not true employees of the UC system staff. Their status as outsourced workers offer them no job security. Therefore, they were amongst the first to end up on the chopping board when our school system failed to obtain a workable budget from the California state funds.

As students, we have a mass of organizations dedicated to fighting for our causes, even if we are not activists ourselves. But for the hundreds of workers who are already working long hours for minimum wages, they do not have the luxury of going on strike or holding rallies to garner attention for their situations. They have families to feed. Their children's next meal to consider. Taking time off from work to plead their cases is simply not an option.

Here is where the UC Irvine Worker-Student Alliance (WSA) come into play.

“The WSA was formed in 2007,” says Abraham Medina, a senior Sociology undergraduate member, “when we felt that the mainstream student organizations here on campus are not giving adequate attention to worker issues.” Its members range from graduate and undergraduate students, UCI alumni and the workers themselves. Though relatively small in number, most of its roughly 50 student members belong to more than two other organizations, and are extremely active in reaching out to the community. Medina, for example, is also part of the Orange County DREAM Team that assist undocumented youths gain access to higher education. The group prides itself for its practicalness and lack of a hierarchy structure, believing that to fight for equality, they must first treat each other as equals.

The group immediately went to work in May of that same year, when outsourced workers from UC Berkeley, Irvine, Santa Barbara and Santa Cruz joined together demanding an improvement to their substandard wages. After numerous petitions, rallies and letters to the Chancellors of each campus, along with the backing of the American Federation of State, County and Municipal Employees Local 3299 union, the workers finally won a crucial battle for their rights when they reached a settlement with the UC system to increase wages for UC Berkeley, Santa Barbara and Santa Cruz workers by $1.75, while UC Irvine is to immediately stop further outsourcing from one of the companies, Commercial Landscaping Service, who provides the campus with groundskeepers, and in-house those who were already working here.

However, UCI received the short-end of the bargain when the Office of the President denied that the funds to in-house the UCI workers existed. As such, as of today, these workers remain outside laborers with no health insurance, no sick-days, and no pension plans for retirement. Since then, the WSA has continued to fight feverishly for workers' rights.

More recently, when it was announced that major cuts must be implemented in UCI in order to keep the university running, the WSA reemerged in the spotlight. On April 29, 2009, the group held a panel titled “A Worker Struggle is a Student Struggle”, in which these subcontracted workers were given the opportunity to describe their personal experiences working for UCI in hopes of drawing the backing of students. “However,” says Sandra Flores, a sophomore History undergraduate member, “UC administrators have only answered with divisive practices and tactics of intimidation in order to prevent any worker movement on the campus...UCI [was] threatening to fire and replace all present workers [at the time] to avoid in-sourcing the current workers.”

On May 14, 2009, they hosted a rally titled “Protest UCI Racism” in which they again called for the in-housing of the 150 subcontracted workers hired through ABM Industries, one of the largest facilities services contractors in the U.S., who were still denied employment after over two decades of service. As outsource workers, not only are they paid minimum wage ($8.25), as opposed to the $12 that UCI-employed workers earn, they are not entitled to vision and dental insurance, retirement benefits or vacation time. Although hundreds of students showed up at the rally in front of the administration building that day, “negotiations have deteriorated,” says Fernando Chirino, a fourth year Sociology graduate student member, “three workers who have already been laid off have just received letters saying they will never be [rehired].” In August, 35 more custodial positions were cut in the university's attempt to close the $77 million gap left behind by state budget cuts.

Currently, the WSA is partnering with several other activist groups in the Defend-UCI coalition. They have temporarily switched their focus from fighting for workers' rights to helping laid-off workers get through this difficult period. Aside from the usual protests and rallies to garner attention to their cause, the group is also holding can drives to lighten the unfortunate workers' loads.

What's Happening to Outreach?

by Jason Davis and Lauren Demello

December 1, 2009

Severe economic hardship has required faculty and employee furloughs and layoffs throughout the University of California education system. Many of the difficult decisions forced upon the UC have meant heavy, repeated blows to sports teams, Humanities, and various outreach programs, among others. UC Irvine has already seen the closure of one such outreach program, and the future of at least another remains uncertain. While many programs at UCI are making do with less funding for the 2009-2010 school year, still others are nervous about further cuts and potential closures for 2010-2011. Unfortunately, cuts from some of these programs directly affect services to the surrounding community. Although some of the services have been preserved in different entities, a climate of uncertainty persists.

In the spring of 2008, an outside review team at UCI recommended the closure of SAAS—the Student Academic Advancement Service, and a restructuring of its services to be adopted by other programs within the Division of Undergraduate Education. SAAS was federally funded, in part, by the US Department of Education to assist first-generation, low-income students, and offered study skills workshops, academic counseling, career planning, and tutoring to eligible students. SAAS was also responsible for the popular Summer Bridge and Transfer Bridge programs, which have thankfully been transferred to Student Support Services. According to Shelly Brown-Gunn, Associate Director of SSS, there were several recommendations in the report outlining how services could be improved or restructured. “The decision to close SAAS was a reaction to sudden and drastic budget cuts to DUE last summer. The Deans determined that a lot of what SAAS did for students had some duplication in other departments, so they had to make the ‘lesser of all evils’ decision of shutting down that department to be more efficient with the services provided in utilizing other departments already performing those services.” Some of the federally funded money that previously went to DUE for SAAS now goes to SSS, but Shelly said that it aspires to benefit the same students—roughly 450—for the same services—just under a different name.

Shelly reiterated that restructuring is still taking place and that DUE might not be done with layoffs to balance their budget. And that’s a lot of work to take on for a new organization that is essentially under-staffed. “DUE had to have multiple layoffs to achieve the budget savings after the cuts. Closing SAAS didn't solve the entire problem with the budget. Whenever a division has to do massive layoffs, there will be the issue of the remaining staff having to take on more responsibility to make up for the productivity losses. That is what happened with the restructuring of my department to take over part of what SAAS did. Choosing who to lay off is a heart-wrenching process and I don't envy the people that had to make such difficult decisions… I was shocked to hear they [SAAS] were being closed, and I didn't see that coming at all. But the DUE was shocked to get a nearly 20% cut—it was a million dollars that needed to be shaved from the current year's budget—a cut of that magnitude with that timing was unprecedented. It is just a dismal time for the UC and for California right now.”

Amidst the certainty of additional midyear cuts, the future of other student and community outreach programs is uncertain. Humanities Out There is a program designed to boost students’ reading, writing and critical thinking skills in secondary schools. This year, the partnership is with the Orange Unified School District and H.O.T. has focused its efforts on literature and history through a variety of historical, artistic, and scholarly publications. As Program Manager, Peggie Winters coordinates the recruitment of graduate instructors and UCI undergraduate students who tutor in the OUSD. Contrary to general perception, H.O.T. is not a recruiting tool for Humanities, nor is it open only to Humanities students. “Our tutors come from all over,” Peggie said. “We have pre-med students, information computer science students, and engineering students. We’re trying to introduce college level teaching at the high school. In the high schools that we go to, most of the students are going to be first generation college students. We’re trying to reach out to the groups of high school students that have never thought about going to college because no one in their families ever went to college.”

Jeff Lake, an eleventh grade English teacher at Orange High School, says that the Humanities Out There program is very well received by his students, and that the lesson plans are relevant to their studies. Although many of the students are unsure what they want to study after high school, Jeff says “H.O.T. is effective for any student, regardless of their future collegiate interests,” and that many of his students are considering college as a result of H.O.T. “I feel that my students have obtained some of the skills required to succeed in college. Most of the H.O.T. lessons have dealt with analytical writing, which is a skill students need to be well prepared for. Not only for success in their remaining years in high school, but for post-secondary writing courses they will need to complete [as well].”

There are currently one hundred UCI undergraduate students working under the instruction of six graduate students. Each undergrad then becomes a tutor to roughly four or five High School students; in total, H.O.T. provides college-level instruction to five hundred and forty High School students every quarter. Obviously, funding is an issue with such a large student staff, and until this year, H.O.T. was funded, in part, by a grant called Gear Up under the UCI Center for Educational Partnerships. With the latest installment of cuts to CFEP’s budget, H.O.T. was dropped from the grant. To stay afloat, H.O.T. has been receiving money from the School of Humanities. Next year, though, H.O.T. will only be receiving $20,000—a rate, Peggie says, is not enough. Dr. Stephanie Reyes-Tuccio, Director of CFEP, confirmed the cut. “HOT was heavily funded by CFEP in the early days. Those were the days that the CFEP received double the funding that it gets now. But [in] 2001, CFEP’s funding was cut [by] 50%. The next year, it was cut even more.

“My supervisor told me that we don’t have money to fund HOT,” she continued. “Gear up was designed to make school wide change in terms of scores in mathematics and language arts.” But since H.O.T. was only offered in two classrooms for each school, it just didn’t affect the number of students needed to justify its support. “That’s the capacity that HOT has based on their funding. So, there’s no way that we could or did affect school wide increases in scores when HOT can only service two courses.” Since CFEP has been unable to increase funding to 2001 levels, H.O.T. lost its inclusion in the grant. “There’s no funding to support H.O.T.,” said Dr. Tuccio, “and there hasn’t been for a while.”

Responding to the question of SAAS, Dr. Tuccio said she was devastated and questioned whether the reduced staff of SSS could appropriately handle the increased load. “We’re still new in the academic year. At this point it’s hard to tell what will happen. I [recently] met with the Associate Dean and was briefed on SSS and the takeover of SAAS. But she was optimistic about how they would take all the different components of SAAS programming and distribute it to different organizations across campus. And her feeling was that things would be done more efficiently in time… I’m going to be watching very closely to see how this transition goes and to make sure the needs of the students are being met because I’m accountable. I was recently told that SAAS would have been serving many more students this year.” But a restructuring of Humanities Out There, similar to what happened with SAAS, would not be a welcomed alternative for H.O.T., says Julia Lupton, H.O.T.’s founder. “I feel that something that makes HOT special is the [graduate] research and the interest of [local] schools. I think if it were taken over by another group on campus it would just turn into a homework help thing. It would be very different from what HOT currently delivers.”

Unfortunately, when programs are unable to support themselves financially, they are the first to see cuts. Initially, there was “a host of different outreach programs across campus. CFEP was [created] to get everyone in one place and have synergy, to leverage everyone’s efforts and to have a more strategic outreach toward the schools instead of everyone doing their own thing.” Dr. Tuccio noted the difficulty in keeping these programs running, and although CFEP has written three proposals for the Gear Up grant, she said it isn’t enough to sustain programs at their current level of funding. “Schools don’t have money to fund the programs so they come to me for additional support. Unfortunately it is at a time when the campus is cutting me, so I have less support to offer them.”

CFEP, too, is going through changes. It also is downsizing and they are moving to a new location—a smaller and less accessible location. In the “old days,” before there were budget constrictions, CFEP used to publish lesson plans collaborated for H.O.T. by UCI graduate students and local High School teachers. The lesson plans haven’t been printed in three years, but electronic documents are routinely requested from all over the world. According to Julia, these publications aren’t remedial pamphlets, and teachers and students in any school can use them, even if they were never affiliated with H.O.T.

If Humanities Out There were to close for school year 2010-2011, it would mainly affect those in the community that wouldn’t be exposed to college level thinking and writing. With H.O.T., underserved and diverse groups of students are learning firsthand that college is a realistic, worthwhile, and rewarding endeavor. At UCI, losing H.O.T. will primarily affect graduate students whose departments do not fund TA-ships, and the undergrads who tutor within the surrounding communities. Jeff Lake feels the H.O.T. tutors are very effective, and that his students look up to them as “experts in the field.“

“If H.O.T. is not able to return next year,” remarked Jeff, “I feel my students will miss out on a valuable opportunity for small group instruction and a ‘window’ into the college life that the tutors provide.”

Although Julia Lupton is not no longer involved with H.O.T., she understands the current situation. “The fact that we have survived this year amazes me, and the fact that we weren’t cut last year. It’s sort of an end to an era,” she remarked. “If the money comes back, [maybe] we can start up the program again. We do have a really nice structure with graduate students developing content and undergraduate students getting to teach the content. So my hope is that it will be brought back and that this is just hibernation. I want this to build back up within the school of humanities.” As for Peggie Winters—who had become teary eyed at the mention of closure—she suspects the school will make an effort to relocate her into another administrative role. “It’s extremely frustrating to be struggling like we are,” she said. “We are borderline depressed about it. We feel helpless because there’s nothing we can do. We feel bad, but we understand the economy. The sad thing is, I feel the way we are being treated is that this program is a luxury.

“This program is not a luxury.”

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The Center for Educational Partnerships is a division of Student Affairs and works to create “collaborations that support preparation for and success in higher education… in order to achieve the University of California's goal of academic excellence.”

Student Academic Advancement Services closed on August 31, 2009. None of the previous counselors could be reached for comment.

Student Support Services is continuing many of the functions previously offered by SAAS, albeit with a reduced staff. The Division of Undergraduate Education is monitoring its transition.

Humanities Out There is continuing its mission in the Orange Unified School District for the remainder of the 2009-2010 school year.

The Cost of Quality

By Morgan Slade

In the Cross Cultural Center, the distant hum of the overhead projector echoes throughout the room. Thirteen students shuffle in and quietly prepare for the tuition hike ‘teach-in’ to begin, one of many held on the UCI campus two days before the UC Regents passed the 32 percent educational fee increase.

Teach-in organizer Tia Peterson, Graduate student of Psychology and Social Behavior, addresses the gathering, warning that further fee increases will result in an education that leaves students financially and emotionally bankrupt. Peterson states,

"I came to UCI because I was highly recruited. The deal was that I attend UCI with full financial support because they were invested in the contributions I could offer as a member of their research team. I have lived up to my end of the deal. I have published articles, done numerous studies, graded papers and mentored many undergraduates. I have trained undergrads to become R.A.’s and have written their letters of recommendation. I have passed my comprehensive exams, finished my second year project and earned my masters degree. I have done all of these things and done them well. In the end it does not matter how hard I have worked because due to a lack of funding in my department I get dropped anyway. I have fulfilled my duty to the university. They have broken their promise to me."

Student activist and organizer Emmeline Domingo also speaks at the teach-in, stating, “We don’t elect our regents. They are appointed to us. So the question that immediately arises is whether they are invested in the students or are their interests purely political?”

The common assumption at this meeting and in discussions among students and faculty across campus is that the tuition hike, brought on by California’s fiscal constraints, is a calamitous breach of trust. Many students argue that the 32 percent fee hike is forcing them to bail out the UC system. In exchange, the student body will be devoid of diversity as middle and lower income students are unable to absorb the fee increase; resulting in many qualified yet discouraged applicants from contributing to the nexus of ideas that comprised our formerly accessible UC system. But is this really the case?

While the UCLA protest displayed the impassioned resistance of students, in fact, there is some evidence to suggest that the hikes are providing opportunity that was previously unavailable.

According to an action item addressed to the Office of the President’s Committee on Finance, “Of the $505.1 million that mid-year 2009-10 and 2010-11 fee increases would generate, approximately $175.1 million would be set aside for financial aid; the rest would be used to address State budget reductions, mandatory cost increases, and other pressing needs” (http://www.universityofcalifornia.edu/regents/regmeet/nov09/f1.pdf).

Throughout 2009-10 the Blue and Gold Opportunity Plan has accommodated fee increases for undergraduate students whose family income is less than $60k. In 2010-11 the Blue and Gold Opportunity Plan will expand its funding to meet the needs of undergraduate students whose family income is capped at $70k.

Ricardo Vazquez, contributor to the UC Newsroom shares, “With the income cut-off set at the median income for California households, the plan will potentially extend to half of all California households […] The Blue and Gold Opportunity Plan will initially provide a minimum level of gift assistance for 48,100 eligible California-resident students” (UC Regents approve policy providing minimum aid for lower-income students).

According to the Committee on Finance, the expansion of The Blue and Gold Opportunity Plan will:

"Provide system wide fee coverage to an additional 800 students who were not previously eligible for participation in the Plan. The overall benefit to increasing the Blue and Gold Opportunity Plan is not only to raise the financial aid income threshold for current UC students, but also to encourage a greater number of low income students to apply and hopefully be enrolled at the University of California."

In addition to the expansion of the Blue and Gold Opportunity Plan the University is working to mitigate some of the strain presented to middle class students. The University will cover one-half of the fee increase for middle income students who have become financially impacted by higher fees and would have otherwise been excluded from grant assistance as eligibility was designated for families whose income was capped at $100k but now includes families with incomes as high as $120k. In fact, students with incomes below $180k will experience greater accessibility to resources previously untapped.

The Blue and Gold Opportunity Plan coupled with increased Pell Grant/ Cal Grant resources and lax UC Grant eligibility requirements all serve to maintain the UC’s commitment of assisting low and middle income students.

Yes, California is in the red. Due to the onset of tuition hikes students have been enlisted to combat President Yudof's threat of mediocrity. However the student fee increase isn’t the only casualty produced by the budget crisis. Over 2000 employees are expected to face layoffs between this year and next. The UC system is experiencing the loss of respected faculty to various institutions with no projection as to when they will be replaced. Hours have diminished, programs have been deserted and positions have been confiscated. Perhaps the fee increase is an unjustifiable means to an end. However when considering the benefits reaped from salvaging the integrity of the UC system one must ask themselves if they are willing to contribute to the quality of their own education.

Is Proposition 13 the reason behind this mess? Part 2

This is the second part of the two part investigative piece on Proposition 13 that explores whether Proposition 13 is to blame for the mess going on in the California Budget Crisis. This part explores whether Proposition 13 is truly the case as to why California is in it's budget woes. 

If you want to read the first part, click on the following link-

http://ucibudget.blogspot.com/2009/11/is-proposition-13-reason-behind-this_24.html

Is the two-thirds majority vote requirement in Prop 13 to blame for being a hindrance to this economy?

A claim like this is an overstatement. First off, according to Joel D Fox, former president of the Howard Jarvis Taxpayers Association, Proposition 13 is not responsible for the two-thirds vote requirement to pass the state budget or the two-thirds vote of the people to raise local taxes for special purposes. The two-thirds vote on the budget was established more than seventy years back in 1933 for budgets that exceeded 5% growth over the previous year’s budget. In 1962, that two-thirds standard was applied to all state budgets after the constitutional revision. The supermajority vote requirements is not limited to just California, but the United States in general. In fact the two-thirds vote can be found numerous times in the United States Constitution. Because the two-thirds supermajority has been long instilled in our constitution, it makes a good point that the two-thirds vote brings a sense of overall agreement to important decisions. If there were no two-thirds supermajority voting requirement, it would be obviously unfair if a tax can be passed by people who don't have to pay that tax. 

In contrast, Joel Stein of Times magazine states that for the sake of California's economy, it's best for the people to not vote because their vote has taken not helped California progress. To read the article, click here

Is there a need to reform Prop 13’s property tax cap in order to make up for the tax revenue that was lost?

Although the California property tax revenue was cut by 57% in 1978 due to Proposition 13, that only put California down from being one of the most taxed states to an above average taxed state. According to the CCSCE (Center for Continuing Study of the California Economy), due to the passing of Proposition 13, California ranked 45^th in effective property tax rates at .477%; however, we still generate enough capita from property tax at $1,151 per capita to be ranked 27^th in the nation. That is fairly high compared to bottom ranked Alabama, which makes $455 per capita from property taxes. Even though property tax revenue was lowered the year Prop 13 was implemented, that did not hurt California from raising enough tax revenues above inflation.

According to George Rebane of the Bastiat Triangle Association-

“The important and revealing metric to assess the impact of Prop 13 is the inflation adjusted per capita revenues that the state has enjoyed over this period.  Everyone knows that since Prop 13 the state has found many other areas and activities from which to squeeze tribute out of us during the last 27 years.  So let’s see if the passage of Prop 13 has somehow caused collected property taxes to fall behind in contributing their share to the state’s coffers.

1980 per capita property tax was $6,360,000,000/24,000,000 = $265.00.

 2007 per capita property tax was $43,160,000,000/38,000,000 = $1,135.80.

The CPI increase gave us a total inflation of 202.4/88 – 1 = 2.3 – 1 = 1.3 = 130%.

The inflation adjusted 2007 per capita property tax then becomes $1,135.80/2.3 = $493.82.

The inflation adjusted percent increase is then $493.82/$265.00 - 1 = 1.864 – 1 = 86.4% more than inflation increased during the 27 year interval.

Putting it another way, the state’s annual property tax revenues increased at a rate
(1.864)^(1/27) – 1 = 1.023 – 1 = 2.3% over that of inflation.  And since the average annual inflation rate over that period was (2.3)^(1/27) – 1 = 1.031 – 1 = 3.1%, the state pulled in property tax revenues that grew at a 2.3%/3.1% = 74.2% higher rate than needed to keep pace with the 1980 per capita property tax receipts.” (2009)

Proposition 13 shifted cities’ revenue focus away from property taxes and move towards other revenue sources. According to Associate Economics Professor Gary Richardson of University of California, Irvine, “So for local governments that likes to tax property and find it convenient to tax property, this Prop 13 puts a crimp as to what they can do. That (Property tax) was a very convenient method for them to raise revenue for their citizens. So that’s going to shift the types of governments or the taxation to other areas and it might have an effect on the composition of government. If local government can’t pull some strings (because) they can’t raise money through property taxes, they’ll try to raise money through other means or other government units will have to pick up the slack.”  Since then majority of our general funds have been coming from, ranking from highest to lowest, Personal Income taxes, Sales tax, Property tax, Corporate Income tax, and other miscellaneous taxes. According to the CCSCE, California’s personal income tax collection per person is $1,418, ranking the 6^th highest in the nation. Our 9.55% income tax rate is the 4^th highest in the nation and for incomes more than $1 million per year, there is a 10.3% tax rate, the highest tax rate for incomes more than $1 million in the nation. California also boasts the highest sales tax rate in the nation with an 8.5% sales tax rate for customers, 2.25% higher than the national mean, 6%. Not only does California boast the highest sales tax rate, it also has the highest Corporate income tax rate at an 8.84% flat rate. Overall, California ranks 6^th in tax burden percentage in the United States with an estimated 10.5% of income going to taxes compared to the 9.7% national average. Clearly not much has changed compared to 1978 before Prop 13 was implemented into our state’s system when CaliforniaAmerica.  had a tax burden percentage of 11.7% compared to the national average of 10.3%. In conclusion, it is clearly an overstatement to mention that Proposition 13’s property tax cap has diminished our tax revenue when we still remain one of the highest taxed states in the United States.

So if California is the highest taxed state in the United States, why isn't our revenue increasing as it should? Why did California's expenditure drop from $91,547.0 to $84,582.9 (in millions)?
Thomas Del Beccaro, Vice Chairman of the California Republican party, states three reasons why. "(1) the national economy, (2) that so many Californians have left over the last 5 years and (3) millions of Californians are now unemployed.  All together that means a shrinking taxpayer base." With taxpayers fleeing from California, we lose taxes along with them too. 

What about the Commercial Property owners? Couldn’t the State of California have made much more revenue if they weren’t given the grand benefits of Prop 13’s property tax cap?

As mentioned before in Part 1, “a corporation owning commercial property is bought out or merged, but the property remains in the ownership (deeded) of the corporation, then the property can effectively change ownership and avoid Prop 13’s provision that fixes the amount of tax based on the property’s resale value.” Although this has greatly reduced the property tax businesses have to pay to maintain property, this does not mean that businesses have the benefit of paying less taxes. Prof. Richardson stated, “We have plenty of mechanisms to tax businesses. If a business is not paying enough in one type of tax, consider another tax. If Disneyland (referring to the example in part 1) is not paying enough property tax, then just add a one dollar surcharge on ticket prices (Corporate income tax).” 

Although taxing corporations through other means can help raise revenue lost from the property tax cap, we ultimately forget that it's people who pay taxes. If the government Imposes a new tax (corporate income or sales) on Disneyland, Disney may lower dividends to stockholders or lower the wages of the workers. If possible, they can do both along with raising ticket prices. In other words, it's possible that stockholders, workers, and visitors at Disneyland are altogether paying for the tax on Disney. (Cited from economics FAQ from Pitzer.edu)

To see how the California’s Government changed since the enactment of Prop 13, check out this link: http://www.hjta.org/propositions/proposition-13/analysis-government-revenues-california-enactment-proposition-13

Is it Prop 13’s fault for the declining quality and spending in our K-12 education?

Prop 13 has some effect on the spending of K-12, but it’s certainly not the only thing going on. First off, there is certainly more money in the school system now than before Prop 13. Even though there has also been more students in school than in there were back in 1978 when Prop 13 passed, more money is spent on the students, in real per capita dollars. A study by the Center for Government Analysis shows that there is a 30% more spending per pupil than there was back in 1978. So why the problem in K-12 education does persists? According to Joel D. Fox, “…education is not just about money. Too much administration, union rigidity, parental involvement or lack thereof are all issues. And the problem is not just in California…There are many problems with public education in this country that do not revolve around money.”

Secondly, Proposition 98 ensures a minimum funding guarantee for k-14 education (elementary to community colleges). This ballot initiative, passed in 1988, binds the state funding to ensure that K-14 will receive consistent funding.  The California Department of Finances states that, “The state's share of the guarantee is derived by subtracting local property tax revenues (the local share of the guarantee) from the total guarantee amount. Proposition 98's share of overall General Fund tax proceeds averages about 43 percent. As a percentage of new (additional) General Fund tax revenues, Proposition 98 gets approximately 54 percent, depending upon the factors and tests. For example, for an increase in General Fund tax proceeds of $100 million, Proposition 98 would get about $54 million on the average.” However, there are consequences from ballot initiatives like Prop 98 (earmarking initiatives) that is damaging California’s economy which will be explained later.

Now what about the funding for UCs and other California public universities? Is Prop 13 to blame for the cut spending of our public universities?

Before we go point fingers at Proposition 13 for the spending cuts on public universities in California, we must realize we’re in a nationwide recession where other states are cutting spending on services and that proposition 13 is just one of many ballot initiatives that are limited to our state. During an economic recession, taxes fall and spending cuts must be made, but earmarked taxes limit the government’s choices as to what spending should be cut. Political Economy Professor Linda Cohen remarks “I think it’s important to know we’re in a very serious economic recession. All states are under a crisis so whether or not we have Prop 13, we would’ve been in recession. By repealing or reforming Proposition 13, we’re not going to get a quick fix. The reason why things got exacerbated is because of (California’s) bad fiscal structure.” So what makes California’s fiscal structure different from other states? “California does a lot more earmarking through propositions and California’s revenues are more volatile than other states,” answers Prof. Richardson. Throughout California’s fiscal history, there have been many ballot initiatives to give guaranteed spending to certain services from California’s tax revenue, designating a certain minimum percentage of the tax revenues to that service without allowing the legislature to cut spending on those services. “When we do earmarking, we’re tying the hands of the government and we’re letting special interest dictate spending outside of the legislative process, and that often does not generally lead to good outcome,” comments Prof. Richardson. Facts from the CCSCE show that in the 2006-2007 fiscal year, out of the $170 billion in state and local tax revenue, the personal and corporate income tax making up $63 billion, went to general funding while property tax revenue ($42 billion) went to schools, cities, counties and special districts, sales tax ($45 billion) went to state government, local government, and transportation agencies, and the miscellaneous tax ($20 billion) went to local government. All the tax revenues that did not go to general funds went to services that were able to pass ballot initiatives such as highway maintenance, transportation, K-12 education, water bonds, Parks and recreation, and etc. Meanwhile, the government had to figure out how to split the $63 billion amongst the general funding services such as prisons, youth rehab, healthcare, tax relief, higher education, resources, labor and workforce, and etc. Because of the low tax caused by the recession, the government is left to cut spending to help the state survive in this deficit. The problem is the government is not allowed to cut spending on any of the services that receive funding from earmarked taxes leaving them to only cut spending on whatever is covered by the general funding such as prisons, rehabilitation centers, healthcare, tax reliefs and higher education. Because the government is only allowed to cut spending on whatever programs and services are covered by general funding, this has led to the cut spending on higher education such as UCs. 

Although it would have been beneficiary for public universities if they weren't as many earmarked taxes as there are today, to believe that there will be a significant increase is just a mere speculation. Prof. Richardson states, "When there's a downturn (earmark) you think 'Well maybe the decisions (Budget cuts and spending) would have been different.' Well that is kind of a speculation. It's not clear if the decision was different. I suspect we would have gotten less of a cut, but I'm not a 100% of that." Even if there were no earmarked taxes, giving Government more options as to what services should get cut spending, it is possible that the government still would have chosen higher education to take the damage.

So if not Prop 13 what is to blame for the California Budget Crisis?

According to Prof. Dan Mitchell of UCLA, “At the peak of the business cycle, the state was already taking in less in revenue than it was expending. The faltering economy and the loss of taxable gains from the stock market worsened the deficit and brought about the current fiasco.” In time of a nationwide recession, every state is hit hard economically due to lack of consumer confidence in spending, stock market crashes, the weakening value of the dollar, and layoffs which has led to lower tax. The unfortunate problem is California is hit the hardest. “The budget downturn is worse in California and that has nothing to do with our fiscal structure of our government, that has to do with the economy and that our economy was hit harder by these shocks. The government problems are what transmit the shock to through government to government services. But the shocks of the economy are not caused by Government budget structure. The government budget structure is not the reason why couple of years ago people were building these houses out in the desert that people did not want to pay for or the rate they had to pay for to sustain them. And that seems to be the big part of the California budget crisis,” explains Prof. Richardson. So if neither the California fiscal structure nor the Prop 13 is the cause of the California Budget Crisis, what is the main cause? Simply put by Prof. Richardson, it’s the main cause of the recession itself, the United States Housing bubble.

To understand what caused the United States Housing Bubble, please check on this link to learn more- http://www.wealthdaily.com/articles/united+states-housing-bubble/1145