Seems a good reason to hike tuitions. We need to keep those university administrators in the lifestyle to which they are accustomed. Students? They are at best a secondary concern.
So why did UC behave so recklessly? Quite simply, public institutions have the exact opposite incentives necessary to manage a defined benefit system appropriately. The decision makers who authorized the funding holiday in 1990 are all long gone, and none of them will bear any of the cost for their actions. In fact, they all directly benefited from their profound mistakes.UC regents and plan trustees, all being members of the retirement plan themselves, all saw their take home pay immediately rise as a result of their contributions dropping to 0%. Further, UC administrators saw millions of dollars flow back into their general budget, no longer designated for funding the retirement system.
Pete Constant, Senior Fellow at the Reason Foundation, finds that public pension systems are “actually a perverse system in which there is a win for the entire membership when pension board trustees are wrong!”
He notes that, “The risk associated with not meeting actuarial assumptions is borne entirely by the taxpayers…unfunded liabilities are generally amortized over long periods of time, spreading the associated costs across generations.”