Thursday, December 1, 2011

The Regency

Reposted from Zunguzungu.

Most of the Regents of the University of California — whose very name gives you a good idea of the kind of power they wield over the direction and functioning of the University of California – are unelected, appointed to 12 year terms by the governor of California, and almost without exception, they have no real background or apparent interest in education. They are corporate moguls, the 1%, whatever you want to call them.

On Monday, they defied California’s open meeting laws by sort-of teleconferencing from four different campuses, voting to raise various administrative salaries by about $3.5 million, including the UC Davis chief campus counsel. Perhaps they suspected he would be busy in the near future? But as many are pointing out, at a time of across-the-board-cutbacks in the work of teaching and being a university, to find raising executive salaries to be “essential” — as UC president Mark Yudof put it, “We consider these retention efforts to be essential. I understand it’s not a great time, but we can’t really close down shop and say we’re not going to make any effort to retain our best people” — tells you a lot about their priorities.

The students still came. And this is still a temporary victory for the student protesters. The regents are trying to work towards an 81% tuition hike, but student protesters threw a sufficient scare into them that they had to make up bullshit warnings of violence and hide behind telephones and police. I predict they’ll raise tuition dramatically this summer; SOP is do the dirty stuff during summer break (though, of course, winter break is around the corner too). Anyway, here’s a column of peace police at UCLA, for example, protecting the regents from students:

As a scathing editorial in the San Jose Mercury put it:

The phone-it-in session conducted in four locations was an abuse of the spirit, if not the letter, of state open-meeting laws. And for the premier public university system of the state that leads the world in technology, it was a logistical embarrassment…Public comments were heard in rotation from each site — but heard only. There was an audio connection but no video. Students couldn’t see most of the people they were addressing — indeed, had no way of knowing if anyone outside the immediate room was seriously listening to them and not rolling their eyes, checking email or whispering among themselves. It was a recipe for frustration, and predictably, it all boiled over.

Angry students shut down the meeting. In the attempt to calm things, the regents had managed to increase the tensions.

After a break, it got worse. At three of the venues, the session was moved to smaller rooms. At UCSF, there was little room for the public beyond the press.

We cannot recall another state agency holding a public meeting by teleconference. It’s within the letter of the open-meeting law that governs the regents meetings; the Bagley-Keene Act allows for teleconferencing — but this is not how it was intended to be used. The provision was included to accommodate a board member who could not physically attend a meeting. That wasn’t the issue here.

Perhaps we’re old-fashioned, but we still believe that in adversarial situations, it’s important to be able to look people in the eye when talking with or listening to them. It shows respect and fosters better communication. And at a public meeting, all members of the public should be able to not only listen to board members but also see them. All of them. While staff can efficiently conduct business by voice and video conferences, policymakers like the regents need to meet openly in front of the people they govern.

The Monday experiment turned into a farce. Participants at the four venues could not see each other, any more than residents across the state monitoring the disembodied voices on the Internet could see any of them. It was no way to do the public’s business, and it better not happen again.

It will though. This wasn’t a blip; this is what they always do, every time. They are waging a war on their students. When students and faculty and workers try to make their voices heard, they hide behind closed doors and police. So we should now turn to look at the regents themselves. Who are these people who are entrusted with total power over the UC system?

There are 26 of them; one student is appointed to the board by the board — for a one-year term — and then there are 7 ex officio members, the governor, lieutenant governor, speaker of the state assembly, state superintendent of public instruction, president and vice president of the UC Alumni association, and also the president of the UC (appointed by the regents), Mark Yudof himself.

The other 18 are appointed by the governor, as I said, to 12 year terms (5 by Gray Davis, the other 13 by Schwarzenegger). The best reporting on the UC Regents is Peter Byrne’s “Investor’s Club,” from which I’ve liberally poached a lot of details. But I’ve spent some time profiling the appointed regents more briefly, just so we can get a sense for their overall makeup.

Some, like Richard Blum, are almost caricatures of everything the Occupy Wall Street movement is opposed to: a hyper-connected investment banker (founder of Blum Capital) who sits on the boards of all sorts of corporate and nonprofit firms, is married to a powerful congresswoman, and functions as a living and breathing embodiment of the phrase “conflict of interest.” Blum takes center stage in Byrne’s reporting, here, for example. Or this, from Changing Universities.

One tidbit from Byrne’s reporting, though you should read the whole thing if you’re interested; Blum oversees investment for the UC’s $63 billion portfolio, and is also the largest shareholder in two for-profit corporate-run universities, which the UC invests in. As Peter Byrne puts it,

“Marketing strategy aside, Mr. Blum has taken on two seemingly disparate roles— one as an advocate for a nonprofit university, and the other as an owner of two for-profit educational corporations. As a regent, Mr. Blum has approved cost-cutting policies for UC that appear to have enhanced the profitability of his vocational schools. And in 2007, Mr. Blum’s spouse, Sen. Dianne Feinstein (D-CA), wrote federal legislation that benefited the for-profit college industry. For several years, Mr. Blum’s firm, Blum Capital Partners, has been the dominant shareholder in two of the nation’s largest for-profit universities, Career Education Corporation and ITT Educational Services.”

But Blum is just one, and it’s the whole 18 that we need to look at. So the first thing you notice, is that quite a few have close Schwarzenegger connections. Most prominently, Bonnie Reiss and Paul Wachter (who both work in finance) are two of Schwarzenegger’s closest associates and advisors for decades, his ”anchors, the people who were with him before politics and will be with him after.” George Kieffer was Maria Shriver’s attorney, co-chaired Schwarzenegger’s reelection committee, and recruited staff for his administration. And Charlene Zettel was a two-time member of the California state assembly, before Schwarzenegger appointed her as his Director of the Department of Consumer Affairs from 2004-2007 And it won’t surprise you to learn that most have donated to Schwarzenegger campaigns over the years; Hadi Makarechian, for example, was one of the top 50 contributors to Schwarzenegger’s reelection campaign (and was also national campaign finance co-chair for Mitt Romney’s 2008 presidential run); he’s a real estate developer (the founder, chairman, and CEO of Capital Pacific Holdings). He’s also Orange County aristocracy, his family the “closest thing Orange County has to the Rockefellers.”

Along with Reiss and Wachter, there are a lot of financiers. George M. Marcus is the founder and chairman of The Marcus & Millichap Company, whose mission ”is to help our clients create and preserve wealth by providing the best real estate investment sales, financing, research and advisory services available.” Leslie Tang Schilling is an investment banker, the founder of Union Square Investments Company, and Russell Gould was a Senior VP at Wachovia and is still president of Gould Financial Consulting.

Odessa Johnson is the only regent who has anything like a real education profile, having been a community college dean for two decades. Others, like David Crane, have spent some time doing stuff that looks like education — he’s a “lecturer” at Stanford, for example – but he spent twenty four years as a partner at Babcock and Brown, an octopus of an investment firm specializing in structured finance and spends a lot of time talking about how terrible it is that public sector employees are allowed to be in unions. Or William De La Peña, whose official UC Regent bio describes him, at the very top, as a professor of ophthalmology. In reality, he the founder and director of “De La Peña Eye Clinics” while the fact that he’s the owner and CEO of WDLP Broadcasting Company, Llc. and used to own a soccer club in Los Angeles is obliquely acknowledge by the sentence: “Other business interests include the media and soccer.” As far as I can tell, the biography’s statement that he “is” a professor refers to a position he held for for six years in the 80′s, but to which he has not returned.

The chair of the board, Sherry Lansing was the CEO of Paramount Pictures, but more recently (vi ReclaimUC) she’s created a thing called the “Encore Career Institute,” which will help unemployed Baby Boomers “rewire instead of retire.” Courses will be designed by and taught through UCLA Extension — a certificate program which will cost between $5,000 and $10,000 — and will accomplish the goal of ”deliver[ing] some of the fantastic intellectual property that UC has” to students in the state and the world. (Also worth noting (and noted by Byrne), she’s on the board of directors of Qualcomm Inc– annual director’s fee of $135,000, plus stock options, of which she owns “more than $1 million” and which came to a direct payment of $485,252 in 2009 — and after Ms. Lansing joined the Qualcomm board, UC quadrupled its investment in Qualcomm).

And then there’s your general captains of industry. Eddie Island was a vice president at McDonnell-Douglas, which used to be a gigantic defense contractor until it merged with Boeing in 1997, and became a behemoth defense contractor. Norman Pattiz was the founder and Chairman of Westwood One, “America’s largest radio network and one of the world’s leading media companies.” Monica Lozano is the publisher and CEO of La Opinión Newspaper, which she inherited from her father (and which he inherited from his father), and she makes almost a half million a year for sitting on the boards of directors at Bank of America and Walt Disney. And Frederick Ruiz is retired from being the CEO and founder of Ruiz Foods, “America’s top frozen Mexican food manufacturer.”

Finally, there’s prominent lawyer Bruce Varner. When he was appointed to the regency, UC Riverside’s Chancellor said that “He will be an excellent ambassador to the Regents about the growth, vitality, and promise of the Inland Empire,” which is a quote I can’t particularly make sense of.

The most important thing is just to recognize that these are the (mostly) men who are entrusted with almost complete power over one of the most important and valuable public resources the state of California has, an institution of higher learning that was built by the state of California for the good of the state of California. But one particular reason all of this matters so much is that the greatest loss of revenue to the UC was not, in fact, from state budget cuts, but from investment losses (though the privatization of the university was well on its way even before the financial crisis). And as Peter Byrne shows in his massive series, the UC investment strategy was radically shifted in the early 2000′s away from safe and reliable (and more modest) methods of investing into (ultimately disastrous) modes of investing that caused the UC’s finances to drop like a stone when the bubble burst:

“[After 2003] regents Gerald Parsky, Richard C. Blum, and Paul Wachter—all financiers by trade—took control of UC’s investment strategy. Sitting on the board’s investment committee, the three men steered away from investing in more traditional instruments, such as blue-chip stocks and bonds, toward largely unregulated “alternative” investments, such as private equity and private real estate deals. According to UC internal reports, the dramatic investment change has led to an “overweighting” of investments in private equity. One concerned regent has likened the change to “gambling in Las Vegas.” [that's George Marcus, by the way, who objected to investing pension fund money in that way, to his credit (and to the discredit of the other regents who disagreed)]

This is important, because — as Bob Samuels pointed out a year ago, the UC’s funding shortfalls owe much more to investment losses than to state cutbacks:

…UC administration has argued that since the state reduced university funding by a combined $600 million in 2008 and 2009 (after we account for $718 million in federal recovery money), the system had to raise fees 41%, furlough employees, and layoff teachers. However, during this same time period, the UC lost over $23 billion in its investments.

This means that the investment losses were more than forty times greater than the state reductions, but the university administrators never talk about these huge investment losses. In fact, at the last UC Regents meeting, after I brought up the lack of discussion concerning the UC’s investment losses, the head regent, Russell Gould, exclaimed that, “Our investments have outperformed our peers in the last twenty years.” Not only was this statement incorrect, but it shows how the people overseeing the university do not want to deal with the real issues. Rather than looking at their own internal problems, the UC administration’s central strategy is to blame all problems on the state.


  1. As far as I can tell, UC investment income has little to do with UC operations. Whatever the losses are in investments, that's about the accountability of the investors. UC doesn't put those investment earnings into ops. The losses that matter are in research indirect costs and administrative bloat (positions, salaries, expenditures). Charles Schwartz showed that UC undergraduate tuition *fully covers* the costs of instruction. What the huge reductions of state support expose is just how much gravy is being passed around to support "reputations" and "status". The "excellence" rhetoric used by UC officials in reference to the university is really code for "our status and pay". As the SUNY Albany students have got it, time to "chop from the top". I don't know what excessive administrative salaries have to do with "excellence" in either education or research.

  2. Two things: first of all, the public comment periods provided by the Regents are completely lame. It would be better if there was a website where persons interested in commenting could post a preview of their comments as YouTube videos, and then if the public could vote on which presenters would actually speak in person at the actual Regents meetings.

    Secondly, I wish the protesters would stop trying to shut down every single Regents meeting because that strategy is really helping no one in the long run. If they want to protest they should do so outside so that the meetings can continue.

    By continuing to shut down every single Regents meeting, the protesters are only making it easier than it already is for the Regents to conduct their business behind closed doors.