Regents Approve Internal Transfer of $2.1 Billion

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The UC Board of Regents approved Thursday the internal transfer of a maximum of $2.1 billion into the university's underfunded pension plan.

The funds will move in $1 billion increments each year for the next two years from the university's Short Term Investment Pool to the pension fund in order to avoid borrowing money from outside lenders, who charge the university higher interest rates.

STIP is mainly used by UC researchers as a sort of savings account to hold and accrue interest on research grant funding not currently being used.

"For us to borrow to fund the necessary retirement contributions would be pretty expensive," said systemwide Academic Senate Chair Daniel Simmons in an interview March 10. "Using our own money ... does save a great deal to the extent we can do it."

This shift of money into the university's pension fund - which faces a multibillion dollar funding gap accrued due to years of no payments being fed into the fund as well as the recent economic collapse - saves money in the long term by paying off a larger portion of the plan's debt now, rather than letting it sit and accrue further over the years, according to UC Executive Vice President and Chief Financial Officer Peter Taylor.

Because STIP is largely comprises research grant money that can be withdrawn at any time, it requires a high level of funds available for immediate access. Taylor said the pool - which had assets valuing $8 billion at the end of the 2009-10 fiscal year, according to the UC Treasurer's Annual Report - would always have enough in it to meet cash demands.

Internal transfers such as this have happened before, according to UC Executive Vice President for Business Operations Nathan Brostrom, but never on this scale.

The pension fund move follows a presentation to the regents on Wednesday that advocated for moving a separate $1 billion from STIP into the university's Total Return Investment Pool in order to generate more revenue for the university.

According to Taylor, the move could generate $62 million annually for the university because of different investment practices between the two pools. TRIP has a riskier investment policy than STIP does because TRIP allows the university to put a greater proportion of its funds in more volatile, but potentially more lucrative, investments.

Bob Samuels, president of the University Council-American Federation of Teachers - a union that represents lecturers, UC faculty and librarians - said the move was irresponsible.

"If the market has another crisis, they're totally screwed," he said.

But Regent Richard Blum said at Wednesday's meeting that the investment change was not that big of a risk.

"It's almost too conservative," he said. "I don't know what the dollars would add up to but, if you look at the return, you will find that we have left a huge amount of money on the table."

Tags: UC BOARD OF REGENTS, PENSION PLAN


Jordan Bach-Lombardo is the lead higher education reporter. Contact him at [email protected]



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