caledinsider.org: The Budget Literacy Project

Context: The Transparency 101 presentation was hosted by the Faculty Seminar on UC’s Financial Future, an open seminar organized by UC Berkeley Professors Stanley Klein (Optometry), Alan Schoenfeld (Education) and  Charles Schwartz (Physics), devoted to research into topics such as the construction finance and how the University of California contributes to the state’s economy. The seminar meets Tuesdays from 5-7 p.m. in 489 Minor Hall on the UC Berkeley campus.

Note: Additional specific questions asked during the Transparency 101 presentation and their answers, if available, will be available in a later post.

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“Money not formally restricted to its use is fungible,” UC Berkeley Professor Emeritus Charles Schwartz (physics) said. “Fungibility is the antithesis to transparency.”

Schwartz was speaking at a presentation hosted by the Faculty Seminar on UC’s Financial Future Tuesday night (March 9^th) called Transparency 101. The presentation consisted primarily of a lecture given by Schwartz about parts of the UC budget and UC financial documents that he considered unclear. His lecture was followed by a response period for UC Berkeley Associate Vice Chancellor (AVC) for budget Erin Gore and AVC for Finance and Controller John Ellis, as well as a question-and-comment period for the audience, which consisted of around 30 to 40 students, faculty and staff.

Disagreements shaped the presentation, but overall it was characterized by a shared interest in inquiry.  Everyone seemed to agree that UC finances could be more transparent.

Berkeley Professor Stanley Klein (optometry) emphasized the nuances of views expressed in the seminar, explaining as an example that he disagrees with Schwartz on a number of topics.

“That’s what makes this seminar interesting– different points of view,” he said.

The presence of Ellis and Gore made the presentation particularly unique. UC administrators and non-administrative members of the UC tend to be seen as polarized and uncooperative, but here they were engaging in thoughtful dialogue.

However, there may be a limit to the impact this dialogue can have. While Gore and Ellis can share information about UC finances and may even be able to revise UC financial records to make them more understandable, they have specific responsibilities that are mostly restricted to the Berkeley campus. Their positions have little to no influence over the UC Regents.**

Schwartz, who was clear to direct his criticism of the UC to higher officers such as UC President Mark Yudof, explained that Gore’s responsibilities include Berkeley’s budget planning at the beginning of the fiscal year and Ellis’s include the accounting for the campus at the end.

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Controversies that figured prominently in the presentation were accounting for unrestricted funding, the classification of funding that goes toward university hospitals and the effect of pay cuts on faculty.

Unrestricted funding

In the quote about fungibility and transparency, Schwartz was referring to the University of California’s unrestricted fund, which is comprised of money pooled together from various sources such as state aid and student fees. Because the funding sources that flow into the unrestricted fund are fungible or not bound to specific uses, no one can pull a dollar out of a student’s fees and say, “This dollar went toward this professor’s salary,” or “This dollar went toward construction.” The uses of unrestricted funds, therefore, are not transparent.
Gore disagreed with Schwartz that fungibility and transparency are irreconcilable, though she admitted that information about how the UC uses its fungible funds is currently not as clear as it could be.
“Just because money is fungible doesn’t mean you can’t see where it’s spent—not to say we’re there yet,” she said.

Classification of funding for hospitals

On the topic of funding for university hospitals, Schwartz said the category “Total Expenditure for Instruction” in UC financial schedules 1D (Berkeley) and 4D (UCLA) is deluding because it does not refer specifically to money spent on teaching activities but also includes money that goes toward things like the salaries of doctors at university hospitals.

A professor in the audience countered that UCLA doctors’ salaries can be considered instruction expenses because the doctors may be educating medical students who are watching their procedures.

Pay cuts

In relation to the controversy over pay cuts, a graduate student asked if UC Office of the President officials could quantify at what level of pay cut faculty would leave their jobs. He recited a “mantra” used by UCOP officials:

“If we don’t pay them enough, then they’ll walk,” he said, and asked at what point the faculty would walk–will a doctor or professor leave after receiving a one percent pay decrease?

A professor responded that Berkeley lost 48 retention cases last year.*

Gore suggested that it’s not just the money that keeps people at the UC and that that various factors create a delicate balance, including a desire to contribute to public education.

“It’s more art than science,” she said. “The fear is always that we don’t want to break Berkeley, we don’t want to break (the) UC.”

The next step

Many topics, such as where the overhead on grants goes, were only touched upon on Tuesday. In order to follow-up on topics that were not thoroughly explored, seminar facilitators and audience members decided to continue the discussion next week, at the March 16 session of the seminar.

“We knew this (presentation) would just be dipping our toes into the issues of fiscal complexity,” Schwartz said.

*I don’t know if “last year” means 2009 or the 2008-09 school year, but it is the phrase the professor used.

**The state exercises less control over the UC system than the CSU system. Critics of this policy say it gives the UC Regents too much power over the UC system.