Where the Money Goes in the UC System: Revisiting the Compensation Scandal

In 2006, a series of stories broke in the media documenting how the University of California regents were granting lavish compensation packages to top administrators, and many of the perks going along with the high salaries were not reported. After several articles in the San Francisco Chronicle and a legislative hearing, it was discovered that the regents were constantly breaking their own rules in order to give people hidden compensation. According to one Chronicle article, “University auditors told the UC Board of Regents they had found that 143 exceptions to the university's compensation policies had been made to give extra pay or benefits to 113 senior managers.” However, this discovery of secret deals and broken rules was only he tip of the iceberg. It turns out that for years, the university was hiding from the public its compensations deals by only reporting some of the money that top executives and employees were getting. Thus, even though the UC is a public institution, it failed to fully disclose many of its decisions and policies.

In 2006, a state audit of the UC found hundreds of examples of misspent public funds and secret deals for top administrators. Here are some highlights from The San Francisco Chronicle’s reporting on the auditor’s findings:
-- Thirty-nine people getting extra vacation.
-- Fourteen senior managers receiving honoraria from the university -- $200 to $13,000 -- despite a policy against it.
-- Fourteen senior managers receiving incentive payments in violation of UC policy or not approved by the regents. Some are continuing awards of up to 15 percent of base salary.
-- Thirteen housing-related payments that violated policies;
-- Six sabbaticals granted to employees who didn't qualify for them or who were paid more than policy allowed.
-- Eleven stipends that either were not approved or were extended without approval.
-- Eleven cases of extra severance pay promised.
One of the things to note about all of these examples is that they concern secret deals of extra compensation; in other words, none of this money was listed in the public records of the employee’s salary.

To see how corrupt and wasteful a university can be, it is helpful to look at several other costly forms of secret spending that draw money away from vital instructional activities as they raise the compensation of the wealthiest employees:
The audit revealed that one executive who was paid well to move within California was Mitchell Creem, associate vice chancellor and CFO of medical sciences at UCLA. Creem received a $150,000 relocation allowance and 11 weeks of temporary housing -- well beyond the limit of 30 days. The regents were never told.

In another case, Thomas Jackiewicz, associate vice chancellor in the UC San Diego medical school, received a $40,000 "relocation incentive" even though he lived within California, which violates policy and was not approved by the regents. He also was promised a severance package that exceeded university limits.
These examples show what happens when the administrative class takes over a university, and they are able to reward each other without any level of public scrutiny.

In one of the most shocking findings of the auditor’s report, we find the following statement: “The University of California said it struck at least 700 separation agreements with employees over the past five years -- worth about $23 million.” This finding really got my attention, and so I looked for details for these costly separations, and I found these revelations:
When UC Berkeley Associate Athletic Director Mark Stephens was passed over for a promotion at Cal last year, the university promised to keep him on the payroll, giving him $183,000 over three years while letting him take a full-time job somewhere else.

Two years ago, UC Davis agreed to give a medical professor, Dr. Casey Daggett, $150,000 in exchange for his resignation and a promise to drop all his legal claims against the university.

In 2002, the UC Berkeley athletic department forced administrator Kevin Reneau to step down but agreed to keep him on the payroll for 2 1/2 years at $86,000 per year so he could reach retirement age and his family could qualify for health care benefits.

The Chronicle reported the university's settlement pact with former UC Davis Vice Chancellor Celeste Rose. Under that agreement, UC Davis agreed to give Rose $50,000 and keep her on the payroll for another two years, at $205,000 a year -- without requiring her to do any work -- in exchange for her promise to drop any claims of race or gender discrimination against the university.

Dr. Daggett, an assistant professor of clinical surgery at UC Davis, was promised $150,000 in exchange for his resignation and the release of any legal claims, according to a settlement agreement UC reached with him in March 2004. UC also agreed to drop any claims against him, the agreement said.

These are just a few examples of the hundreds of cases of secret wasteful spending, and they tell us that when a university says it has no money to pay for things like teachers and smaller classes, the reason for the institution’s lack of money may be due to the fact that it has become taken over by a class of administrative employees who are bent on turning public institutions into their own private piggy banks.