As trial closes, a Big Lie about City College finances

    Judge Curtis Karnow will have to sort out all of the misinformation in the CCSF trial. He won't rule until December.
    Judge Curtis Karnow will have to sort out all of the misinformation in the CCSF trial. He won’t rule until December.

    By Tim Redmond

    NOVEMBER 3, 2014 – So many stories, so little time, so in the middle of a heated election I missed the last day of testimony in the City College case. But the Chron’s Nanette Asimov has a report that shows how the ACCJC commissioners either intentionally or out of ignorance missed the entire point of the school’s financial troubles:

    The lawyers called four commissioners to the stand who said they voted in 2012 to put the college on notice that it would lose accreditation if it didn’t come into compliance with all standards within a year, and in 2013 they voted to revoke.

    “Frankly, I was appalled at the fact that they had a financial situation that was not sustainable,” testified Sharon Whitehurst-Payne, whose term on the commission ended in June. She also said the college “had not taken us seriously” about repairing its financial and governance problems, and that she “didn’t see that much had changed” by 2013.

    She said “93 percent of (college) income was going toward salaries and compensation … I would have been looking for them to go back to the union and say, ‘This is not sustainable. … If we have to take a pay cut, that’s what we all have to do.”

    In the audience, faculty looked shocked. During a break, Alisa Messer, who was faculty union president at the time, said employees had taken a 9 percent pay cut and campaigned vigorously for Proposition A — a parcel tax bringing in $15 million a year to City College — and Proposition 30, a statewide tax to end years of college cuts.

    “My reaction can’t be quoted in the paper,” Messer said.

    On the stand, Commissioner Frank Gornick said college officials themselves told the commission in 2013 that the college remained in “significant disarray,” and that there was “an intimidating environment” for those who wanted to comply with accrediting requirements.

    Commission Chairman Steven Kinsella said he voted to revoke because the college owed more money than it had in the bank, which “technically means they’re insolvent.”

    Deputy City Attorney Ron Flynn reminded Kinsella that Prop. A would bring in millions of dollars a year, and the money would arrive within weeks of the commission’s revocation vote. “Was that an improvement?” he asked.

    “No,” Kinsella said.

     

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    The testimony earlier in the week made clear that City College was “insolvent” in part because the state of California not only cut its support to community colleges in the Great Recession – but also delayed payments, sometimes pushing the mandated funding into the next fiscal year. So on the books, the school was out of cash; in reality, the City of San Francisco was providing bridge loans until the (guaranteed) state money arrived.

    There was never a missed payroll. Vendors got paid. The lights were on.

    And more important, City College – the staff, the unions, the administration, the trustees – decided as a matter of consensus policy not the change the school’s mission or decimate its course offerings in tough times. Instead, the faculty took pay cuts, the administrative overhead was reduced – and the school decided to try to solve the long-term problem in a way that used to be pretty common:

    They decided to ask for a tax hike.

    Instead of cuts, City College sought revenue-side solutions. And that approach worked: Voters at both the state and the city level agreed to give the college more money.

    Related article  'And so begins the resistance'

    Is there something fundamentally wrong with that? Have we gone so far to the right as a society that we have to accept as gospel that the only answer to funding challengers in the public sector are more and more cuts?

    That’s what the ACCJC seems to be saying. City College wasn’t willing to cut enough, wasn’t laying off faculty and eliminating classes, wasn’t following the Republican playbook … and instead was looking for community support.

    Right now, today, City College is financially stable in part because of new local and state taxes, and in part because state Sen. Mark Leno got a measure through guaranteeing funding during this nasty accreditation battle. The only reason the school isn’t doing as well as it should be is that the ACCJC, instead of helping solve the revenue problem, tried to shut the school down. Because it wasn’t cutting enough.

    And that, of course, caused an enrollment drop, which caused a revenue drop … which made no sense at all.

    That’s one of the huge lingering issues in this trial – and it will be up to Judge Curtis Karnow to sort it out.

    • jch

      This is a good assessment, even if it did rely in part on the Chronicle’s reporting. The article and the testimony of the commissioners illustrate that the ACCJC is following a “disaster capitalism” model whereby a severe economic shock, the great recession, is used to impose a more business-friendly regime, in this case one where a public institution is scaled down and its functions replaced by private entities. For another example is this, consider the replacement of the public school system in New Orleans with a charter system following Katrina.

      We know that STWEP Agrella is part of this agenda and probably Chancellor Tyler too. More interesting would be to learn the background machinations that brought us two interim chancellors with the same agenda after Don Griffin became ill.

    • Sam

      It’s good that you finally addressed the real issue here – the gross financial mismanagement of CCSF, in particularly noting the testimony that CCSF is, or at least was at the time, technically insolvent.

      Even so, you failed to mention the huge black hole of unfunded pension and healthcare liabilities, despite mentioning the incredible 93% of spending going on staff costs. The pension hole alone indicates a dire crisis, and yet the faculty appears to be blindly pretending that there is no problem.

      They claim to have taken a 9% pay cut. Big whup. It probably needs to be 20% to make any measurable impact on the insolvency. And more importantly and incredibly, CCSF staff are still paying nothing towards their generous pension plan – a travesty to the taxpayers who are on the hook for that, as well as for their own pensions.

      And yet CCSF and the city have their heads in the sand, blindly claiming nothing is wrong and that we can all have free pie forever. And when a neutral entity points out that the emperor has no clothes, it is demonized.

      Blaming the messenger won’t pay CCSF’s bills. That will take staff and service cuts, down-sizing and privatization, or else the whole bag of dirt will have to shut down.

      • alachicana

        “CCSF staff are still paying nothing towards their generous pension plan “– Really? You are misinformed about that on 2 counts: CCSF staff does contribute and the pension is not generous.

        • Renee

          He also thinks Brice Harris is CCSF’s chancellor.

      • monica collins

        and here come the haters to bash CCSF’s hard working employees. As it’s pointed out in other posts we do fund our pensions and are paying more for our ‘perks’, also taking large pay cuts, which is no skin off your butt so of course you don’t care. I hope it happens to YOU Sam. Your arrogance and elitism are overwhelming. btw I am not a teacher

        • Sam

          I never said you didn’t work hard. You would be fired if you didn’t, even at CCSF, I’d like to think.

          But please furnish the proof that you pay 100% of your pension costs, as you claim when you state “we do fund our pension” because my information is different.

          And on what planet is a 9% adjustment to your bloated pay package a “large” pay cut?

          • Angelica

            What didn’t come out in the trial, and seems to still be confusing many onlookers, is that CCSF faculty make on average $10K less than other CC faculty in California. This 92% figure that people keep comparing to 85% at other schools does not equate to some % amount over other CC faculty that we get paid. I turned down a job in another district for this one and I would now be making at least $25K more per year if I had taken the other job and that was in a small town where the cost of living is still quite low. And yet I live in one of the most expensive cities in the world but somehow am expected to make the lowest pay? And Sam, you call that “bloated”?

            Back to that 92% figure. At my child’s elementary school, 98% of the budget goes to salaries (this is the nature of education, people — salaries are the biggest expenditure!). No one seems to be apologizing for that figure over there, and I hope no one would say that my son’s 2nd grade teacher is overpaid. She would make more in almost any other profession. And no, Sam, we don’t fund 100% of our pensions – that isn’t how pensions work. But a big chunk of every paycheck goes there. And it’s a bigger chunk than my brother who is a firefighter pays into his state pension. And it’s a bigger chunk than my friend who works at a CSU pays into hers. I’m not sure why you think we shouldn’t be paid fairly for a job that requires advanced education, and we shouldn’t get a pension like other state employees get. If the idea of pensions bothers you, that’s a fight that needs to play out on a larger stage. The pension at CCSF is the same one all public non-CSU/non-UC teachers are part of in California – CalSTRS. We don’t get some special treatment just because we’re CC faculty. The rules are the same for all. And the average CalSTRS pension for a CCSF faculty retiree is about $3800 a month. Please tell me what planet you are from in which that amount of monthly income is living the high life…

            • Sam

              What is the percentage of your income that you are required to contribute to your pension?

              I’m having some difficulty getting an answer.

            • Angelica

              Sam asked about pension contributions. This can vary over time, but it is the same for all CalSTRS participants. The percentages are listed here:
              http://www.calstrs.com/post/contributions-0

              Interestingly, when I just looked at my last paystub, the amount withdrawn is higher than that (12%), but I believe there is a supplement required as well and perhaps that makes up the difference.

            • Sam

              Angelica, what about the employer pick-up clause, which reads to me that your supposed contribution is actually reimbursed to you by CCSF?

              “Most employers participate in the federal Employer Pick-Up Program under Internal Revenue Code section 414(h)(2). Under this provision, your employer “picks up” your CalSTRS contributions so that you can defer income taxes on that portion of your compensation.”

            • Angelica

              Sorry, I don’t have a clue what you’re talking about. No one picks up my contribution. I make it myself out of my paycheck, always have. Income tax is deferred on that payment just as it would be if I was a private sector employee paying into a 401(k). Nothing special there either.

            • Sam

              Angelica, that quoted passage I gave was taken directly from the citation that you gave me!

              It indicates that these alleged staff pension contributions are “picked up”, presumably through extra pay.

              It reads to me is that you got a pay raise that covers your after-tax pensions costs, effectively making it free.

              Moreover your employer and the state are making a massive contribution on your behalf – reads to me like 20% to 30%

              I can assure you that NOBODY in the private sector gets that deal. I am paying for my pension and your pension. Why are you worth that deal?

            • Angelica

              I disagree with you. This is exactly how retirement funds in the private sector work. When my husband contributes to his 401(k), his taxable income is dropped the same amount; that is to encourage Americans to save. His deal is better than mine because his employer matches a portion of that contribution, but he can’t touch any of it until he retires. And at that point, it will be taxable. That is how my pension works, too. I pay the contribution, but — as I read it on the website — the employer “covers” me so that just like a 401(k), my contribution reduces my taxable income. A pension is different from a 401(k) in that every dollar my husband puts into his account will go back to him some day. I will get my pension until I pass away, but if I pass away a day after I retire, none of the contributions I made were really “mine.” In that way, my contributions don’t really go into a private account just for me (the way my husband’s do). But the State of California has set it up so that it appears that way for tax purposes. Does that make sense to you? It’s explained on the website here:

              >Most employers participate in the federal Employer Pick-Up Program under Internal Revenue Code section 414(h)(2). Under this provision, your employer “picks up” your CalSTRS contributions so that you can defer income taxes on that portion of your compensation.

              >Your contributions must be deducted from your compensation and considered creditable compensation for retirement purposes.

              >Your tax-deferred contributions are credited to your Defined Benefit account as “Employer-Paid Member Contributions.” The contributions are taxable when returned to you or your beneficiaries as a lump sum or monthly benefit.

              So the contribution comes out of my paycheck and is “credited” to an account for tax purposes, but the amount in that account isn’t really mine and doesn’t really go back to me. Even if I want a lump sum the day I retire, the amount in that account won’t decide my lump sum. A formula of years served and salary, etc. will decide my lump sum. What you misread as some special way we never have to pay into our pension isn’t that AT ALL. How would CalSTRS stay afloat if no one ever paid into it?? It’s just a way to make sure that we get the same tax benefits that those in the private sector get.

      • Jean

        Anyone who sums up the problems around City College by calling it “the whole bag of dirt” is not exactly interested in the value or interests of the institution.

    • iknowed

      So long as City College is underwritten by the full faith and credit of San Francisco’s taxpayers, a commitment that is stronger today than ever, then City College will never reach insolvency.

      One technique of disaster capitalism is to lard up public institutions with middle managers who identify politically with the elites so as to bind up the educated classes to the interests of the kleptocrats.

      That is why the ACCJC is focusing so intently on lowering the dollars spent in the classroom in favor of middle management, as classroom spending creates more educated people with which the elites must contend which complicates the agenda of managing the educated.

    • jch

      Good point. Note than the 2014-2015 budget projects faculty expenses declining 7.34 percent while administrative expenses are increasing by 27.8 percent from 2011 to 2015. – See more at: http://theguardsman.com/category/featured/budget-finalized-amid-discontent/#sthash.u5S8eYpD.dpuf

      Also note than money for consultants has gone up $4 million.

    • Max

      Sam,
      Did you say “CCSF staff are still paying nothing towards their generous pension plan”?
      [I copied and pasted]

      • Sam

        Max, I put out that claim so that someone could prove me wrong, if it is wrong.

        So far nobody has been able to show me evidence that CCSF staff contribute to their pensions, nor how much.

        I’d welcome such proof or else will continue to assume otherwise.

        • jch

          Interesting debate tactic Sam. Why don’t you call the State Teachers Retirement System and find out for yourself? Do you really believe STRS would allow CCSF faculty and administration to collect generous benefits without making a contribution? If so, you should really go back to school. CCSF offers classes in government and economics.

          Also, since you bring up the budget issues, here is a short look at the healthcare retirement issue drawn from the AFT lawsuit against the ACCJC. Three points are key:

          1. CCSF made a conscious decision to adopt a pay-as-you-go system for retiree healthcare benefits in lieu of cutting into instruction funding. This approach was endorsed by the state chancellor in 2010 and used by other community colleges.

          2. The ACCJC has been bludgeoning colleges to join a prefunding compact in which several of its commission members are involved. Assessing prefunding of retiree benefits No other accreditation agency does this. This should be investigated by the attorney general.

          3. The last budget submitted by a real board of trustees for CCSF included prefunding of healthcare retirement benefits.

          There’s more, but you can read it for yourself. Have fun.

          OPEB Made Simple

          Adapted from the June 19, 2013 “Short Summary of the OPEB-GASB 45 Section
          of the CFT-AFT 2121 Complaint” filed against the ACCJC April 2013
          Direct quotations from that summary are indicated.

          What is OPEB?
          OPEB stands for “other post-employment benefits,” such as retiree health benefits.

          Why is OPEB so important to the accreditation of City College of San Francisco?
          “During the last six years, the ACCJC has criticized and sanctioned colleges, including City College, because they did not sufficiently ‘prefund’ their estimated liabilities based on a projected 30-year cost of promised retiree health benefits.”

          What is GASB 45?
          GASB (Government Accounting Standards Board) is a private organization of accountants. In 2004, GASB adopted a standard known as GASB 45, which identifies, through a set formula, the amount that all government agencies should “prefund” in retiree benefits each year. “Over the next few years,” GASB 45 became “applicable to all governmental agencies.”

          What is ARC?
          ARC is the Annual Required Amount, or the estimate of these prefunded benefits. GASB 45 requires that each government agency record this amount on its balance sheets; however, GASB does not actually require the prefunding of these estimated costs. “GASB simply identifies the annual cost of prefunding were the liability to be amortized (principal and interest spread out over installment payments) over a period of 30 years.” The ACCJC has “misrepresented the purpose behind GASB 45,” claiming that it requires prefunding of these estimated benefits. In fact, “assessing prefunding of retiree health benefits is not done by any other accrediting body.”

          What is “Pay as you go”?
          Payment of the actual amount of retiree charges each year is referred to as the “pay as you go” practice, which City College and many other governmental agencies had been using until recently. As the baby boomers retire, “pay as you go” will no longer suffice. During a period of fiscal crisis, however, this method made sense at the college as a way to protect classes and students. In fact, the State Chancellor’s office validated “pay as you go” in a June 2010 advisory.

          What does ACCJC demand that colleges do with OPEB?
          ACCJC requires that colleges pre-fund retiree health benefits by contributing to an irrevocable trust designated for this purpose. ACCJC gave as one of the reasons that it had placed City College on show cause in July 2012 the fact that though the college had joined a trust fund to prepay the estimated costs, it had not yet contributed to that fund.

          Why was this a questionable demand?
          The Community College League of California (CCLC) developed a new Retiree Health Benefit JPA (Joint Powers Authority), a trust fund to which colleges were seriously encouraged to contribute. A number of evaluation team members and some ACCJC commissioners sit on the board of this trust fund, which represents a conflict of interest. “Steve Kinsella, the president of Gavilan Community College and a CPA [and an ACCJC commissioner since 2010] has been placed on at least nine [evaluation] teams, four times as chair. The teams he has chaired have come down hard on colleges for not ‘prefunding’ their ARC.” Kinsella not only helped to create the Retiree Health Benefits JPA, but he also sits on its board of trustees. “ACCJC has appointed about a dozen other JPA trustees to serve as evaluation team members, who have been involved in issuing about 25 evaluations that reviewed colleges’ OPEB funding.” Frank Gornick, another ACCJC commissioner also sits on the CCLC JPA trust board. This brings to mind a critical revision of the old entrepreneurial maxim “find a need and fill it” to “create a need and fill it.” Instead of spending restricted resources on classroom instruction, colleges are being required to “generate income for bond and stock traders who invest in these [trust] funds.”

          Did City College have a reasonable approach to OPEB?
          The college chose to continue “pay as you go” during a time of serious statewide fiscal crisis, thus preserving the quality of education at the college by using needed funds for classroom instruction. We are moving through that crisis, plus we have increased the revenue stream, so NOW, in fact, a reasonable approach would be to increase OPEB funding. Respected actuaries, however, disagree on what the rate of that increase should be. It’s hard enough to forecast fiscal stability for six years and impossible to assess it for 30 years. The GASB 45 standard is an estimate, not a predictor of the future. What if, for example, 20 years from now a single payer healthcare system swept the nation? Of course, we cannot base our funding on that kind of dream for some and nightmare for others, so City College’s recent budget passed by the Board of Trustees (now unseated through a questionable rule change by the Board of Governors) included adequate pre-funding for OPEB. In fact, AFT 2121’s alternate budget included a similar amount.

          What does all of this have to do with negotiations?
          Now that the economy is turning around and revenue streams have increased thanks to Propositions A and 30, we can move from a “pay as you go” policy regarding OPEB. Nonetheless, OPEB must not be used as a weapon to unnecessarily decrease funds available for classroom instruction and for fair salaries and benefits, including retiree health benefits, for faculty. Fair compensation is one of the main reasons our instruction remains so high. We can recruit and retain committed, engaged full-time and part-time instructors.

          What are some final words?
          In summary, OPEB will require adjustments to our budget in the coming years. City College had taken a reasonable approach toward OPEB during the economic downturn. The college should not have been sanctioned for this reasonable approach, which preserved the high quality of classroom instruction despite dwindling resources.

          • Sam

            5,000 words and still no answer to my very simple question:

            What percentage of income do CCSF staff pay into their pension fund?

            I’m sensing obfuscation and deflection here. Does anyone here know?

            • Max

              It goes up every year, but it’s between 8 and 9% Then there is an additional payment for the supplemental plan, which is also required. So it’s between 11 and 12% total. All CalSTRS members pay at the same rate. And I just looked up firefighters with CalPERS – their rate is 10.5% So it looks like all California pensions are about the same. CSU faculty pay into CalPERS so they’re the same as the firefighters above. So Angelica’s claim that she pays a larger percentage than a firefighter or a CSU faculty member is correct, but only by a percentage or two. The UC faculty, on the other hand, have the best deal. They contribute just 6.5%…

            • jch

              All of which Sam could have figured out if he knew anything about the system and bothered to make a phone call. Is it possible that certain “facts” asserted here are simply grabbed out of the air?

            • Sam

              JCH, it has been widely reported that the CCSF pension liabilities are out of control and that staff contributions are inadequate.

              It’s not unreasonable to call out those like you who claim that isn’t so to back that position up with hard data.

              I asked a simple question and you danced around it. I hope the city has better witnesses than you on the stand.

            • Angelica

              And now, Sam, that you see how warped the “facts” were as the ACCJC reported them are you willing to agree that they may not be telling the truth in other ways, too?

    • Tad

      Pension reform: This is the third-rail that politicians in the Democratic Party have to ignore to stay in the good graces of the public-sector employees working on their campaigns.

      Public-sector workers have defined-benefit pension plans that guarantee annual returns of between 5-8% no matter what the stock market does. CALPERs and all the other schemes are hugely underfunded. Only corporate CEOs enjoy similar largesse. The rest of us have to get by on 401-K plans.

      This wouldn’t bother me in the least except for the fact that money that should be going straight into the classroom (in the case of schools) or infrastructure or services is instead being funneled straight into police, fire, bureaucrat, and, yes, teacher pension pots.

      Public employees need to learn how to fund their own pensions like the rest of us do it.

    • Rick B

      Tim writes: “… the ACCJC seems to be saying. City College wasn’t willing to cut enough, wasn’t laying off faculty and eliminating classes, wasn’t following the Republican playbook …”

      Guess what? The above partly describes what the new administration at City College, the ACCJC enforcers, has been doing the last two years. And, it shows no signs of letting up. These administrators, with support from the state chancellor’s appointed special trustee with extraordinary powers, have been reducing the pay of faculty and staff while embellishing their own pay, increasing their ranks, hiring more cops, and cutting classes. They have instituted policies and put out messages that have discouraged students from enrolling. They continue to irrationally attack the college’s department chair structure which could be seen as partly responsible for CCSF’s “instructional programs in credit and non-credit” that “provide high-quality instruction.” By the way, that description of CCSF’s instructional programs did not come from a starry-eyed supporter of CCSF, but are words that can be found in the ACCJC’s 2012 report placing CCSF on show cause.

      see page 37 http://www.ccsf.edu/ACC/Accreditation%20Evaluation%20Report%202012.pdf

    • Imbd the company you keep

      Coty College is a great place to study & thrive. Keep going gene gire

    • I owe the first part of my career to City College. I got through all the basics there before enrolling in a serious design program. When I arrived at the professional school I was so much better prepared than the other students it was amazing.
      That being said, when one sees an effort to close down a serious public institution dedicated to educating everyone, one has to ask, why? Who benefits? Obviously the private schools and other local public institutions would be picking up the slack, but, what is the real motive behind discrediting CCSF?
      Could it be that someone covets the real estate the buildings sit on? The entire campus is spread all over the city at this point, much of it much be leased property. Since SF State is being turned into a development property, one can’t help but wonder if the same is being planned for CCSF.
      If anyone has any other ideas or motives to suggest, clue me in.

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