The Neoliberal Restructuring of California State Government

With last week's 32% increase in fees for students of the University of California, the regressive transformation of California state government is almost complete. State workers such as myself, a predominately middle and lower middle class group, remain on furlough three days a month by order of the Governor. In effect, the Governor has imposed a 15% pay cut on us. People that rely upon existing programs face delays and longer lines at state offices, regardless of the urgency of their requests.

Meanwhile, school districts across the state are scrambling to cut their budgets in response to reduced funding from the state, while home care workers are challenging cuts to their slightly above minimum wage salaries in court. As I summarized in early August:

If you are a judge in California, you get to decide if you are going to take a 4.6% pay cut. If you are a state worker, one of these same judges empowered the Governor to cut your pay 15%. If you are a lower middle income worker with a family, you face the prospect of losing heath coverage for your children, while others lose the opportunity to qualify for it. If you are an in home health services provider, the Governor and the Legislature decided to try to cut your already meagre salary by approximately 17%, while reducing the number of people entitled to receive such assistance.

Now, the students are in the line of fire. The fee increases are particularly egregious when one discovers how generous the UC Board of Regents have been in awarding salary increases and fringe benefits to high level administrators. Consider, for example, the new President, Mark Yudof:

The University of California says its incoming president will skip the residence favored by former presidents and live in a 6,800-square foot Oakland home instead.

Mark Yudof is scheduled to start in his new job next month after leading the University of Texas since 2002.

In the past, UC presidents and their families lived near the university system's Berkeley campus in a 13,000-square foot home now in need of millions of dollars in repairs.

The 63-year-old Yudof and his wife are set to live in a new home that will cost the university more than $11,000 per month.

That comes on top of a salary and benefits package for Yudof that puts his annual compensation at more than $925,000. Yudof's predecessor earned $436,000 per year in total compensation.

Or, the newly hired Chancellor of UC Davis, Linda Katehi:

Many UC employees are infuriated by recent high salary hires of senior administrators when up to 170,000 UC workers face mandatory furloughs and pay cuts.

Although UC's president said all salaries are being frozen or cut during this budget crisis, State Senator Leland Yee (D-San Francisco) insisted top administrators are out of control, handing out hundreds of thousands of dollars in inflated bonuses and salaries to senior staff.

"Unfortunately what's going on in the UC [system] is that there's no accountability whatsoever," said State Sen. Yee. "They are a state institution, a public institution. But because of the way the constitution is structured, it gives them that independence."

According to Yee, the independence allows the system to hire academics like Linda Katehi as UC Davis' new chancellor.

"She's an inventor whose own work in the field of engineering has led to 16 patents," said UC President Mark Yudof.

Katehi -- a renowned researcher and the former Vice Chancellor of the University of Illinois at Urbana-Champaign -- will receive a $400,000 salary at UC Davis; a 27 percent increase over her predecessor.

Katehi will also receive free university housing, an $8,900 yearly automobile allowance, a $100,000 relocation allowance and a faculty position and low-interest home loan when she eventually leaves the chancellor's office.

Katehi's husband -- who holds a Ph.D in chemical engineering -- will also be considered for a job at UC Davis.

Apparently, in the first circle of hell, UC administrators are somewhere just below the managers of Wall Street brokerage houses when it comes to increasing their wealth while the rest of us struggle during one of the worst recessions in the last 150 years. But, to fully grasp the severity of the situation, there are two additional pieces of the puzzle that must be added.

Last month, after a special session, the Governor and the Legislature agreed to place an 11.1 billion, that's right, billion, dollar water bond on the ballot for possible approval in November 2010. Leaving the serious environmental issues aside, as it appears that the passage of the bond will facilitate projects that will result in the further degradation of the Sacramento-San Joaquin River Delta, there is the insescapable fact that it will increase the debt service obligations of the state. Even without the passage of the bond, these obligations are substantial:

Currently the state has more than $130 billion of outstanding bond debt. A little more than half, $66.4 billion, has been sold to investors. The state will pay $5.75 billion to service that debt this fiscal year, or 6.7 percent of general fund revenues. The state treasurer's office projects that those debt payments could more than double, growing to $13.54 billion by 2018, or more than 10 percent of revenues. That's an astounding number.

Hence, there is a sinister synergy. Generally, as the state has become increasingly reliant upon the issuance of bonds to finance its operations, more and more of its tax revenue is being collected to distribute to wealthy bond purchasers who do not have to pay California state tax upon their interest income. In other words, there is a regressive redistribution of income from the broad tax base to wealthy bond purchasers. As the percentage of state revenue required for debt service increases, we can anticipate even more draconian cuts in state services going forward.

More specifically, there is also a redistribution of income from state workers, students and recipients of existing state services to UC administrators and the judiciary. If the water bond passes, this redistribution will become even more pronounced as they find themselves subsidizing new water projects for the benefit of agribusiness and southern California developers. In the absence of a shockingly good economic recovery, it is hard to see the future here as anything but bleak. And, even more alarmingly, it appears that the debt service noose is about to strangle the federal government as well.