Tag Archives: Proposition 30

Hundreds of Students Attempting to Shut Down UC Regents Meeting Over Tuition Hikes

UPDATE (11:19 AM PT): After issuing a dispersal order to remove all students from the room, the Regents are voting on the budget now.

Cross-posted from Firedoglake and Dog Park Media:

About 500 students are currently blockading entrances to the University of California Board of Regents meeting at UC San Francisco this morning, where the Regents are scheduled to vote on a budget that presumes a 24 percent across-the-board increase on UC tuitions over four years. Picketing students have pledged to shut the meeting down.

According to Charlie Eaton, one of the organizers of the protest and co-author of a report released this week that charged the Regents with employing exotic financial instruments that doubled the UC system’s debt load over three and a half years, as of 8:45AM PT only a third of the Regents have made it inside the building. About 100 students are inside, according to Eaton.

At Governor Jerry Brown’s prompting, yesterday the trustees of California’s State University system postponed a decision on fee hikes and the Regents backed off a plan to raise fees on UC professional school students. But major tuition hikes for all UC students remain on the table. The Regents have voted to increase tuitions in all but two of the last eleven years, this year being one of the two.

Last week, California voters passed Proposition 30, which raises taxes in part to stem tuition hikes in the state’s UC and CSU systems. Student organizing and activism played a major role in the success of the Prop 30 campaign. Yet in the very first meeting of the UC Regents following the measure’s passage, the battle over tuition hikes is continuing unabated.

“These proposed increases are totally unacceptable, especially given the fact that the Regents leveraged student tuition hikes to enter into reckless interest rate swaps that created a huge part of UC’s financial mess in the first place,” said Eaton. “There will be no business as usual today for the UC Regents.”

Millions in Prop 30 Tax Revenues Will Be Diverted from Higher Ed to Wall Street, Thanks to Regents

Cross-posted from Firedoglake and Dog Park Media.

Millions of dollars in new tax revenue earmarked for the University of California system as part of the state’s recently passed Proposition 30 will instead be routed to major financial firms, because of bad bets made by a Wall Street-influenced UC Board of Regents.

Over the last decade, tuition and fees for undergraduates in the UC system have tripled, adding enormous debt burdens to UC graduates and pushing lower-income students into the already overburdened state college and community college systems, or out of higher education altogether. Members of the UC Board of Regents, which governs the system and which approved the tuition hikes, have blamed the increases on the bad economy and on politicians.

However, according to a new report written by five doctoral students at UC Berkeley, in the years preceding the 2008 financial collapse, members of the Board of Regents themselves had overseen “a qualitative shift in the financial practices of the University of California” by employing the same kinds of exotic financial instruments that precipitated the meltdown on Wall Street – primarily, bond issuances hedged by interest rate swaps.

An interest rate swap is essentially a bet that interest rates will rise. UC would issue a bond with a variable interest rate, then make regular payments to a third party (typically an investment bank) based on an agreed-upon fixed interest rate. The bank would then pay back to UC a dividend based on the variable interest rate of the original bond, if the variable rate were higher than the fixed rate. If the variable rate were lower than the fixed rate, then the money would go the other way: UC would owe money to the investment bank.

Between 2003 and 2007, the report explains, UC acquired interest rate swaps with five investment banks in order to issue over $600 million in bonds to finance development of medical centers on three campuses. Medical schools and hospitals are major profit centers for universities. As UC used debt financing to expand these profit engines, tuitions for students continued to rise. Since the risky contracts the Board of Regents entered into were made possible by the collateral afforded by UC student tuition costs and by the Board’s ability to jack up tuition and fees at its discretion, the same students whose ballooning debts and tuition payments to the university were making the UC system’s exotic financial bets possible were receiving no tuition relief from the university out of the profits generated by those bets.

The result of these complicated arrangements has become a familiar story since the 2008 meltdown. The Board of Regents’ pursuit of cheap money to increase UC profits left it exposed to the financial collapse. According to the report, UC’s risky bets have now cost it $57 million, which could rise to over $250 million over the next three decades. Between May 2007 and the end of last year, the Regents doubled UC’s debt load. The UC system is currently paying about three quarters of a million dollars per month to Wall Street firms as a result of the swaps.

Moreover, the LIBOR scandal earlier this year demonstrated that Wall Street bets against rising interest rates were in fact fixed by the banks. All of the interest rate swaps described in the report were based on variable rates determined by LIBOR. Through market manipulation by the banks, UC’s bets were guaranteed to be a raw deal for students, their families, taxpayers, faculty, university workers and anyone else associated with the university.

Like many other ripped-off institutional counterparties to LIBOR trades, UC has standing to sue the banks. But the Regents have not only failed to do so, they haven’t even tried to renegotiate the terms of their agreements, as other institutions have successfully done. The question is, why?

“UC Regents and management have provided no explanation for why they are not re-negotiating or litigating against Wall Street to re-coup losses on these swaps stemming from the banks’ illegal interest rate manipulation,” said Charlie Eaton, a UC Berkeley Sociology graduate student and one of the authors of the reports.

One possible answer is another sadly familiar story: The UC Board of Regents has become what the report describes as a “revolving door with Wall Street.” An increasing number of posts in top UC management and on the Board of Regents have been filled by former Wall Street bankers, the report explains, including a new CFO position created in 2009 and filled by Peter Taylor, who was the Managing Director of Public Finance for Lehman Brothers before he found himself out of a job following the firm’s spectacular collapse. Monica Lozano, a UC Regent, also serves on the Board of Bank of America, a position for which she has received approximately $1.5 million. Bank of America stands to make as much as $28 million from an interest rate swap at UC San Francisco, according to the report. B of A is also one of the banks under investigation for LIBOR manipulation.

Prop 30 was passed last week by California voters in part to stem the tide of perpetual tuition hikes and the rapid decline of public higher education in the state. But because of the Regents’ predilection for gambling with student tuition money, much of that new tax revenue will be routed away from tuition relief and toward the very Wall Street firms that – with the Regents’ help – created the financial crisis that accelerated the higher education crisis in California in the first place.

Since its founding, the UC system has always played a central role, both structural and symbolic, in making the California Dream possible. Over the last decade, it appears that the Regents leveraged that dream to make the UC system a player in Wall Street’s casino economy. As with any casino, the game was fixed. Now the rest of us are being forced to pay for their mistakes.

Vote Yes on Proposition 30: Jerry Brown’™s Budget Plan

This is the first part of a series of posts analyzing California’™s propositions.

California’s Budget Problems

Proposition 30 is the most important proposition on the ballot this year.

More below.


California, as is well known, has a big budget problem. This problem started with the onset of the economic recession and was worsened by a number of factors, ranging from extreme constraints on the legislature’™s power to Arnold Schwarzenegger’™s incompetence.

Things have gotten better lately. Schwarzenegger has been replaced with a governor who knows what he’s doing. The two-thirds supermajority requirement to pass a budget, which was responsible for much of the deadlock, no longer exists.

There are still big problems, however. California has implemented massive spending cuts to balance the budget. Program after program has been cut to the bone. Worse still, the state seems poised to cut far more if this proposition fails to pass.

Take the University of California system:


Since 2008, budget cuts have forced these universities to raise fees by more than 40%, compared with a national average of 15%. If Proposition 30 fails to pass, fees will be raised by 20% more still.

Why is this happening? It’s because the legislature has its hands tied. There are two ways to balance the budget: increase revenue and cut spending. California requires a two-thirds supermajority to do the former, and Republicans have consistently blocked revenue increases. So California has been left to cut, and cut, and cut.

Now, in general you should focus on cutting spending rather than increasing revenue to balance the budget. But California has taken it way too far. We have basically done nothing but cut and cut for nearly half a decade, without any revenue increases. There’™s basically nothing left to cut at this point. But if Proposition 30 doesn’™t pass the state will be looking once again for billions more to cut ($5.951 billion more, to be exact).

What Proposition 30 Does

Proposition 30 comes four years too late, but it’™s still very necessary today.

Yes, Proposition 30 is a temporary tax increase. It falls mainly on families making over $500,000 -“ but the sales tax will increase as well. The sales tax increase lasts for four years; the income tax increase for seven.

But the truth is that in a budget crisis, eventually somebody will get hurt. If it’™s not families making over $500,000 it’™ll be students and teachers and policemen and firefighters. For almost half a decade, budget cuts have again and again shafted these people. If Proposition 30 fails, they’™ll be hit once again. If Proposition 30 passes, the pain will shift to families making over $500,000.

I endorse this proposition knowing that I will sacrifice a bit. Many Californians (perhaps the majority) will vote against this proposition because of this fact. But it’s not as if they’re dodging the pain by voting against Proposition 30. They’™re just shifting it to their children.