Students strike back
As a statewide demonstration looms, investments by the UC Regents are scrutinized
On January 8, the Regents of the University of California held their bimonthly meeting at the Mission Bay campus in San Francisco. The building bristled with armed guards—both uniformed and in plain clothes.
The regents, many of whom are multimillionaire financiers, appeared worried that students and workers might engage in acts of civil disobedience because the governing board had recently raised tuition by 30 percent, while continuing to spend hundreds of millions of dollars on such noneducational projects as a sports stadium retrofit.
Incensing furloughed employees, the regents rewarded top university executives with $3 million in bonuses while the salaries of professors and instructors are reduced, and core educational programs are eliminated or cut to the bone. The pay of janitors and service workers has been slashed by 15 percent, causing further hardship to families already afflicted by recession.
From Los Angeles to Davis, workers, students and professors are accusing the regents of union busting and de facto privatization of a public institution. The university has discarded its mandate, they say, of educating the masses, affordably—and is transforming a publicly funded institution into a school of the elite.
On March 4, students, teachers and workers from the UC, California State University, community college and K-12 systems will take part in a statewide Day of Action and Strike in Defense of Public Education. The protest against ongoing fee increases and program cuts comes in the wake of similar action taken last October.
Although a handful of the 26 regents plan to participate in support of some student demands, the bonuses granted to executives during unprecedented budget cuts, as well as the regents’ management of the UC’s pension and endowment portfolios, worth $53 billion, are sure to be hot-button issues.
And one high-profile regent, Gov. Arnold Schwarzenegger, appears to have a conflict of interest in regard to a series of large UC investments with Dimensional Fund Advisors of Santa Monica.
Here is the story.
One of the governor’s first acts in office was to appoint longtime business partner and personal investment adviser Paul Wachter as a regent. Since then, Wachter has been a leading force on the board’s investment committee, which currently oversees $53 billion in public and private equity investments.
The governor is himself an ex-officio member of the board of regents. Many of the regents are campaign donors and friends Schwarzenegger appointed to the powerful board. But he is obligated by law to work with the university in a manner that does not conflict with his private financial interests, which are valued at more than $100 million and kept in a blind trust administered by regent Wachter.
Wachter’s and Schwarzenegger’s financial disclosure statements from 2004 to the present show that each owns stock worth “more than $1 million” (no upper limit is specified) in DFA, which controls a $160 billion investment portfolio. Since 2004, shortly after Schwarzenegger assumed office, the regents have invested a third of a billion dollars in DFA, which invests on behalf of its wealthy private clients and several large pension funds, such as CalPERS, which has placed $1.5 billion with DFA managers.
In 2006, the UC retirement fund invested $226 million in a DFA “emerging market fund.” In 2007, this investment increased to $329 million. By the end of 2008, the value of the investment had fallen to $151 million (probably due to stock market losses). As of December 2008, the UCLA campus endowment fund had placed $82.3 million (nearly 8 percent of its total endowment) in three market funds offered by DFA.
Wachter told Spot.us that the regents do not direct university staff to select specific investment fund managers. Rather, the regents decide the types and amounts of investments that are to be made. Considering DFA’s size, he commented, “It is not surprising to see [DFA] represented in part in any endowment or pension fund.”
The regent’s investments with DFA were not a secret: They were publicly reported to the board. And Schwarzenegger’s and Wachter’s DFA ownership holdings are also public records.
Responding to both this investigation and a report on California Watch, state Sen. Leland Yee has been asking hard questions of the regents.
“Unfortunately, not even one month can pass without another scandal plaguing our university,” said Yee, who is an alumnus of UC. “A comprehensive state audit will help further uncover the extent of the waste, fraud, and abuse within the UC, and finally hold university executives accountable.”
Neither Schwarzenegger, Dimensional Fund Advisors, nor the Regent’s press office responded to a request for comments.