ACAuE!V1IC COUNCIL ACADEMIC COUNCIL CHAIR BINION

Enclosure 5

UCFW October 16,2002

UNIVERSITY OF CALIFORNIA

BERKELEY. DAVIS. IRVINE. LOS ANGELES. MERCED. RIVERSIDE. SAN DIEGO. SAN FRANCISCO

SANTA BARBARA. SANTACRUZ

omCE OF nIE PRESillENT

1111 Franklin Street

Oakland, California 94607-5200

Phone: (510) 987-9074

Fax: (510) 987-9086

http://www.ucop.edu

SEP 16 2002

ACAuE!V1IC COUNCIL

September 13, 2002

ACADEMIC COUNCIL CHAIR BINION

Dear Gayle:

I am responding to former Academic Council Chair Viswanathan's June 18th letter

regarding Professor Binder's request for consideration of the Educational Fee Waiver

Program for UC students who are dependents ofUC employees.

As you know, the proposed Educational Fee Waiver Program has broad support

among faculty and staff. The University Committee on Faculty Welfare has reaf-

firmed its commitment to this program and has been trying to find ways to fund it.

The Council ofUC Staff Assemblies has identified this as a key initiative it would

like to see implemented to improve employee morale.

While the interest in this program is understandable, we have calculated that it

would benefit only about 2 percent of our career staff and academic employees. Total

cost for the program, based on October 2000 student and employee data, is approxi-

mately $5.6 million per year. During that year, 1,905 employees had 2,044 student

dependents in the UC system. Implementation of the program could affect decisions

about attending UC, but there is no accurate way to predict the impact approval of

the benefit would have on these figures.

Although we have looked at possible ways UC might fund the program, we are

mindful of the State's continuing fiscal crisis and our need to be restrained in

making financial commitments. We are not hopeful that funding could be found for

the next few years with the current state of the University's budget. We are also

concerned that carving $5 to $6 million for this program from our already con-

strained budget, instead of allocating more money to salaries or health benefits,

would not be prudent orwell received by the legislature. We believe it would not be

appropriate to use scarce resources to give a benefit of significance to some employ-

ees at the same time many other employees are receiving very minimal salary

increases. While the Educational Fee Waiver Program remains a high priority for

me, medical benefits are currently our top benefit priority and I do not want to

detract from our efforts in that area.

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Academic Council Chair Binion

September 13, 2002

Page 2

I appreciate the Academic Council's interest in the Educational Fee Waiver Pro-

gram, and look forward to discussing it again as budget opportunities allow.

Fiat Lux,

I ~ ..:::

Richard C. Atkinson

President

cc:

Provost King

Senior Vice President Mullinix

Associate Vice President Boyette

-2/

HR&B:PPRT 02/15/01

Fee Waiver/Educational Grant Proposal

Introduction:

.Proposal was originally developed by HR&B in consultation with the Faculty Welfare Committee and

endorsed by the Academic Council. Council of Chancellors endorsed moving forward.

Waives the UC annual educational fee ($2,716 -undergraduates/$2,896- graduate students) for

dependents of eligible faculty and staff -for up to 12 person years per employee.

Eligibility includes active membership in UCRP + 5-yrs of full-time service.

Chancellors can make exceptions to 5-year requirement to meet documented recruitment

needs.

Fee waiver will be non-taxable for most employees (exceptions -graduate students unless

they are TA.s or R.A.s,. domestic partners and their children,. and Gal grant recipients)

Current status of DroDosal :

.Proposal was circulated to Chancellors for comment in May 2000.

.Data reports were circulated to campuses in September 2000 for local costing analysis

.Target date for implementation planning is Fall 2001.

Summary of 1999 enrollment data:

» 1,727 employees (600 academics, 1,127 staff) had dependents enrolled at a UC campus.

» Number of dependents = 1,858 (some employees have more than one child attending UC)

» Systemwide cost estimate = $5 million/year.

» Dependents receiving Cal grants (State provided fee waiver) = 92 (or 5% of eligibles)*

Issues Deudin!!:

.Cal grant recipients -since the State is covering the educational fee for these students, an equivalent

amount of money in the form of a grant is being considered. The Cal grant student could use this

grant toward reducing loans or other educational expenses. Counsel advises that grant monies used

for educational purposes other than tuition will be taxable. We are exploring the aspects of creating a

two-tier program (i.e. non-taxable waiver for students without the Cal grant and a taxable grant for

the Cal grant student).

An IRS opinion letter has been requested to ensure that the program does not discriminate in favor of

the highly-compensated.

Proposal requires Regental approval in the Spring 2001 because action involves the Educational Fee.

Faculty Welfare Committee has requested that program costs be centrally funded so that the cost

impact would not fall on individual campuses or departments. Academic Vice Chancellors had

originally recommended that the employee's campus (rather than the campus of the enrolled

student) cover the cost, as is the case for benefits administration.

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UNIVERSITY OF CALIFORNIA, ACADEMIC SENATE

SANTA BARBARA. SANTA CRUZ

Assembly of the Academic Senate, Academic C()uncil

University ofCalif()rnia .

1111 Franklin Street, 12th Floor

Oakland, California 94607-5200

Office of the Chair

Telephone: (510) 987-0711

Fax: (510) 763-0309

EmaiI: [email protected]

January 13, 2000

Richard C. Atkinson, President

Dear Dick:

It is my pleasure to forward to you for consideration the following unanimous

recommendation from the Academic Council to institute an Educational Fee

Waiver Program at the University of California. The proposal from University

Committee on Faculty Welfare (UCFW) reads:

"That the University of California implement a full waiver of the

educational fee for undergraduate and graduate education at the

University of California for qualified children, spouses and domestic

partners of University of California employees vested and active in

the University of California Retirement System, up to a maximum of

12 person years per eligible employee. "

UCFW Chair Robert May first presented the proposal to the Academic Council at

its October 1999 meeting. Chair May introduced the proposal by noting that

UCFW has considered this benefit for a number of years. The projected

unprecedented growth of the University and the need for large numbers of newly

hired faculty and staff called for the serious consideration of this proposal.

The attached proposal from UCFW includes their research on the extent to which

such a benefit is offered at other institutions. Current Internal Revenue Service

policy indicates that, if this benefit were solely offered to faculty, the IRS would

likely regard it as taxable, on the grounds that it is being offered only to UC's

most highly compensated employees. UCFW believes that while this benefit

would be important to faculty, it may be even more important to staff, serving as

an inducement for both their recruitment and retention. Overall, this benefit

would help keep UC competitive with other institutions.

In response to Council's request to Senior Vice President Kennedy for further

financial analysis, Assistant Vice President Lubbe Levin provided UCFW with the

cost of waiving the UC educational fee for children, spouses and domestic

partners of UC employees. This study is also attached.

.be implemented in accordance with the assumptions embedded in the

methodology employed in the costing projections, and

.provide the authority to waive the requirement that the employee be vested

in UCRS be available in cases where there is an urgent and demonstrated

recruitment or retention need. We assume that such authority would reside

with the President of the University and would be delegated to the

Chancellors.

Under the leadership of your office, I hope this worthy proposal will be

distributed for review to all relevant University offices and, eventually, fully

implemented. UCFW stands ready to assist in the development of

implementation strategies.

I look forward to a response on the progress of this proposal and, on behalf of

Academic Council, extend my gratitude for the cost analysis support provided by

Lubbe.

cc:

Senior Vice President V. Wayne Kennedy

Assistant Vice President Lubbe Levin

I Academic Council

UCFW members

UCFW Committee Analyst Jeannene Whalen

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UNIVERSITY OF CALIFORNIA, ACADEMIC SENATE

dDnLEY .DAVIS .IRVINE .LOS ANCi£t.ES .RIVERSWE .SA.~ DIEGO. SAN FRANCISCO

SANTA BARBARA. SANTACRUZ

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UNtVERS~ COMM1T:rEE ON F ACUL TV WE~AJ1.E

Robert Anderson. Chair

Economics

549 Evans Hall #3880

University ofCalifomia

Berkdcy. California 9472003880

'. ;.: c;,":.'.c -.' '. (SI0)642-S248;;~..

;. '. ;"'-.'"';'" FAX (415) 621-7996

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August 19, 1999 -

Aimee Dorr

Chair of the Academic Council

Re:

Fee Waivers Jor Dependents oj University Employees

Dear Aimee,

At itS June II, 1999 meeting, the UCFW adopted a proposal that a full waiver ofUC's educational fee

be given to a spouse, domestic partner, or child of an eligible employee or of the eligible employee's

spouse or domestic partner. Most private universities and some public universities, including California

State University, provide a substantial reduction in tuition to children of faculty or staff. The proposed

fee waiver would be available for a maximum of 12 person years per eligible employee.

I am forwarding a copy of UCFW' 5 proposed Fee Wawers for Dependents of University Employees with

a request that it be placed on the September Academic Council agenda for discussion and actio~.

Cordially.

?Jrt

Robert Anderson r Ii .

Chair, UCFW '11

ccs w/enc:

Council Vice Chair Coleman

Executive Director Bertero-Barce16

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-;. .-, FEE WAIVERS

FOR DEPENDENTS OF UNIVERSITY E:MPLOYEES

Pro~sal

The University Committee on Faculty Welfare proposes that academic and staff personnel be eligible

for a full waiver of the Educational Fee for a spo,:!se, domestic partner, or the child of the eligible

employee or of the eligible employee's spouse or domestic partner.. Those eligible would be

employees who are active members of a University-sponsored retirement plan, and who have 5 or

more years of full-time University service. However, it is recommended that authority to waive the

service requirement be available in cases where there is an urgent and demonstrated recruitment or

retention need. Dependents who are enrolled in either undergraduate or graduate degree programs

would be eligible. Coverage may be applied to an eligible employee's spouse, domestic partner, or

child up to a maximum of 12 person years per eligible employee. .

The proposed fee waiver would apply only to the Educational Fee. Currently, this fee is set at

$2,896 annually for undergraduate students and $3,086 for graduate srildents. It is propos~d that the

Office of the President develop a mechanism to adjust annual campus budget allocations to ensure

equitable distribution of the fmancial impact of the fee waiver benefit across all campuses.

(

The Fee for Selected Professional School Students, which is assessed in addition to the' Educational

Fee, would nQ! be waived under this proposal. The University Registration Fee also would nQ! be

waived under this proposal. This fee, currently set at $713 annually, supports student services and

programs. It is proposed that eligible employees' dependents would continue paying the full

Registration Fee because revenues lost if the fee were to be waived would ultimately impact all

students, either through a lower level of student services or an increased Registration Fee.

The proposed Educational Fee waiver supports the objective of providing a competitive benefit

package to help recruit and retain the very best faculty and staff. It would provide a benefit similar

to what is already provided for the faculty of the California State University system and would allow

the University of California to compete on a more equal footing with other top institutions

:hroughout the country, many of which provide extremely generous tuition waivers for the

iependents of their employees. Those institutions include MIT, Stanford, Yale, -University of

llinois, Johns Hopkins, Princeton, and the University of Pennsylvania.

n addition to the proposed fee waiver, under current policy. spouses and unmarried dependent

hildren under age 21 of newly hired out-of-state members of the Academic Senate may be eligible

) have the non-resident portion of their fees waived in whole or in part. Spouses and dependent

hildren of University employees who work full-time outside the State of California (e.g.. employees

t Los Alamos National Laboratory or Federal Governmental Relations) may be classified as

~sidents for tuition fee purposes under current University policy.

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Tax Exclusion

Fee waivers for undergraduate work provided to an eligible employee's spouse or child who is a tax

dependent would be excluded from the employee's gross income pursuant to Internal Revenue Code,

Section 117(d). Fee waivers for ~aduate level work would be reported as additional income to the

employee subj~ct to withholding.

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Cost Estimates

;

The estimated annual cost of the proposed fee waiver with a 5-year service requirement1s!!':"

$9,895,055. The methodology and data sources used for the above estimate are described below. :;c::.

MethodoloKI

EligIole employees were defmed as academic and staff personnel who are vested (i.e_., at least 5

years of service credit) in a University-sponsored retirement plan. In July, 1998, 58,6611 staff and

academic personnel had 5 or more years of service credit in a retirement plan sponsored by the

University.

An estimated take rate of 3.8% for dependents enrolled in undergraduate programs was developed by

representing the estimated number of dependents enrolled in undergraduate programs as a percentage

of the total number of academic and staff personnel. An estimated take rate of 1.9% for dependents

enrolled in graduate programs was calculated using the same methodology. The overall estimated

5.7% take rate compares to an actuaI7.5% take rate at Stanford University. It would be expected,

however, that the Stanford rate would be higher since their benefit is provided to eligible dependents

regardless of whether the dependent is enrolled at Stanford or another university .

The estimated number of dependents of all University employees who attend the University was

developed by adding the number of dependents admitted to the 1998 freshman class (i.e., 1,053) to

the number of dependents who transferred to UC in 1998 (i.e., 204). That number was then

multiplied by 4 to approximate an undergraduate enrollment of 5,028 dependents. Graduate

enrollment of dependents plus other dependents who might transfer to UC if the benefit were to be

offered to UC personnel was estimated to be 50% of the estimated undergraduate enrollment, or

2,514 dependents. These estimates do not factor in domestic partners or their children who might

take advantage of the proposed benefit since their numbers are expected to be negligible.

I The following number of staff and faculty have 5 or more years of service credit in a University-sponsored retirement

plan:

UCRP:

PERS:

OCERS:

SCERS:

58,364

203

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The estimated cost of the proposed fee waiver was calculated as shown below:

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(undergraduate fee * (estimated underpduate take .rate ~ ~~t~ o(eligible :employ~»/

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"'., (graduate fee *. (estimated graduate .take rate.. number bf eligible~eiriploi#S». ;::.t~~;?;:

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nata Sources

The number of eligible employees with 5 or more years of service credit in a University-s~DSored

retirement plan was provided by Retirement. Planning and reported as. of July,' 1998. ,.The total

number of academic and non-academic personnel, es~ted to be 132,853 employees as of July,

1998, was extracted from the Office of Employee RelatipDS Report I.A. The number of dependents

of University employees (both academic and staff) admitted to the 1998 freshman class and 1998

transfers was obtained from Admissions & Outreach. "

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I VI &'99

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Who would receive the benefits of an Educational Fee waiver program?

Faculty and career staffwho:-::::..- ':,-':::

.are .active members in a University-sponsored r~tirement plan;

.have at leaSt five years of service; and

.have dependents registered as students _at the University of California.

2. What would t~e program cost?

Because actual data are unavailable. many of the costing components were derived. The

costs. of course. are de~ndent upOn the assumptions used in deriving the data, such as:

a) intent to register data from Freshmen and Transfer students with a parent who was a

University of California employee in 1997 = 849. (Note: 1997 was the last year such

data were collected.)

b) ratio o.fgraduate students to undergraduates = 20%. or 170.

Using these figures:

.the 100% cost of the fee waiver is approximately $4.5 millio~ annually;

.the 75% cost of the fee waiver is approximately $3.4 million. annually.

See Attachment I for a description of the costing methodology.

3. What would the program cost if it were limited to faculty ?

Based on the derived data noted above and applying the ratio of 30% faculty to staff:

.the estimated cost of a 100% fee waiver for the faculty only, including senate and non

senate, is approximately $1.36 million annually;

.the estimated cost of a 75% fee waiver for the faculty only, including senate and non

senate, is approximately $1.02 million annually.

If the program is limited to faculty, however, the benefit will be taxable pursuant to IRC

117, par.1174.02, and therefore less valuable to faculty. We do not recommend limiting

the fee waiver program to faculty.

4. Would the fee waiver replace financial aid?

No, the fee waiver program is not intended to replace existing financial aid programs.

The model for determining the amount of financial aid is to fIrst calculate the student's

expense budget; then deduct reasonable contributions from the student's parents. If

additional support is needed, the student may be eligible to receive federal and state aid.

5. How does fmancial aid impact on the cost of the fee waiver program?

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Financial data for students with parents who work at UC are not available. I(is P9~~,~~~~,~

however that the actual cost of the fee waiver program will be less than estimated In the

event a s~dent re~eives a pare~ta1.contribution,.supPO.rt from federal.and s~~e gr~~~ ~d

scholarships momes, the contribution from the fee waiver program Will be, redu~~ O~!!~t

applicable. See Attachment II-for examples of how a fee waiver benefit,'~~r,¥~,~~,,::!;

student's financial aid package. '," ",; :-"i: -"~i;'..=t:.;:~

6. What is the present value of a fee waiver benefit to a new faculty hire?,

Proposed eligibility criteria include a 5-year University service requirement, With

exceptions granted for demonstrated recruitment and retention reasons. :

Appointment statistics show that 60%, or 219, of the ladder rank faculty hired in f 997

were between the ages of20 and 39; with 40%, or 142, falling benveen the ages of 40 to

60. Assuming that most college-eligible children belong to the smaller group offacwty .

(the 4()- 60 age group) the value of fee waiver as a recruitment tool may be an attractive

benefit. We are unable to assess the full impact of the fee waiver program as a benefit to

faculty because we do not have statistics on the actual age or number of children.

7. Can the program be structured so that the benefit is portable to other

.institutions of higher education?

We surveyed the Comparison 8 institutions and the California State University system

regarding fee waiver programs. None of the public institutions offer a portable fee

waiver benefit. Three private institutions within the Comparison 8 offer a portable'

benet)t: MIT, Stanford and Yale. For example, Stanford's program provides that eligible

dependents of employees receive $4,000 annually for 4 years of undergraduate study

either at Stanford or another university. The overall take rate at Stanford is 7.5%. Data

on the number ofUC employees with dependents enrolled at non-UC institutions are not

available.

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:Attachtrientl

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Costing Methodology

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The following steps describe the methodology used to calculate the cO~()filie:feel~fu~?~~i~;

waiver program:. .--'

a) In 1997, Intent to Register ~ta ifom fres~en."and transfer stude,rits ~fl~~'~J~~~:£,r~~

had a parent who was a University of CalifornIa employee. : ;"; :";'::::,~:;'[:'~-:",:~r~'.':

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b) Sin,ce the number ofUC vested parents is unknown, set up a ratio~eent1ie~~:::::;;~;!~i~i.:,

number of intents to register to the total number ofUC employees: 7 ':: ;;; ~"C

849 Freshmen & transfer intents/132 853 total workforce=.OO64 ,i:-;' ';:-' ,,;;',:r!;~- ".:-,'

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c) Assume the same number of students in each year of undergraduate study and: ;.-:-.'~,.::,'"

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multiply .0064 by 4 years = 2.56% take rate;.' : '~\':,i!:-C ,~:",,~":':~1,.

d) To complete the formula for deriving the number of students with UCvested parents, ,

multiply the four-year take rate by the number of vested employees: .--;; .

2.56% take rate * 58,661 vested employees = 1,502 undergraduate students.. .'

It is assumed that the take rate for students with a vested or non-vested parent would

be the same. If vesting were not a criterion, the number of undergraduates would be

3,401. (2.56% take rate * 132,853 total workforce = 3,401 undergraduate students.)

e) The annual cost of providing an educational fee waiver for 1,502 undergraduates is:

1,502 undergraduates with UC vested parents * $2,716 ed fee = $4.079.432

(.'

f) Next calculate the ratio of graduat.e students to undergraduates = 20%. or 170. and

follow same formula above:

g) Since the number ofUC vested parents is unknown. set up a ratio between the

number of derived graduate students to the number of all UC employees:

170 graduate students/132.853 total workforce = .0013

h) Assume the same number of students in each year of graduate school and multiply

.0013 by 2 years = .26% take rate;

i) To complete the formula for deriving the number of graduate students with UC

vested parents, multiply the two-year take rate by the number of vested employees:

.26% * 58,661 vested employees = 153 graduate students

j) The annual cost of providing an educational fee waiver for 153 graduates is:

153 graduates with UC vested parents * $ 2,896 ed fee = $443.088

k) Based on the above assumptions. the estimated total cost to the Universir:y :

$4,079,432 undergraduates + $443,088 graduates = $4.522.520

Note: The number of students used in this model may be overstated. In this costing

model we project a steady 4-year participation rate. Also the graduate student number is

projected and may be overstated. In this model the number of graduate students who are

financially independent of their UC parents are not considered. Rather than refine the

details of the student population, any overestimate will be balanced against the

underestimate of not including numbers for spousal program participation.

Attachment n

Examples Showing the Potential Impact of the Fee Waive:rB~ent -on a

Student's Financial Aid Package. --

I. Low income (Darental earnin~ under $30.000): parent unable to make a

contributio~; student therefore qualifies for D3;aximum financial aid:

$13,357

-0

-3,150

-3.429

$6,778

~2.716

$4,062 .

= student expenses.

= no contribution from parents

= Federal PELL grant

= Cal grant.

= short fall to which the fee waiver will be applied

= educational fee waiver

= loans and work study

ll. Mid income (Darental earnings between $30.000 -$60.000): parental contribution

provides partial support

$13,357

$ -7.000

$ 6,357

-3. 429

$ 2,928

-2.71Q

212

= student expenses* .

= parental contnoution .

= remaining need

= assume not eligible for Federal PELL grant

= Cal Grant

= shortfall to which the fee waiver will be applied

= educational fee waiver

= loans and work study

m. High income (Qarental earnings over $60.000): parental contribution meets the

entire student expense.

$13,357

-13.357

$ 2.716

$10,641

= student expenses*

= parental contnoution

= not eligible for PELL or Cal grants

= educational fee waiver off-sets parental contribution

= loans and work study

= actual parental contnoution after ed fee waiver off-set

Note: academic scholarships will further offset expenses and be deducted from the

student expenses before the fee waiver is applied.

.1999-00 systemwide average student expenses. used by Student Academic Services

office in determi~ng financial aid package. includes books. supplies. personal expenses.

health care allowance. transportation. fees. and room and board costs.