University of California Hits the Panic Button

A public relations bomb just landed in my inbox: an email fromUC Berkeley Chancellor Robert Birgeneau and Provost George Breslauer announcing the impending reality of horrific budget cuts across the Berkeley campus and the rest of the UC system as the state slowly faces up to fiscal reality. Instead of the 8% cuts (approximately $67.2 million) that the campus had originally projected during their budgeting process, they now anticipate that the cuts likely to be approved by the legislature will force a 20% (or $145 million) cut. As you can imagine, the letter doesn’t get better after that.

I just read this a few seconds ago, so I don’t have anything thoughtful to say about it yet, but I felt compelled to reprint it here in full in order to publicize the situation. As I was looking at it, I couldn’t help but wonder at the extent to which these circumstances are likely to bring about radical changes for all of us affiliated with the country’s most renowned public institution of higher education. The inherent volatility of financial markets aside, the situation is a tragedy which could have been at least partially prevented through more effective action by California’s political elites.

Dear Campus Colleagues:

As you are undoubtedly aware, California’s financial crisis has worsened severely in recent weeks; this means that the likelihood of unprecedented cuts in State funding of the University has risen dramatically.  UC Berkeley is facing the most difficult financial situation that we have ever encountered in our university careers.

We know that you have been hearing rumors about a number of potential actions designed to reduce costs not only at Berkeley but across the system.  We want to lay out the financial context for you, tell you what we think may happen, and let you know our leadership strategy for the Berkeley campus as we manage through these difficult times.

Today, we find ourselves facing stark new realities.

Six weeks ago, UC Berkeley faced a $67.2 million budget gap for 2009-10. That anticipated shortfall has now grown to $145 million.  Here is how we have been working to address the anticipated shortfall.

* The recently-enacted 9.3% student fee increases and other revenue-enhancement measures that become effective July 1, have reduced the $145 million gap by $30 million.

* In addition, through the work of many of you, our cost-saving measures introduced in 2008-2009 have further reduced the gap by another $15 million.

* That leaves us, at present, with a $100 million remaining gap for the academic year 2009-2010.  We are hopeful that this gap will not grow further as the State finalizes its budget, but we must assume that this is our working target as we plan for the coming year.

* The possible loss of the Cal Grants program, as proposed by the Governor, is not included in the above totals.  These grants total $47 million annually to the UC Berkeley campus.  They cover fees for a large number of our undergraduates.  The loss of Cal Grants would not only disadvantage those students; it would fundamentally subvert our social imperative to provide broad social access to the excellence at UC Berkeley.  The Joint Legislative Budget Conference Committee has proposed protecting student awards for 2009-2010 grants, but that is not 100 percent certain.

* Federal stimulus funds are beginning to trickle in, but are not designed to cover existing core operations.

UC Berkeley, of course, is not alone in facing these challenges.  Private universities have suffered major declines in their endowments while public universities nationwide have experienced severe cuts in State support.

This basically means that we are now facing a reduction of our baseline budget that will likely continue, and may even deepen, over multiple years.  These unprecedented developments require us to examine the underlying assumptions that guide us in delivering and supporting the University’s mission of teaching and learning, research and scholarship, and public service.

For UC Berkeley, this much is certain: all of us—students, faculty, staff, and senior administrators—will be required to sacrifice as we navigate our way through this crisis.  At the same time, it is essential that we work together to address the formidable challenges ahead of us.

Our budget planning scenarios, which had earlier anticipated an average of 8% permanent budget cuts to all campus units for the coming fiscal year, will now likely be at a campus-wide average of 20%.  While some units will need to spread the cuts over two years, the campus average cut must be at least 12% in 2009-2010.  The remainder must be taken by 2010-2011.

These cuts will not be uniform “across-the-board”; units that are core to the teaching and research missions will be given somewhat lesser cuts than the others, and, within the teaching-and-research realms, units with higher capacity will be asked to take larger cuts than those with lower capacity.  This is the only rational approach in a campus like ours if we are to preserve our depth and breadth of academic excellence—our principal competitive advantage.

Clearly cuts of this magnitude will require all areas of our campus to sacrifice considerably, and to make changes in their core operations.  We will need to reduce our workforce significantly and this will be painful and difficult.  To accomplish this, we will also need to make changes to our core operations and the way we do our work.  All of these efforts will take time to achieve.

Over the summer, managers will work with their units to make difficult but necessary decisions about reductions in our workforce, while determining which services we can eliminate or curtail.  Naturally, all policies and procedures will be followed, and we will work to treat our people with the respect and dignity they deserve under these very difficult circumstances.  We are sensitive to the impact of staffing reductions on the workload of remaining staff and are seeking ways to streamline our business processes.

As each unit or department works to meet our new budget number, many specifics remain unclear, requiring approval by the Office of the President and the Regents for system-wide implementation. We would like to inform you of those things that are likely or certain to occur in 2009-2010.

What We Know for Sure

* It is, unfortunately, certain that, during 2009-2010, efforts to implement permanent budget cuts at all UC campuses will result in the elimination of many staff positions.

* It is certain that, during 2009-2010, there will be a near-total freeze in new faculty hiring at UC Berkeley.

* It is certain that, during 2009-2010, a staff hiring freeze at UC Berkeley will remain in effect.

* It is also certain that there will be no faculty or staff early-retirement programs at UC campuses on the order of the VERIP of the 1990s.

What is Likely to Happen

* It is highly likely that, through temporary furloughs and/or pay cuts, faculty, staff, and senior administrators at all UC campuses will see their wages reduced by about 8 percent (with potentially a lower rate for our lowest paid workers); it remains uncertain whether pension calculations will be affected by this reduction.

* It is highly likely that, at some point during the 2009-2010 academic year, faculty, staff, and senior administrators at all UC campuses will begin contributing to the UC pension fund.

* It is quite possible that the health-care premiums paid by faculty, staff, and senior administrators at all UC campuses will increase significantly.

Our first and foremost goal is to preserve the academic excellence of Berkeley.  To that end, let us be clear as to what we will not entertain during this crisis.

* We are not discussing or considering layoffs of Senate faculty members, tenured or untenured.

* We are not discussing or considering making Senate faculty promotion decisions contingent on available funding.

* We will not sacrifice Berkeley’s commitment to breadth and depth of academic excellence.

* We will not allow the budgetary crisis to subvert either the delivery of our teaching mission or the support infrastructure for research.

* We will not sacrifice our commitment to social access: low-income students who have earned a place at Berkeley must be capable of affording a UC Berkeley education.

* We will not flag in our commitment to recruit to Berkeley the best graduate students in all fields.

* We will not abandon our efforts to train and promote a highly skilled and diverse workforce.

These are the guiding principles that will be in the forefront of our activities as we entertain difficult choices.

As we progress through this budgetary crisis, we are also looking forward to the longer term prospects and we are taking measures to reduce the size and cost of our enterprise by streamlining work.  For example, we have begun implementing a multi-year plan to streamline administrative processes in IT, Human Resources, procurement, business services, student advising, research administration, and other areas.  Many of these improvements will involve centralized and automated systems that will reduce our dependence on a patchwork of decentralized, labor-intensive operations.

Over time, a combination of layoffs, retirements and normal attrition will result in a smaller workforce that will bring our staff and faculty payroll closer to alignment with State funding, while maintaining high-quality services.  Toward these ends, we have already made substantial investments in systems such as the Human Capital Management (HCM) systems, the Berkeley Financial System (BFS), and an upgrade to ePro, our procurement system.

We are also working with the Office of the President on ways to cut costs by adopting system-wide (UC) administrative systems and reducing prices through system-wide procurement of some goods and services.  Locally, we are consolidating the administration of contracts and grants and are merging back-office functions of both academic and non-academic units.

We are actively engaged and working closely with the Academic Senate and a faculty subgroup that has been formed specifically to examine budget reduction measures.  We anticipate evaluating all options around hiring, retention practices, and strategies to defend the breadth and depth of academic excellence for which UC Berkeley is renowned.

We are implementing an entire suite of revenue-enhancement measures: full recovery of the central administrative costs associated with our self-sufficient auxiliary enterprises; negotiation of a higher federal overhead rate for campus research; expansion of the reach and earnings potential of University Extension and Summer Sessions; and, of course, intensified private fund-raising.  We are also restructuring campus debt to reduce those costs over the near term.

In the external realm, University leaders are advocating aggressively, making sure that legislators, the public, and UC’s closest constituents understand the value of our mission, employees, and students.

We pledge to redouble our efforts to strengthen UC Berkeley’s long and rich tradition of combining access and excellence.  Throughout the State, country, and even the world, Berkeley remains the standard by which all other universities are judged when it comes to the combination of comprehensive academic excellence and deep commitment to a public mission.  We will not shy away from our commitment to either of these lofty goals.

Through shared sacrifice by students, staff, faculty, and senior administrators, and through renewed efforts to reduce over time the cost of delivering instruction, research, and administrative services on campus, we will emerge from this crisis more focused and more efficient, but equally excellent and accessible.  UC Berkeley has been an outstanding institution for 141 years and it will still be outstanding 141 years from now.  We look forward to working with you toward these ends.

What happens next?

We are acutely aware that the economic situation makes this a difficult time, professionally and personally, for many of you.  Change of this magnitude will be difficult.  We have asked our Human Resources area to assist in a number of ways, specifically by supporting managers and employees as we work through this difficult time.  We understand that clear information on campus actions and resources to help you is essential. We ask that managers and supervisors please take time to go though this message with your employees.  We renew our commitment to bring you that information as we learn it, via e-mails and on our Budget Central website: newscenter.berkeley.edu/budget

We hope that you will watch the site for budget news as it develops, and we thank you for your continued commitment and dedication to this unique institution.

Yours sincerely,

Robert J. Birgeneau
Chancellor

George W. Breslauer
Executive Vice Chancellor and Provost

Calling Bullsh*t on the Facebook Governance Vote

Well, Facebook users’ votes on the proposed Terms and Conditions are in – all 650,000 of them – and the company is pleased to report that 75% of the voters approved!

Hang on a moment, though – they only got 650,000 votes? I thought they wanted 30% of the Facebook user population to participate…

Since Facebook claims over 200,000,000 users – 650K is less than one third of one percent. Thirty percent would have been 60 million votes, not a measly 650 thousand.

That’s as if the United States held a national vote to reform the constitution and only the state of Montana voted…And then somebody described the election as a success.

In fact, since only 75% – or 450,000 of the 650,000 voters actually approved of the new T and C, it is more accurate to say that less than one quarter of one percent of the Facebook population supports this proposal.

So the equivalent in a U.S. election would be if the entire population of Memphis, Tennessee voted in favor of amending the constitution; the population of Spokane, Washington voted against the amendment; and the rest of the country just sat it out on the sidelines.

Since Facebook spokes-persons seem to indicate that the company intends to accept this vote as a sufficient mandate for adopting the new T and C, they are turning my snarky twilight zone scenario into a reality.

Here’s Facebook’s chart of the results (as re-published on the LA Times’ Technology blog):

Facebook Governance Vote Results (credit: Facebook.com and latimes.com)

…and here’s my chart of the same results (sorry for the fuzzy image – feel free to take 5 minutes and bake your own if you want a better one):

Facebook Governance fail

Such a woeful mockery would be even funnier if it weren’t so sad.  Go, go, gadget, democracy!

I draw two conclusions:

1. Facebook has been hoisted by their own petard and they probably deserve whatever they get. This was a well-intentioned – but nevertheless naive – stunt from the beginning. It’s unfortunate that nobody at FB saw fit to back up all the rhetoric of user-generated revolution with a more meaningful participatory process.

2. Legitimate democracy is really, really hard. It doesn’t matter if it’s online or not. It’s not as simple as just holding a vote and hoping everyone will show up. It’s also not as simple as saying that the Facebook users were irresponsible because they didn’t show up. You have to build a culture of democracy in order to support democratic institutions like elections. That doesn’t happen overnight and it may be that a population like the users of Facebook isn’t sufficiently organized or engaged to begin that process.

Like it or not, this is going to serve as an object lesson for the other companies tinkering with participatory media and more demcoratic forms of online community governance.  I don’t think they will try anything like this for a long time (if ever) and that’s sad.

What would I like to see happen next? I would love Facebook to own-up to the failure of this process. Their credibility is not threatened by admitting that such a poorly-designed experiment, it is threatened if they do not admit it – which is exactly what they’re doing right now.

Cue Post-Obama Cringe-athon: Newsom announces candidacy for CA Governor

Gavin Newsom, looking slick (photo: Wikipedia)

The SF Chron reports that Gavin Newsom loudly declared his candidacy for governor via social media services like Facebook and Twitter yesterday.

In his speech Newsom promised “to spin CA to the future.”

Ugh.

Welcome to the sad reality of post-Obama politics in the U.S., where every candidate will succumb to the temptation to imitate the form and style of the OFA campaign without capturing the substance.

If Newsom is any indication, many of these candidates will fall flat on their faces – repeatedly – in the process.

Somebody get this man a new speech writer.

(updated: April 24, 2009 )

New Pew Survey: The Internet in Campaign 2008

The crazy-productive folks at Pew’s Internet and American Life project have a new survey published looking at The Internet’s Role in Campaign 2008.

There’s a lot of fun results to mine for anybody interested in political news consumption, participation and engagement via the Internet. I still need to read it more closely, but some of my favorite sound-bites so far:

• ~20% of those surveyed posted political commentary or content online

• ~20% of those surveyed reported seeking news sources that challenged their point of view

• A handy chart comparing where self-identified democrats and republicans get their online news. Statistically significant differences are marked with a “^” (Hint: look at CNN, Fox, Radio, and the Internet). Caveat: see my methodological comments below before interpreting this too deeply.

• This staggering time-series graph illustrating the decline of newspapers as a primary source of political news over the past 10 years or so (respondents were only allowed to mention their top two sources of news)

Americans' top sources of election news during the 2008 campaign

On a methodological note, it’s interesting that the surveyors chose to conduct the survey via land-line telephones only.

Some of you might recall that Pew also published some really interesting data in the middle of the campaign season suggesting that cell-only voters are disproportionately young, democratic, and Internet users.

Despite the fact that the surveyors weighted their results to try to reflect the demographics of telephone users in the U.S. as a whole, I take that to imply that the numbers in this latest survey should provide a conservative estimate the total Internet use in the population as a whole. At the same time, I think it undermines some of the comparisons between democratic and republican voters based on the land-line only data.

Development Industry Fail

USA Today has a really frustrating story about the UN’s abusive misuse of USAID funds for reconstruction projects in Afghanistan.

Basically, if you can think up a malicious way to screw up a development project, the UN probably did it. They built bridges that weren’t stable; “fixed” banks to make their basements leaky; and even siphoned funds into off-shore accounts.

USA Today includes a handy PDF of the USAID report.

For anyone who’s read James Ferguson’s classic The Anti-Politics Machine, this may all sound eerily familiar. Ferguson is a Cultural Anthropologist who teaches at Stanford. While the book is pretty heavy in the social theory department (if you don’t like Foucault, don’t even go there…), it chronicles how systematic failures occur as a consistent by-product of global governance and development organization interventions in the Global South.

This particular catastrophe is a totally different kind of failure than Ferguson talks about, but I think there’s a fantastic study to be done looking at how graft has become a systematic by-product of US interventions in the War on Terror in Afghanistan and Iraq.

We’ve gotten accustomed to passing off this kind of thing as a symptom or consequence of the Bush administration, but the problem with that explanation is that the phenomenon has replicated across such different bureaucracies and contexts. This is not just a few bad apples, it’s a series of institutions that unintentionally -  but consistently – create opportunities for abuse.

The IMF Reloaded…Remixed

Tony Curzon Price has a thoughtful piece at Open Democracy in which he examines what he calls The G20’s sins of commission.

I’m interested in a whole bunch of angles that Price explores, but the money shot for all you global governance and development geeks out there is a graph Curzon Price recycles from Paul Swartz at Council on Foreign Affairs Geo-Graphics blog:

Curzon Price goes on to use the graph to make an interesting (and important) claim about the implications of China’s newfound romance with the IFI’s and global regulation.

I, on the other hand, thought it would be kind of fun to play with the graph to try to get a better sense of what may have driven these changes in the IMF’s role over time. Since Swartz doesn’t share the data or source for his graphic, I’m reduced to hacking around with the .jpg in the GIMP (which made for a really fun distraction during a meeting the other day). Apologies for the resulting visual clutter, but here’s the same graph with some new knobs and bits. The bigger dots correspond to the events that accompanied the biggest shifts:

My jumbled, colorful dots represent a few of the most relevant political and economic events of the past thirty years. What’s interesting to note is which ones seem to correlate with changes in the IMF’s role as the “lender of last resort” for the Global South. Here’s the key to the dots:

1. Margaret Thatcher elected: May 1979
2. Black Monday: Dec 1987
3. Berlin Wall taken down: November, 1989
4. Soviet Union Collapses: December 8, 1991
5. Mexican Peso crisis: Dec 1994
6. Asian Financial crisis: July 1997
7. Brazil devalues the Real: Jan 1999
8. Dot-com bubble bursts: March 10, 2000
9. September 11, 2001
10. Argentine debt default: Dec 2001
11. US invades Iraq: March 20, 2003
12. Brazil and Argentina pay off IMF debts: Dec. 2005
13. Global Recession: October 2008

Some of the things I thought might correlate with sudden changes in the global weight of IMF lending – such as Black Monday (2); the Dot-com bubble burst (8); Argentina and Brazil paying off their debts (12) – didn’t seem to matter at all.

Others – such as Thatcher’s (and Reagan’s) election (1); the Mexican Peso crisis (5); and the 1-2 combo of the Asian (6) and Brazilian (7) financial crises – appear magnified when seen through this lens.

Most intriguing to me is the long steep slide that occurs following September 11, 2001 (9). My inclination is to explain that as the result of a perfect storm that combined the eroding credibility of the IMF (Joe Stiglitz, eat your heart out!) and a real estate derivative and petro-dollar fueled explosion of private lending world-wide. No matter how you slice it, though, there’s no denying that the world financial system has gone through some exceptionally dramatic changes in the last ten years.

Other than that, I don’t have a flashy Theory of Everything to explain all the data here. Heck, as I said, I don’t even have the data. Nevertheless, it’s fun to speculate.

Google and Market Failure: Think Wal-Mart, Not Microsoft

British Library by Steve Cadman (2007) CC-BY-SA

As in just about all the coverage I’ve seen of the Google Books deal with the Author’s Guild,
Friday’s NY Times story raises the familiar specter of Google-as-monopolist. This continues the longer-term trend of tarring the Mountain View, CA based firm with the same brush as it’s older, bigger, and more widely-distrusted rival from Redmond, WA. I’d like to point out a problem with this storyline that stems from the nature of the particular terms of the agreement.

In my mind, the nastiest and most inexplicable aspect of this agreement is not the bare fact that Google is about to buy the rights to a massive proportion of the world’s books. That has been a long time coming and is not a surprise. As many have pointed out, it could, in principle, lead to price manipulations when Google turns around to sell access back to libraries. However, I suspect we won’t see anything like that. Google’s lawyers aren’t stupid – they know that the Justice Department will be hot on their trail as soon as they get the faintest whiff of something like this. They will not want to let this happen if they can help it.

No, as I understand it, the truly nefarious part of the agreement preserves Google’s right to pay the same rate for licenses that publishers might offer to a hypothetical Google competitor in the future. This means that Google has effectively cornered the market for buying digital books – putting it in a position to shape the market to its liking in a way that looks much less evil to consumers.

The likely outcome is that buyers of access to Google Books won’t necessarily pay a premium price as they would with a typical monopolist. Instead, it is the organizations that sell rights to the books to Google in the first place who will be paid less than they would in a more competitive retail market.

Back in the 1930’s, the industrial economist Joan Robinson termed this kind of market failure a “monopsony.” The ideal typical form of monopsony arises in situations where the market for a particular good only has one buyer. This monopsonistic buyer is able to manipulate prices in much the same way that a monopolistic vendor would. The result is a market where the pricing mechanism fails to reflect supply and demand, perpetuating distortions and the breakdown of all the nice side effects that come along with a working market such as quality control, incentives to innovate, and adequate compensation for the producers of the goods in question.

Monopsony makes for less exciting headlines because it does not threaten consumers. Monopsonistic retailers slowly suck profits from their suppliers, forcing them to accede to their demands through the threat of massive revenue losses. The paradigmatic examle of a monopsonist in recent years has been Wal-Mart. The giant firm gets low prices for consumers by manipulating the prices of vendors (and by systematically undermining the labor market, but that’s another story). As soon as Wal Mart threatens to stop carrying their product, a seller has little bargaining leverage since they cannot afford to lose such a massive customer.

At least one person (who I don’t feel comfortable naming or quoting directly without permission) in the Berkman Center’s cyberlaw clinic assures me that the terms of Google’s agreement with the Author’s Guild are not totally clear on this point. Nevertheless, the fact that such an interpretation is not inconsistent with the text of the agreement should be reason enough to worry anyone who reads, writes, buys, or sells books.

Fears of a Post-Industrial Isolationist Era

Jagdish Bhagwati had an op-ed in the FT last week entitled “Obama and trade: an alarm sounds” in which he reviews the incoming administration’s trade team and economic advisors and concludes that we may be in for a new wave of protectionism.

Protectionists unite!

For Bhagwati, a Columbia professor and long-standing free-trade acolyte, this is a very, very scary prospect.

In an interesting aspect of his analysis, Bhagwait says that it’s not so much the ideology of the incoming team that poses a threat to the free trade agenda, but rather their relative lack of connections into the institutions that have advanced free trading in the past. He then argues that given the current resurgence of Keynesian statism and the generalized fear about the future of American companies, such ill-connected and unaccomplished trade team will not be strong enough to resist the base protectionist impulses coursing through congress and the private sector.

I’m of two minds about these claims. On the one hand, Bhagwati is notorious for dismissing the importance of sovereignty and state-based critiques of free-market ideology. Given that his defense of a utopian vision of purist globalism was so overblown, his fears are likely to be as well.

At the same time, however, I sympathize with Bhagwati insofar as I fear for the fate of the global political economy if the United States starts aggressively advancing an anti-global agenda.

Since the creation of the WTO in the mid 1990s, the United States has functioned as a hypocritical hegemon, advocating that everybody else drop their trade barriers while staunchly defending its own. This contradictory stance has bred a widespread (and well-deserved) distrust of US negotiators by small and poor developing countries (and by numerous fair trade activists). However, it has also facilitated the maturation of multilateral institutions into increasingly transparent and democratic forums for international policy deliberation.

That’s right, say what you will about the negative, anti-democratic aspects of the WTO and UN governing bodies like WIPO, but it’s hard to deny that they’ve become the closest thing the world’s got to legitimate sites of global governance. As such, they may continue to serve as glorified platforms for the pet ideologies of global elites (usually voiced by US, EU, UK or Japanese negotiators), but they have also given rise to compelling counter-examples of low- and middle-income country collaboration.

So where does that leave me on Bhagwati’s piece? I contend that it’s not worth getting too frightened about the incoming administration’s personnel – they’ll gain access to all the insider connections or information that their predecessors left behind and will more than likely maintain continuity with previous administration positions. Few early signals have suggested that Obama intends to deviate from Clintonian or Bushian (?) trade tactics.

Nevertheless, I share Bhagwati’s concern about the extent of generalized panic about exposure to global markets and competition. An ideologically-driven anti-globalist backlash would be quite disastrous and would probably receive a warm welcome in much of the country. Obama’s trade people will probably be unable to do much to confront this likely turn of events alone. Instead, it will fall to the president and globalist executives in the private sector to take leadership positions against post-industrial isolationism.

Racial Profiling Fail

‘Safest’ seat remarks get Muslim family kicked off plane – CNN.com

If you fly AirTran, consider calling/writing to complain. If you don’t fly AirTran, consider keeping it that way.

(H/T Jillian York)

Happy 2009!

Hmmm. My first New Year’s Day post. That means I’ve been doing this (off and on) for about a year.