UC, CSU systems sued
Disclaimer: The refunds demanded from this lawsuit would directly impact The California Aggie. Campus News Reporter Alex Weinstein is a volunteer writer and does not receive a stipend.
Two lawsuits were filed on April 27 alleging that the UC and California State University (CSU) systems breached contract in closing campuses and not rendering certain services. The plaintiffs call for students to be reimbursed.
This may be a challenge, however, as the university is currently facing a major financial crisis. In a recent letter to Gov. Gavin Newsom, UC President Janet Napolitano claims that “direct assistance that UC campuses will receive through the CARES Act will not be sufficient to cover even the first month of [the UC’s] COVID-19 response.”
The plaintiff named in the case against the UC, Claire Brandmeyer, claims that despite these losses, students should still be paid back. Brandmeyer is a third-year student at UC Davis majoring in psychology with a minor in gender studies.
“I feel like they’re doing the bare minimum,” she said about the university’s response. “I feel like they have the money.”
The claims in the lawsuit detail certain fees and expenses that students pay toward the university. Plaintiffs claim that some of these services are not being rendered.
For Spring Quarter 2020, the total campus-based fees amount to $641.74, according to the UC Davis Finances website, and the student services fee was $376.
Many fees listed in the suit, however are still partially being used: the ASUCD fee is still going toward paying senators, administrators and funding other online programs, The California Aggie fee is still going toward staff salaries, the campus expansion initiative fee continues as construction is ongoing, the 24-Hour room remains open, counseling and tutoring services are offered online and professors continue to commute to campus to record or broadcast lectures.
When asked about a partial refund for some of these fees, Brandmeyer and counsel gave conflicting answers.
“I am looking for a full refund,” Brandmeyer said.
Noel Garcia, an associate attorney at Cowper Law, PC, one of the three groups representing Brandemeyer and her class, said the refund was considered a pro-rata, or proportional, refund of fees paid for the entire year.
“However, it’s a full refund for the spring quarter fees,” Garcia said.
An answer from the plaintiff, however, differed from that given by the counsel. After being informed of some of these ongoing programs, Brandmeyer said, “all the fees that we are paying for, what we are not using is the money that I think should be returned.”
The total of fees, according to Garcia, is $1,100 averaged across all UC campuses — a combination of campus-based and student services fees.
The UC as a whole, however, is at over a $310 million loss for Spring Quarter 2020.
Garcia said CSUs and UCs have multi-million or multi-billion dollar endowments to sustain them.
“Not only was it admitted that they have money in reserves, but that they’re not willing to use it to bail themselves out right now because they want to get those monies from people in the future,” Garcia said. ”So instead of using the money they have, they’re tapping into money that’s already been paid by the students, and essentially pushing those losses off on the students.”
She referenced a recent panel of higher education leaders that spoke about endowments.
Many endowments are donated for a specific cause. Donors stipulate that these funds need to go toward a specific project or type of program. This panel also discussed the existence of unrestricted endowments — those with no direction on where the funds are allocated.
“This seems like precisely the time to use the vast unrestricted endowments available to the UC System,” Garcia said via email.
According to James Hyatt, the UC Berkeley Vice Chancellor and CFO Emeritus, however, endowments are not “as great a source of flexibility as one would think.”
“If [donors] view their endowment that they give for particular purposes to be used as a fallback fund, […] they may not be as receptive to giving future gifts to the university,” Hyatt said.
The question of redirecting restricted endowments was also discussed during The California Aggie’s interview with Garcia and Brandmeyer.
“It falls directly in line with whether or not [the UC] can reallocate funds from students that were paid for a specific purpose,” Garcia said. “Is it legal for the schools to take fees already paid by the students for a specific purpose and move them to pay for something else? Is it legal for them to do the same thing with endowments? Those are all things that will be played out in this lawsuit.”
Garcia said the legality of transitioning funds and the outcome of this case was to be determined by the court. This argument would then shift the financial burden onto the endowment funds.
The UC has $21.1 billion in endowments, according to a 2019 report, though it isn’t specified how much of that is in restricted funds. Across the 226,125 undergraduates who attend UC schools, at $1,100 each, the suit would be seeking approximately $249 million in refunds.
Assuming the unrestricted endowments have not already been allocated, this situation raises the question of whether the university can ethically use endowments as a bailout.
“[The UC] has made several statements about how they’re constantly saving and putting away money for a rainy day,” Brandmeyer said, but she didn’t offer a source for these claims, where this money is or how the UC accumulates it. The UC is a public university system, meaning that, by nature, it is not-for-profit.
When asked for comment, Kelly Ratliff, UC Davis’ vice chancellor of Finance Operations and Administration, said tuition funds and fees are being used for what they are normally used for, although there are extra expenditures in some other areas.
The suit claims that CARES Act funds, along with other government stimuli, do not excuse the university from returning the service fees.
At UC Davis, the “CARES Act Emergency Relief Grant Fund [will provide] emergency financial aid assistance to students for expenses related to the disruption of campus operations due to the coronavirus pandemic,” according to a recent school-wide email from the financial aid office. UC Davis is providing nearly $17 million in stimulus funds to the 71% of undergraduates who qualify for financial aid due to disruptions from COVID-19.
“This does not absolve University of California, however, of being required to disgorge the wrongly-retained monies that Plaintiff and the other Class members paid for fees,” the suit said. “The CARES funds are intended to be used as emergency cash grants, not as a vehicle for universities to retain money that is not theirs to retain.”
The UC Office of the President (UCOP) has not changed its stance on refunds, saying on its website that though some or all instruction for all or part of Academic Year 2020–21 may be delivered remotely, tuition and mandatory fees have been set and will not be refunded.
When asked for comment, UCOP media strategist Stett Holberg said the UC has provided more than $300 million in prorated housing and dining refunds systemwide for students who chose to leave campus housing. Holberg did not offer comment on the lawsuit.
The lawsuit does not discuss room and board refunds, and at the time of publishing, UCOP did not reply to a further request for comment relevant to the suit.
“I love Davis, and I love going to Davis and I love living there,” Brandmeyer said. “I’m truly [pursuing this suit] because I can see the pain and the suffering with my own eyes. I feel like they’re not taking this seriously enough.”
Written by: Alex Weinstein — firstname.lastname@example.org