The University of California has pocketed millions of dollars in profits from Lawrence Livermore National Laboratory’s corporate manager that could have been used to help LLNL retirees with healthcare costs, the retirees claim in a recent newsletter associated with their ongoing lawsuit.
The retirees reached that conclusion by analyzing the annual financial reports of UC and Lawrence Livermore National Security, or LLNS, the Laboratory’s corporate manager, as well as the joint venture agreement by which LLNS operates.
According to their analysis, the University received approximately $134 million in cash distributions from LLNS between 2008 and 2018.
“While LLNS has been fighting our lawsuit in court for nearly 10 years, the Regents have received substantial profits from LLNS,” the retirees’ newsletter said.
“Clearly, the (UC) Regents have funds available to resolve this case and provide the University-sponsored benefits that were promised.”
Historically, the University operated the laboratory on a not-for-profit basis. It was reimbursed for management costs, including healthcare benefits, while transferring any excess revenues to LLNL research programs.
UC healthcare was available to LLNL retirees from 1961, when the University’s Board of Regents authorized it for both active employees and retirees, until the for-profit consortium took over as manager near the end of 2007.
Responsibility for retiree health benefits was then transferred to LLNS, which was contractually obligated to provide benefits that were “substantially equivalent” to those that had been offered by UC.
After a year, however, the Laboratory's federal sponsor, the U.S. Department of Energy, modified the contract so that LLNS only had to provide benefits comparable to those that were offered by private industry, a lower and less expensive standard.
At the same time, LLNS began making cash contributions to UC, with $5.5 million transferred in the 2008-2009 year, and an average of more than $13 million per year thereafter.
The total for the 10 years summarized in LLNS financial reports is $134.2 million.
Whether and how this information might influence the lawsuit now underway is unclear, but it will be a particularly bitter pill for many retirees to swallow.
The change from nonprofit to for-profit status was mandated by Congressional representatives and bureaucrats who promised that the new arrangement would be much more efficient.
The opposite turned out to be true, however, as demonstrated by staff layoffs in 2008 forced by the shrinkage of an operating budget that was depleted by a sharply higher management fee and new taxes.
The retirees were not affected by the layoffs, but they had considered the loss of UC healthcare to be a violation of promises made during their careers at the Laboratory--promises on which some of them based career decisions.
They formed an organization called UC Laboratory Retirees Group, or UCLRG, and raised funding to file a lawsuit in 2010. The suit became a class action four years later.
In recent weeks, the two sides have participated in settlement discussions under the supervision of a retired judge, Maria-Elena James, but no settlement has been reported.
A trial is scheduled for May 6 in Alameda County Superior Court in Oakland.