Molly's notes on Feb. 16 CORE and STRS Board meetings; HCA meeting

From Molly Janczyk, February 16, 2006

CORE met at 11:45 as usual with Mary Ellen taking notes for the Election 2006 discussion re: Flyers and Conni Ramser was welcomed for a question and answer session. Minutes to follow.

Speakers at STRS Board meeting:

1. Mark Millis: 30 yr retiree: OEA-R/NEA: Some retirees cannot work 35 yrs due to illness, conditions, funding but still depend on SB190 for its enhancements for the 66%.

2. Gary Hollow: Retiree with 36 yrs: OEA-R: Some retirees understand that STRS pays more $ and benefits to retirees than it collects from actives. Reducing staff won't pay for HC. The only thing that can pay for HC is a dedicated stream of revenue for the HC Fund. We must all work together for legislation. We can't ask for 13th cks, compounded COLAS, etc. when we don't have the money to pay for HC.

3. Tom Curtis: Speaking on the Retreat: Thanked the board for its efforts and hard work. Gained an appreciation for the efforts and a better understanding of the work that goes into decisions. Thank you!

4. Vicki Huff: Active with 34 yrs. OEA Exec. Comm: Represents actives in urging board to work together; HC costs are an albatross around our necks; HCA are working together; nat'l solution best but not happening now. HCA: Comprehensive Plan w/o burdening any one grp.. Retain enhanced benefit which has been counted on; actives pay into system 5 yrs longer and do not withdraw funds for 5 yrs longer and do not costs system for HC for 5 yrs longer.

5. Dave Speas: former STRS Board Member: Thank you. I remember the 13th ck and other benefits when we were making great quantities of money and none of us said not to give it to us. Then the crash and we are $9 Billion short. We'd be $34 Billion short if not for STRS investment staff.

We must learn from the past: We should have planned for a rainy day instead of giving retirees less costs and more benefits. Is there a plan for an emergency to protect funds from another disaster? It is your job to protect basic benefits and protect the funds so that an even more painful result does not occur.

6. Lloyd Knudsen: 30 yr retiree: Where is the same passion for retirees that was exhibited by some board members last month for non-investment staff compensation? I know you are thinking we must make decisions on all facets of STRS business. I know one superintendent whose motto was: Children First! Every decision was based on Children First. What was best for the kids, not the teachers, even though we thought teachers made education happen. The STRS board motto should be: Retirees First (all retirees-future and current).

A churchgoer I know has tithed 10% his entire life. Teachers tithe 10%. Retirees have made that financial commitment to STRS throughout their careers. Money was sent to invest, safeguard and later pay back to them in pension and subsidized HC benefits.

The board agonizes over non investment staff compensation, staff leaving but staff will leave when the grass is greener just as educators leave. Education goes on. I taught in a lower paying district with pride in the district serving the community and doing a good job for the kids. I hope staff at STRS appreciate all the good things they enjoy as employees at STRS. Please remember: Retirees First!

7. Scott DiMauro: Pres. Worthington Assoc., OEA/NEA: Commend Brown as Chair for overseeing the board during adverse conditions. Rumor that STRS staff should be under STRS vs. OPERS. Hope not based on thinking staff not excellent. When levy on ballot, it is about kids though some don't recognize that. STRS staff does care about Retirees and that is why they are here.

Break: 1 hr till 4pm HC Meeting:

Spoke with Conni Ramser about a 2/14/06 OEA meeting where Robt Davis allegedly talked of some members on the STRS Board being in favor of actives having their own health savings accounts and eliminating the 35 yr plan and even one board member wanting to see SS take place of our retirements. (The writer and attendee at the meeting felt it might be a political appointee, if true).

I simply complimented Conni on her speaking points to us, her diligence regarding researching topics and her saying how important it is for all to discuss and debate before voting during her meeting with us. I gave a few ex.'s of how these statements hurt OEA and collaborative relations as it puts us in the place of telling again and again what is NOT true.

NO BOARD MEMBER IS IN FAVOR OF ELIMINATING OR ROLLING BACK SB190 or any portion of it. Investment Appointee STRS Board Member, Stephen Buser, simply asked for a report on its financial impact. ALL saw that it WAS NOT a drain on STRS funds and that ALL EDUCATORS benefited-both actives and retirees - EQUITABLY. NO ONE WANTS TO DO AWAY WITH IT. Everyone sees the danger of trying to roll back for any portion and that would create terrible conflict an no one wants to lose the enhancements they gained. Stephen Buser said to tell ALL THAT HE APPROVES IT AND WOULD VOTE FOR IT IF IT CAME UP AGAIN! Conni reminded me of emails from retirees that questioned SB190 and I said yes, some did question and wished to see the study. But, having seen it, all realize both retirees and actives gained. She says she has to continue telling actives it is not a problem and asked that we help spread that message to calm fear.

Connie spoke of her determination for HC for all retirees-future and current and her duty as a board member to represent membership. She asked that we all work forward towards legislation to benefit all. She said the board learned by trusting sources and not having documents in fron of them before voting and it would not occur again.

HCA Meeting: The meeting was impressive with many offering suggestions and good debate resulting in changed minds and common ground. Mike Billirakis chaired the meeting: Main points for drafting legislation for increased contributions for HC Funding: I'm not going into too much detail or who said what as it may distract AND agreement was reached and all offered good faith comments to address issues in my opinion : -All membership would be treated the same by contributing and being offered access to HC if they chose with Sandy Knoesel stressing the importance of this with emotion: 'All are our members.' -BILL LEIBENSPERGER SPOKE FOR ALL MEMBERSHIP on several occasions stating: 'We do not like to see tiers of coverage but all treated the same referred to retiree HC.' When speaking about DC beneficiaries , he stated that it may not be that they do not want HC and if packages change, they may change their choice but regardless all to be treated the same. This is response to the fact that Dc (Defined Contribution Plan does not pay the same into the Pension funding and DB Defined Benefit makes up the difference). DC opts of of HC with STRS. But legislation would allow them the choice). -All actively teaching educators would be treated the same making contributions with choice of access to STRS HC. -Guaranteed fund for the contributions protected for HC only! -Refund options were discussed; pro: more attractive; con: take more contributions to fully fund HC Perhaps some small issuance could be written into legislation.

Mike called for a draft by March including these pts. for legislation.

****Investments: Our investors are saving us! STRS beat the market by
135 basis points!

STRS Investment Staff has earned us 12.5% in the last 7 months: fiscal year 2006! Forecast: inhouse more modest than out of house: No recession in sight! US Economy ok: growth about 3%; inflation higher due to energy costs but core inflation less than 2%. Employment growth-should average 150,000 per mo. Internat'l growth-good

Returns VERY GOOD with STRS AT 12.5% thru 1/06! Compare to OPERS 9% ; STRS 12.5%; closest in country is CALPERS at 11.2%; No similar fund nationally higher than STRS.

STRS is involved more with merging markets at 35% of investments. So, pulled money out for fixed income so not overweighted. Buser wanted to know that this good news was not due to riskier ventures and may come tumbling down; Mitchell said it is good overall with average return around 11%.

Buser questioned why we had to use outside mangers at 16 times (or 40 basis points ) the cost of using in house STRS investors at 5 basis points.

Mitchell said they send out what they just cannot do with a limited staff and until they hire replacements for some lost staff, they cannot perform all the investing responsibilities. Just don't have staff needed to do so.

Mitchell said they will continue to lower equity overweight. In 1/06, they removed $540 million from Domestic and $300 million from Internat'l and gave $1 billion in Development to outside investment staff as STRS didn't have capacity to handle it. Removed $100 million from merging and gave to external staff as well for same reasons.

JOHN LAZARES complimented and thanked Steve and his staff on a job very well done.

Dennis Leone told me that their returns were amazing and that one STRS female investor earned us $30-40 million - just herself. He said she was worth her large salary and he wanted to keep her for us at STRS. We spoke of non investment staff essential to her if that applied and perhaps compromise could be reached in some circumstances.

Dave Speas has often spoke of retaining this talented investment team and support staff with proper compensation as they have the potential to get us out of financial stress.

For what it is worth:

OUR INVESTORS ARE SAVING US! Regardless of what occurred in the past , some may not have even been at STRS nor did THEY make the decisions on what occurred. THOSE WERE MADE BY AN OLD BOARD UNDER AN OLD DIRECTOR!

IF THIS INVESTMENT STAFF CONTINUES TO EARN US THESE RETURNS WE CAN BE AT
30 YRS UNFUNDED IN A MATTER OF A FEW YEARS! Then more can also be contributed to the HC fund when 30 yrs unfunded liability is met. If they earn 8.5%, it will take longer but will happen.

Are other investment employees out there? Yes. Are they less money? we can get some less. Does that mean they can earn 12.5%-better than the national average or other Ohio pension systems. Well, maybe not since STRS IS the highest.

I want out of this quagmire the sooner the better. The abuses of the past are quelled and our vigilance will never again lapse. Let's not cut off our noses to spite our face. If these investors can move us out of unfunded liability of beyond 55 yrs., let's let them do their jobs. Dave Speas spoke to this last year not wanting us to face 100 yr unfunded liability. The higher it goes, the harder to get back to ground zero.

If ONE investor can earn us up to $40,000,000 and the others are talented beyond national gains, we need stand behind them and say THANK YOU! Steve said about his investors: 'These guys/gals can do anything; they can shoot rockets if they have to!'

Speas felt we should pay them their worth and those who support them and us as non investment staff. I have seen non investment staff go to any lengths to help us. It's hard not to want to give those staff their due. Not overdue, but their due if it keeps those valued at STRS with their level of competence and professionalism.

You can't replace filet with hamburger. Lots would want the job; that is not the point. WHO "ALL" GETS THE JOB DONE AND US ON THE ROAD TO RECOVERY? Compensate them at fair market value for their performance. We need them to give us back our retirements and provide retirements for actives.

Some of you will ask why I am supporting STRS? I always did, just not those who wronged us. But that is over; they are facing charges and now we must get to business of getting back to normalcy and retirement for all-future and current retirees. I just want to help get that done and harping about past offenses isn't doing that.

Whatever it legally takes should be our motto: Whatever it takes to achieve funding for HC and secure retirement for us and for future retirees. We want young educators of high quality to teach our children and grandchildren. We want them to receive their just benefits for doing so.

So far, Hall, Meuser, Fredrick, Brackett, Ramser have qualified for candidacy for the STRS Active Board Seats.

Damon Report:

Damon attended the Annual Winter Legislative Conf and Coalition to Preserve Retirement Security. Speaker Democrat Earl Pomeroy, supporter of public pension, noted he sees trouble on horizon for younger generations because while they save at rate comparable to older workers, they are in peril due to decline of defined benefit plans, decline in interest rates, increased life expectancy and increase HC costs translating to higher out of pocket costs. Move to DC plans means a risk of inadequate accumulation of money for retirement.

Jeff Birnbaum, columnist for the Washington Post gave an assessment of Bush Presidency. Deficit putting limits on range of domestic issues. Primary issues to public pension sector : HC and SS reform. The President's 2 initiatives: HCSA and commissioning study on SS done before but this time Medicare and Medicaid will be included.