A history lesson for newbies: A 2004 letter that tells how it all started

The Plain Dealer

OHIO’S LARGEST NEWSPAPER

July 2, 2004

To the judges:

It would have been easy to dismiss a call from a disgruntled retiree complaining about extravagant spending at the State Teachers Retirement System. But Stephen Ohlemacher thought it was worth checking out.

The retiree was upset that health insurance premiums would soon double, while benefits would be cut, something that was happening at other pension funds that took a hit when the stock market plummeted. But at STRS, the retiree said, the lavish spending continued even as the assets declined.

Ohlemacher combed through STRS records and found that the tip was on the money. STRS had handed out $14 million in bonuses to its employees during the three years when the system lost $12.3 billion in assets. Among those rewards was a bonus that boosted one employee’s $164,000 salary to $342,880.

STRS also granted generous fringe benefits to employees, allowed board members to travel frequently out of state and spent nearly $900,000 in artwork at its $94.2 million headquarters. The building included a fitness center and a childcare center that STRS subsidized so that workers with salaries as high as $66,000 could get discounted rates for their children.

The revelations outraged retirees and working teachers, as well as more than 100 state lawmakers who demanded that executive director Herb Dyer resign.

Dyer was forced out, the STRS board adopted new policies and lawmakers adopted legislation to bring more accountability to all five of the state’s public employee pension funds.

But Ohlemacher’s reporting didn’t stop after those results. Among those calling for reform were state Attorney General Jim Petro and Auditor Betty Montgomery, who complained that their designees on the STRS board had been outvoted or ignored when they tried to raise questions about expenditures.

Ohlemacher examined the voting records of the designees and found that in fact, they had gone along with every vote on expenditures from January 1999 to October 2003.

Jane Kahoun

State Editor