Flashback, 2003: STRS and Damage Control

Canton Repository, July 18, 2003

Rest of the story sounds a lot like what we already know about STRS

By PAUL E. KOSTYU Copley Columbus Bureau chief

COLUMBUS -- Folks at the State Teachers Retirement System have been involved in damage control in light of reports about the pension fund’s operation.

The damage control has moved to at least two fronts.

First, it seems obvious the STRS board will get rid of Executive Director Herbert Dyer. The board held its second closed meeting in as many weeks Thursday to talk about personnel. This is just a guess, but the meetings are likely briefing sessions by the board’s attorney about his negotiations with Dyer’s attorney. In other words, both sides are trying to find an exit for Dyer that is financially palatable. Of course, we don’t know this for sure because the meetings are secret and board members are loath to talk about what goes on behind closed doors.

The obvious thinking, of course, is that if Dyer goes, then perhaps some of the heat on the pension fund and the board will evaporate as well. That remains to be seen.

Another tactic is to spin the news in a more positive direction. On June 20, board Chairwoman Deborah Scott and Vice Chairman Eugene E. Norris sent a two-page, single-spaced letter to STRS members. The letter went to most of the 400,000-plus members, and several were willing to share the correspondence.

“For 83 years, the State Teachers Retirement System has provided an exceptional level of retirement benefits to Ohio’s public educators,” the letter began. “As members of the Retirement Board, we have been entrusted with maintaining the quality of this system. This is a duty that none of us take lightly. We want you to know that your pension is secure and STRS Ohio continues to be financially sound.”

They continued, “Recently, there has been media attention in some parts of the state focusing on the spending practices at STRS Ohio. We understand that some of our members and the public-at-large have questions and concerns about these issues. ... While what has been reported in some papers has generated questions, it is by no means the whole story.”

Thus, the reason for the letter — to reveal the whole story.

The letter says it’s true that compared to other pensions funds “we do often have a larger investment staff and a larger operating budget than systems that have more members and/or assets.” But that’s because “we save millions of dollars each year by managing more than 80 percent of our investment assets in-house ...”

Of course, of the millions saved, $18.8 million since August 2000 through March this year didn’t help teachers but were given as staff bonuses.

“Our operating budget is higher because the compensation and benefits paid to these investment associates are included.”

The operating budget couldn’t be higher because of the cost of maintaining a $94.2 million building?

STRS recruits and retains “qualified, service-oriented and high achieving associates,” the letter said. “Associates receive the incentive award only for achievements over and above their current job responsibilities — and only if accomplished.”

The letter doesn’t say that some of those achievements sounded more like routine job descriptions than “push goals.”

As a result, the compensation package “has resulted in consistently high levels of performance and consistently high levels of member satisfaction. It also results in low employee turnover.”

Scott and Norris said the board suspended the bonus program because of the impact that the declining stock market had on STRS revenue. They don’t mention public pressure because of extravagant spending.

Instead, they said the administrative budget was reduced for the current fiscal year by $2.8 million while a way also was found to extend the health care program to 2014. Would that be by boosting members’ costs?

Laura R. Ecklar, a spokeswoman for STRS, said the letter was necessary in light of media reports. “We’re damned if we do and damned if we don’t,” she said.

That’s a fair assessment.

In other words, Ecklar was saying the STRS board could be criticized for not keeping members informed if Scott and Norris didn’t respond to media reports. And it could be criticized for responding.

Why?

Preparing, printing and mailing 325,650 letters cost STRS $129,779.

You can reach Copley Columbus Bureau chief Paul E. Kostyu at (614) 222-8901 or e-mail:

paul.kostyu@cantonrep.com