Dennis Leone: Wait a minute, Dave!

Dennis Leone to Dave Speas, September 13, 2006

Subject: Wait a Minute, Dave

Dave -- here is the rest of the story that YOU need to please consider before reaching conclusions and sharing them about the Board's recent decision about spending $315,000 on a headhunter.

1. In April, at the staff's request, the Board approved a complete salary restructuring plan of investment staff and real estate staff. The plan called for huge base salary increases for these people as well as big increases in bonuses. The Board vote was 11-0 because we were told repeatedly that the increases would make STRS competitive, they would make STRS competitive, they would make STRS competitive. I voted yes because of this "competitive" plea, and because I liked the fact that bonuses would NOT occur if STRS lost money (like we did in 2001 and 2002) and because the bonuses would no longer be based on any subjective factors -- two areas I felt strongly about. The bottom line, however, is that the staff got what it wanted to make us "competitive."

2. Then, a month later, the staff asked the Board to add 9 positions, which included a few new people in real estate. One or two are real estate acquisition managers, and one or two are real estate asset managers (meaning they manage 6-8 properties we already own in cities). I provide this clarification to illustrate that these additions are not actually investment portfolio managers. The Board asked questions, we got our answers, and we voted 11-0 to support the staff recommendation. We were told again by the staff how important these additional people were to stay "competitive."

3. Next, in August, the Board got a memo from Damon which said that said he had already "engaged" the services of a headhunter in Chicago for $315,000 to secure the approved additional real estate employees because the staff could not find the quality they desired. I got very upset reading this, because I never would have voted on the increased number of real estate positions had I known that $315,000 would be requested to get the job done At the August Board meeting, Damon announced that he really had NOT already "engaged" the firm, and would do so if the Board supported the notion at the meeting. I voted no and stated that I felt betrayed, given the 2 previous 11-0 votes. After the staff said they had tried to find quality people, but couldn't, I said: "Try again." This was scoffed at. Hmmm, I wonder if teachers are asked to "try again" to raise test scores. $315,000???? It's just too much. Why don't we just make it $415,000 or $515,000.......it's so easy to spend someone else's money.

Worse, with the exception of a few verbal points from the staff about the Ferguson firm, the Board voted to spend the money without having a real clue of what will be in Ferguson contract. (Some of my fellow board members, quite frankly, don't want to know because they feel it makes them more personally liable.) When I tried to ask my contract questions publicly, Board member Geoff Meyers, like Judith Fisher did before, accused me of being "intrusive." I guess I am not suppose to ask about what we're getting for $315,000. I wonder what the contract says about a selected person quitting after 2 months? Do we pay more if we pick someone else from the list? Should it bother me, as a board member, that we're apparently paying Ferguson a percentage of the POTENTIAL bonus increases of the real estate employs, EVEN IF THEY DON'T ACTUALLY EARN THE BONUS?

Remember: This board rejected, on a 8-2 vote, a motion I made to prohibit action on a board agenda contract item unless we at least have a summary of the recommended action in front of us. Nope, they don't want that. Conni Ramser even wrote to me and said that it would be "bad faith negotiations" (in HER mind) if the board voted no on something that Damon was negotiating on the Board's behalf. I wonder, as a school board member, whether you feel that way about your supt negotiating a proposed union contract with the teachers. Doesn't he have to bring it back to the board for a final vote?

As you know, Dave, there's always more to the story. And regarding the child care operations, I will get the actual count tomorrow of STRS investment staff members who actually have children in the Center. And, as you have often said, "a promise is a promise." A promise was broken because we WERE told the Center would be cost neutral and it is not. Yes, I know all of the factors, and I know the staff is trying hard to make it cost neutral, but it is hard to accept this when it is obvious to all that the Center never should have been built in the first place. With the investment salaries now extremely "competitive" in the eyes of the staff, I will never accept anyone saying that the Center is needed in order to keep investment staff. It just doesn't hold up.

Dennis Leone