Fall 2006 ORTA Quarterly: Dennis Leone's STRS Report

STRS Report

Fall 2006 ORTA Quarterly

By Dr. Dennis Leone, Retired Teacher Member, STRS Board

http://www.orta.org/strs_report_fall_06.htm

I am obligated, as an elected retiree member of the STRS board, to tell you the truth about STRS issues and why I vote as I do. I am providing you with information below that you will not see in any official newsletter of STRS or ORTA. Here is my report, after serving exactly one year on the board:

What Have I Supported?

1. I made the motion to prohibit rehired retirees who are working full-time elsewhere from utilizing STRS health insurance, beginning January 1, 2009. This passed on a 5-2 vote, with board members Conni Ramser and Steve Puckett voting no. Rehired retirees utilizing STRS health insurance cost our pension fund $2 million last year. I also was getting tired of school districts ‘using’ STRS to help solve their financial problems, not to mention the fact that many districts are not even considering new teachers or recently laid-off teachers. I thought we all believed in the notion that schools need a mix of both new and veteran teachers.

2. Between October of 2005 and April of 2006, I voted no on the executive director’s monthly spending report seven times because of my opposition to the lavish nature of many staff perks at STRS. Finally, in May, the Board agreed to cut staff perks in six areas and reduce the budget by $410,000. John Lazares and I voted no on three of the six cuts, because we felt they should be deeper.

3. I supported a new structure for how the investment staff will be compensated in the future, insuring that no subjective factors will be used for determining bonuses. Instead, investment bonuses will occur only if STRS receives positive returns. The investment staff has had three fantastic years in a row for STRS. Bonus checks for the other 500 non-investment employees have been ended.

4. I advanced an initiative in May to impose a spending cap of $50,000 on the STRS executive director. The board rejected this 8-2 in June (with only Lazares supporting my motion) and, instead, gave the executive director an incredible $1 million spending limitation. Two months later, my fellow board members had a change of heart. The board adopted a $100,000 spending cap on a 5-4 vote, with board members Puckett, Flannagan, Fisher and Brown voting no again.

5. I have asked my board members to support the development of a contingency plan to activate in the event of a national or worldwide catastrophic happening. At present, a board majority supports doing this. A plan must be developed, even if some board members may later vote no on such a measure.

6. I support the board’s legislative initiative to raise the contribution level of active members and employers 2.5% each to address future health care needs. I worry that when the board does other things that are managerially irresponsible, it hurts our credibility, which translates into hurting our legislative initiative. See below:

What I Have Opposed:

1. In August, I was the only board member (Lazares was absent) to oppose a $315,000 expenditure for a Chicago employment agency to seek three real estate employees at STRS. I feel betrayed on this issue. I voted in favor of adding the three new employees in June, but it was never even implied that we would later be expected to spend $315,000 for a headhunter. Worse, the board approved the expenditure without knowing one specific thing about the contract we have with the agency. Some board members don’t want to know. I attempted, in May, to get a motion passed that would prohibit spending pension money on such a contract unless the board first had the opportunity to know what was in the contract. This idea failed, 8-2, with only Lazares joining me with a yes vote.

2. Also in August, the board authorized the executive director to pay for the personal and private legal fees of three STRS employees, who decided on their own to secure external legal advice after they were subpoenaed to testify in the trial of former board member Hazel Sidaway. Lazares and I both expressed outrage over this payment occurring. Pension money never should have been used, especially when free legal advice was available from STRS lawyers.

3. I very much opposed the $3.4M settlement agreement entered into between the board and the STRS non-investment staff members, who sued to get one more bonus check for work they did in 2003. No one reported the fact that I offered a substitute motion (defeated 9-2) for the board to first seek restitution from Herb Dyer and the board members who inappropriately approved the bonus checks in 2003. Worse, the board actually adopted the settlement agreement without even having a document in hand. Lazares and I were the only board members who voted both against the agreement and in favor of seeking restitution.

4. I opposed the board’s decision to pay $300,00 to a law firm that represented the board in the above mentioned settlement agreement. It upset me that there was no discussion by the board to pay this final bill, other than a poll by email and telephone. I still question the legality of this. I requested that the item be put on the board agenda, but this was ignored. I was never even informed that the bill had been paid. The bill should never have been paid given the fact that the law firm, without the board’s approval or knowledge, inappropriately added a provision to the final agreement. Of course, since the board did not have a document in hand when a vote was taken, the misconduct could not be proven.

5. While Lazares and I both voted in favor of a new policy that is designed to allow the full board to discipline other board members if they engage in misconduct, we both expressed our opposition to the board discussing this in executive session. Discussion of a proposed policy is not a legal reason to go into executive session. It never should have happened. It is ironic that the board engaged in misconduct to privately discuss a proposed policy to deal with board member misconduct.

6. Lazares and I have voted against board members taking out-of-state trips, not because we are opposed to board member in-service, but because we feel STRS has not exhausted options to bring the desired speakers to Ohio (especially when the other four pension systems are sending their board members to the same out-of-state meetings). Further, at a time when so many retirees are struggling to make ends meet, Lazares and I feel that the STRS board should set an example and not spend thousands of dollars on meetings in Florida.

While I am pleased with many of the changes at STRS, I worry about the fact that a board majority thinks it’s okay to allow the executive director to negotiate and implement contracts without the board even knowing what’s in them. Why is it wrong for me to desire to know what the heck I am voting on? I also worry about board members believing that the more they know or learn, the more they become personally liable. This cancerous, look-the-other-way attitude is exactly what gave birth to the entitlement culture in the mid-1990’s with the previous board and staff. Two board members, when I recently requested information about the budget and vendor contracts, publicly accused me of being ‘intrusive.’ I thought it was my fiduciary responsibility, as a caretaker of retirees’ pension money, to be ‘intrusive.’

[ORTA's disclaimer]: The views expressed in the STRS Report are those of the author and do not necessarily represent ORTA or STRS official positions or viewpoints.