Janczyk, Leone & McGreevy discussion: unfunded liability, Ferguson contract

From Molly Janczyk, October 25, 2006

Subject: RE: Major Point Not Missed on Unfunded Liability

I agree about Betty's performance stated in Jim's notes below. Dennis just wished the report first to visit the issue.

Re: Ferguson: yes, I know it is policy but to us, that is not all the picture. It was the large payout to a firm without the board knowing all the details, once again, that is the problem. I would like to hear that kind of thing in your reports, is all. Not just what is general rule but also why some question these things, as I would hope you would want from those who oversee your dollars. That is the pt. to me. Jim, we can all play nice and do business as was usual or we can question and know what we are doing this time around. We sent Lazares and Leone to question. They are listening to us and only doing what WE ask of them. I think this point is missing in a lot of exchange. We WANT to know about any slipped through issues or spending and yes, we would have liked to know the mechanics of the Ferguson Deal and how it operates. OUR MEMBERHIP is one who questions these issues and Lazares and Leone take our questions and any other items which should be known to us to the meetings. WE WANT TO KNOW!

For all to see: regarding the bringing up of other ways to lower unfunded liability other than the always charted and used 1% .

WE REALIZE AND NO ONE WANTS TO CHANGE THE NOW IN EFFECT OF SB190! IT IS NOT AN OPTION NOR ON ANYONE'S AGENDA! The point was not to be comparable .

This is the point: Retirees are scared to death of losing HC should legislation not pass.
1% to HC is constantly charted over the years as a way the STRS Board could lower unfunded liability. It is said it is not being considered. Retirees do not trust that statement as we have learned the hard way that when STRS discusses something it may very well come to pass. So, WHY, was Leone's question, is THAT the ONLY way presented when there are other ways to reduce liability ALSO no one wants or considers them either. But to keep using this example scares members as though if push comes to shove, it may be considered. We would strongly fight that.

He was only raising the point of there are multiple ways so why only ever mention 1%. NOT BECAUSE HE WANTS TO CHANGE SB190 AND NO ONE DOES. We understand ALL BENEFIT FROM IT! The only change I have heard mentioned was by the retiree who spoke Thurs. 10/19 who feels the addt'l benefit retro to '99 and passed '00 was unfair. Of course, retiring in '99, I feel good about it. I didn't benefit from the '98 Incentive for Retiring and I won't benefit from future benefits most likely. Things change and enhancements are part of it. I am better off than older retirees and won't be as well off than younger ones. I don't benefit from 35 yrs and probably wouldn't have retired if I have understood it all back then. That's life. I do benefit from SB190 thought as most retirees do. It would be disastrous to try to change SB190 for actives and retirees already benefiting and Leone has said he would never want to take away benefits from anyone.

You know, folks, listen to the man. Hear what he SAYS IN CONTEXT and stop jumping on every word taken out of context and it is simple: if you have a question, ask him directly instead of supposing and he and Lazares will tell anyone up front and personal. They are really easy to approach. Thousands of us do it and RTA's love them. Take down the wall and attitude and just talk/discuss and stop name calling and behave universally. You can't say be a team player on your issue and vote against them on every issue the membership wants like NO DOCUMENT: NO VOTE and simply LOOKING AT WHERE OUR MONEY GOES . YOU ALL BE TEAM PLAYERS! TEAM MEMBERSHIP! Where were you as team players on those issues or when Lazares and Leone are wrongly attacked in the media?

Where are you THEN? Did any of you support them/him?

NO!

You only want to point out what you view as negative and then fault them when you disagree instead of establishing real dialogue which might, oh no! result in heated debate and then finding ways to uniform compromises.

YOU want to give veiled attacks on not working professionally you call it for legislators to see. As Angelettis pointed out so well: DO YOU THINK LEGISLATORS WILL APPROVE LEGISLATION WHEN THEY SEE BLATANT MISUSE OF FUNDS? The old board found ways 'LEGAL' but not ethical IS THE POINT and this is same ol when THIS board approves rubber stamping money spending by Damon and staff and Board members whether $1400 or $55 credit card fees secretly used until Gary Hollow inquired about Dennis to no avail and Damon had to present all Board Member records. Hollow didn't expect that, he said, when Dennis thanked him for his actions making these records available.

Legislators ARE looking at us for RESPONSIBLE spending and INTEGRITY of spending, for OPEN AND HONEST dialogue resulting in REAL solutions so they see we are trying all we can. Billirakis was praised as if a saint had died. This board member was convicted of 4 ethics violations and OEA chose to speak of his professionalism and impossible to replace interactions on the HCA committee. Bill had how many years to get this rolling and did nothing until STRS Board Members were found out. Suddenly, his name muddied, he wanted to save HC and pled with us to keep him out of our 'news.' WHERE WAS HE all the years on the board when HE KNEW HC was a disaster as OEA and STRS knew since late 80's/early 90's and is documented. WHERE WAS his influence these past 3 yrs even when he decided to be the one to save HC?

Mike was approving misspending and NOT working to save HC, is where he was. Mike was as the Canton Repo said, 'milking the system' another 'legal' but unethical way to up his salary and retirement benefits by being a 'teacher' in the Perry Local SD without ever showing up for one day of teaching while earning big bucks on the road for NEA.

This is who OEA chooses to LAUD! This is the one OEA chooses to use as an example of professionalism and demeanor for other board members. This is who we should mimic in efforts for legislators to see we all are on the same page. FORGET IT!

We will work for HC legislation but we do not feel to behave as Billirakis did is the answer. We do not feel not looking at contracts or voting without documentation or watching Damon's spending is the way to 'all get along ' and be 'team players.' WE WILL NOT ACCEPT SUCH ACCUSATIONS ONLY USED WHEN WE DISAGREE AND FIGHT FOR WHAT IS RIGHT FOR MEMBERSHIP!

If we speak up, oh, be careful, legislators are looking. If you laud such ridiculous ex.'s of professionalism and stand up for 'team playing' on wrong issues, YOU THINK LEGISLATORS AREN'T LOOKING?

They are looking for how we changed, how we oversee what we have, how we stand for membership according to : ORC:3307.15.

It is YOU who don't watch and blindly support those who are convicted who should be worried about legislators!

Legislators, of all people, know honest and passionate dissension brings solutions and real compromise. Problem : This board is so blindsided by what they want and fighting Leone and Lazares they don't see the exceptional qualities they are wasting using these men for local school board presentations, RTA presentations, legislator meetings and school district meetings. THESE ARE THE 2 WHO MEMBERSHIP RESPECTS AND BELIEVES!

Find a renewed path to communication of real debate and working through issues and you will find a "team." Tom Mooney should be on this board. He knows perfectly how to talk with Leone and Lazares with no problems. Mark Frederick should be on this board as he is not afraid to speak and to listen. Tom Hall should be on this board with expertise and understanding of economic and investment issues. Instead we have individuals who want to play nice and give appearances of all agreeing when they don't.

I'm sick to death of this continued play acting. If you can't stand the heat of real work, get out of the fire and let us have those who wish to roll up their sleeves and get down with improving our lot. This isn't a tea party and you don't have board meeting experience. You belong to the old board mentality of good ole boys and girls if you want just and only to play nice with your friends. YOU ARE NOT OUR FRIENDS! YOU ARE THE GUARDIANS OF OUR FUNDS! GUARD THEM!

And as a member of every organization, I want to hear exactly who felt how and voted how. Report ALL the facts not some generic nice general write up and approved issues with no specifics.

Personally, I think Mary Ann and Jeff are nice people but not experience enough or with enough fight to stand up for what is right for membership. Either learn to stand up or go back to your nice lives. Mark M., you are obviously taking a 'learned' approach. I like you. You have kept your word to be responsive. But, take from books what is needed and couple it with reality of a lost trust and needed oversight not in books as we are not those systems but one that has proven we need oversight-esp. with Damon
(regardless of STRS surveys; take your own survey but be sure to mix it up with ages and all membership and let us write the questions)

No insult intended but membership is not happy and we have waited long enough for experience to be learned and views taken seriously.

Thanks.

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Jim McGreevy to Molly Janczyk, October 25, 2006

Subject: Major Point Not Missed on Unfunded Liability

Molly -

I've exchanged emails with Dennis about the two emails you forwarded.

Regarding the Ferguson contract: I don't believe anything I put in my report was inaccurate. I reviewed my notes and I believe I got it right. The bottom line on that contract is, as the staff who negotiated reported to the Board, the language on paying fees was standard contract language for high end headhunters.

On the Montgomery letter: I don't give a rat's patoot what Betty Montgomery SAYS she would have done had she been on the Board. The key point as far as I'm concerned is the legality of the payment. Was it poor judgment on Damon's part to pay it? I think it was. Had I been on the Board would I have voted to approve it? No. But, given Betty's dismal past record on such issues, I don't put much credence in anything she says. She's trying to have it both ways with this letter. Not surprising in an election year, I would say.

On the payroll growth assumptions, I completely agree with Dennis that those assumptions are out of whack with reality and need to be looked at. But, we also understate performance on investment income, so the net result is something of a wash as I heard the report. As Tom Johnson said on the subject "both retirees and active teachers should be pleased at the performance of the fund" as was evidenced in the overall picture. If the HCA proposal passes it will help the funding period substantially, another argument we can use to get it enacted.

Jim

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Dennis Leone to Jim McGreevy, October 25, 2006

Subject: Re: Major Point Missed on Unfunded Liability

How could you possibly conclude that the major point of Montgomery's letter was that the expenditure was "legal." How could NOT report that she determined the payments were inappropriate and that the free service was available to the three employees from the Attorney General's office? How could you, or any retiree, NOT be upset that pension money was used, given this undeniable fact? It matters how Leone, Lazares, Ramser, or Meyers feel, or what they said. What matters is what the truth is........and you are choosing to report a limited version of the truth.

I do not understand what you are trying to say about the payroll growth and our unfunded liability. The truth is the truth. If we adjust our payroll growth assumption to 3.50%, we are at "infinity" -- which means we are admitting that we can't meet our future pension obligations. Board members and you can't smile about our unfunded liability dropping from 55 years to
47 years unless you are willing to tell the truth about our payroll growth assumptions.

Dennis Leone

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From Jim McGreevy, October 24, 2006

Subject: Re: Major Point Missed on Unfunded Liability

Dennis -

I was in the room and heard the exchange between you and Kim Nichol concerning salary projections. I am in complete agreement with you on the seriousness of the lack of accuracy recently displayed on the actuarial assumptions on salary. I think the payroll growth percentage should be in the 2.5% - 3% range for next year. Of course, as Tom Johnson pointed out, on the whole the assumptions are producing a generally balanced picture since STRS has been doing better than assumed on investments and some of the other numbers. I don't think we should use an inflated figure for asset growth even though recent experience has been more robust and that would improve our numbers. But I don't think there's any doubt that the picture today is better than it was a year ago. The trend lines, as I recall the presentations, are in the right direction, even with the shortfall on payroll growth.

On the other concerns about my report that you mentioned in the earlier email, I have tried to present what the Board did as a group, what the consensus is as I observe it. I understand your points about the Montgomery letter, but it was clear to me that, with the exception of John Lazares, the rest of the Board did not see it in the same light that you did. That doesn't mean you're wrong, just that the consensus of the Board saw it differently, and that's what I reported. The letter is out there on the Internet for all to read and draw their own conclusions.

I do appreciate your points about Damon Asbury's contract extension. I would probably react negatively to the way it came forward if I were in your shoes. But, again, I'm trying to report the Board's position, not individual members' positions on such matters. I fully understand why CORE and Kathie Bracy's Blog want to exclusively promote your point of view on some of these issues, but I'm trying to do a factual presentation on the Board's actions. Similarly, I did not provide a complete exposition on Mark Meuser's position on contract review -- I reported the actions of the Board that supported your position.

- Jim

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On Oct 24, 2006, at 9:04 PM, Dennis Leone wrote:

Perhaps you were not in the room when I asked questions of Kim Nichol, but here is the bottom line about our "improved" unfunded liability, which is now "down" to 47 years. My own previous reports to RTA's, I now know, were incomplete. Everything assumes that STRS will have a 4.5% payroll growth from active teachers in the future. The last three years? We have received payroll increases of only 3.0%, 2.4% and 2.1%. If we lower our payroll growth assumption from 4.50% to 4.25%, our unfunded liability goes up to 54 years. If we lower the assumption to 4.00%, our unfunded liability shoots up to 62 years. If we lower the assumption to 3.50% (still higher than what we've received in the past 3 years), our unfunded liability, Ms. Nichol reported, would be at "infinity" -- which is defined as a pension system not having sufficient funds to meet pension obligations in the future. Tell me, James, what should the Board use as a future payroll growth assumption?

The above is a serious, serious matter.

Dennis Leone