Saturday, March 17, 2007

Dennis Leone: STRS Report, March 2007

Ohio Retired Teachers Association (ORTA)
By Dennis Leone, STRS Retiree Board Member
March, 2007

After my last column was published in October of 2006, the Board agreed to re-visit a motion I made months earlier to prohibit Board action on vendor contracts unless the Board first had an opportunity to review a summary of the proposed contracts. My original motion, as you may recall, was defeated 8-2, with only John Lazares joining me in support. Many retirees, in the months following, expressed their consternation over the 8-2 vote.

I am pleased to report that on October 20, 2006, the Board voted 7-2 to approve a motion I made (seconded by Lazares) that will require the STRS staff to provide a summary of all proposed contracts for services provided directly to the Board, and for any proposed contract in excess of $100,000. Former Board member Geoffrey Meyers and current Board member Mark Meuser voted against this initiative.

I am also pleased to report that 13 changes I desired in the Board’s travel and expenditure policies were adopted 9-0 on February 15, 2007. The changes were long overdue. Here are some highlights:

  1. There will be no reimbursements for meals in the future unless itemized receipts are provided. This is the only way to make sure that pension money is not being used to purchase alcohol.
  1. Airplane tickets must be purchased 30 days in advance, and Board members who choose not to do this will pay the difference in cost between the two tickets. Also, Board members – not STRS – will personally pay for any additional fees charged by the airline if ticket reservations are changed for personal reasons.
  1. The previously adopted $6,000 maximum for individual Board members to spend on out-of-state trips per year did not include the conference fee for registration or tuition. Now it does. Board member Conni Ramser last year spent well over $6,000 on out-of-state trips, but this was not in violation of Board policy because her conference registration fees weren’t part of the calculation. They will be now.
  1. Meal reimbursements are now limited to $10 for breakfast, $15 for lunch, and $25 for dinner. Previously, Board members could spend up to $60 per day, which meant that if Board members passed on breakfast and received a free lunch, they could – and did – spend $40 or $50 on a single dinner. My original proposal called for spending limitations of $5, $10, and $20, but the majority disagreed.
  1. No overnight lodging will be provided by STRS on the day that Board meetings end or the day after conferences conclude. I will never understand why the previous policy permitted this. It was so wrong.
  1. Board members will not be reimbursed for expenses while attending in-state meetings unless they are a formally invited speaker or an official participant at the meeting, or unless the Board votes to approve attendance in advance. There were examples in the past when some Board members would decide on their own to attend an association meeting and expect to receive a travel reimbursement.
  1. STRS funds will not be used ever again to purchase credit cards, fax machines, fax lines, or lap top computers for Board members. Also, Board members cannot expect STRS to pay for their personal long distance phone calls when they are attending meetings. It was an embarrassment that Board policies permitted these things, and that – up until a few months ago – several Board members still were contending that such expenditures and reimbursements were reasonable.
Two points of irony regarding the above changes:

No. #1: Three weeks to the day after the Board adopted the revisions, Gov. Strickland ordered a meal reimbursement freeze for certain state agencies like the Ohio Board of Regents – a group that used taxpayer money for a $1,000 dinner. (Sound familiar?)

No #2: My push for the travel policy changes was triggered after Gary Hollow, from OEA-R and NEOEA-R, made a public records request for the travel expenditure report of one Board member – me. He did not express any interest in seeing what the other Board members were spending. He wanted to see what only Dennis Leone was doing. Damon Asbury then produced a travel expenditure report for all board members. What did it show? Credit cards had been purchased for Board members Conni Ramser, Michael Billirakis, Jeff Chapman, Mary Ann Cervantes, and Steve Puckett. A fax line, with a monthly fee, had been purchased for the home of Michael Billirakis. STRS paid for the long distance phone calls Steve Puckett made when he attended a conference in Orlando. Single meals costing in excess of $40 existed for several board members. I wonder how Mr. Hollow and OEA would have reacted if the travel reports for only Dennis Leone or John Lazares had shown these types of expenditures? I think I know.

I wish to explain why John Lazares and I were the only board members who voted no on November 16, 2006, when the board set the reimbursement rates for Medicate Part B retirees, and therefore increased the out-of-pocket costs for said retirees. We both felt: (A) The Board needed to first consider other options for change, like the $1.4 million dollar premium fee STRS pays yearly to provide a small $1,000 life insurance plan for all retirees; and (B) We couldn’t support such an increase for Medicare retirees when STRS money still was being used for things like Board member credit cards, fax lines, lap tops, and phone bills. ORTA, in my opinion, should have supported Lazares and me on this issue.

Finally, I have an obligation to share with retirees why I disagree with published projections by STRS that our current 47-year unfunded liability is projected to hit the desired 30 years by 2009. Note the four charts below:

(Click image to enlarge.)


The increase of about 3,500 retirees per year is what we expect. However, the average decrease of 1,626 active teachers per year over the past three years was not expected. Another decline not expected has been the payroll growth in the past three years. STRS budgets for an anticipated payroll growth of 4.50% per year – not the 2.71% average we’ve received over the past three years. The staff projects only a 2.50% increase for fiscal year 2007. What’s keeping our heads above water? The fantastic investment returns we’ve received – averaging a whopping 14.45% over the past three years. Through eight months in fiscal year 2007, we’re receiving another 12.50%. (STRS budgets for returns totaling 8.0%.) My point is simply this: Absent a continuation of the great investment returns, we will not offset the realities (if they continue) of the other three areas shown above. I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn. More on this, and my recommendations for such a plan, later………

*Note: While this article was submitted to ORTA in a timely fashion, they refused to publish it or give an intelligible reason why.
Original posting date: March 11, 2007; redated to assure appearance on blog

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