Friday, February 23, 2007

Medicare Rights Center "The Big One"

From Tom Cooper, February 23, 2007

Asclepios

Your Weekly Medicare Consumer Advocacy Update
The Big One

February 22, 2007 • Volume 7, Issue 8

One of the biggest lies told by politicians who oppose letting Medicare negotiate lower drug prices is that doing so will make the Part D drug benefit look like the drug coverage offered by the Department of Veterans Affairs (VA) and, as a result, people with Medicare will lose access to medicines they need to stay alive and healthy.

After decrying the inadequacy of VA drug coverage, however, not one of these lawmakers takes the next logical step and proposes changes to improve the drug coverage our veterans receive.

Why is that?

Because the VA provides excellent drug coverage for our veterans. The charges against the VA are simply false and designed to scare older adults and people with disabilities, already battered by high drug prices and coverage gaps under Part D, into thinking price negotiations will make things worse.

Take for example the speech made on the Senate floor last month by Senator Charles Grassley, Republican of Iowa. Senator Grassley charged that the VA covered just one third of the drugs covered by Part D.

It’s just not true. In fact, the VA puts roughly the same number of unique chemical compounds on its formulary (list of covered drugs) as are potentially available under Part D and actually has more drugs (including different dosages and forms of the same chemical) as are potentially covered by Part D (4,778 versus 4,300). And not all Part D plans actually cover all these 4,300 drugs. Many of the drugs are either excluded from the formularies used by the private companies offering Part D or are subject to restrictions that effectively deny coverage—facts conveniently omitted by Senator Grassley.

Bush administration officials also claim that one million veterans have signed up for Part D, demonstrating the superiority of Part D over VA drug coverage. In fact, of the 2.5 million users of the VA drug benefit who are eligible for Part D, 400,000 were automatically enrolled in Part D by their employer or because they also receive Medicaid. Just 250,000—10 percent—have voluntarily signed up for a Part D plan, and there is no evidence that they have stopped getting their medicines from the VA.

The VA does use a formulary to steer patients toward, and away from, certain drugs, as do the Part D plans. When painkillers like Vioxx first came on the market, the VA evaluated their effectiveness, their risks and their costs and restricted prescriptions to those who truly needed the drugs. As a result, it protected veterans against a drug that was ultimately found to raise the risk of heart attack and was pulled off the market.

Another talking point for the opponents of price negotiations has been the exclusion from the VA formulary of the anti-cholesterol drug Lipitor, the most widely prescribed drug in the world. Instead of covering Lipitor, the VA covers other equally effective and less expensive anti-cholesterol drugs. The VA’s price for anti-cholesterol drugs declined from 93 cents per pill in 1999 to 60 cents in 2006. Lipitor costs about $2.45 for a 10 mg pill under Part D, over four times what the VA pays. Yet veterans who do need Lipitor can get it; last year the VA spent $34 million filling prescriptions for the drug.

Most important, the VA has been shown to do a better job of keeping the cholesterol of its patients at healthy levels than Medicare HMOs and other private plans even as it has held down spending by using a formulary to steer patients toward the most cost-effective drug.

That is the real reason drug manufacturers fear the new Congress will create a Medicare-run plan under Part D, with a formulary developed on the basis of clinical evidence and lower drug prices negotiated for all 43 million people with Medicare. U.S. sales of Lipitor brought in $7.8 billion for its manufacturer, Pfizer, last year. Under a Medicare-run drug plan, Pfizer would have to bring its price for Lipitor down to a level comparable to cheaper, equally effective anti-cholesterol drugs if it wants its drug put on the Medicare formulary.

That is why drug manufacturers are spending millions lobbying Congress not to allow Medicare to negotiate prices and provide drug coverage directly, instead of through private Part D plans. And that is why these scare tactics are being used. Drug manufacturers have a lot of lobbying battles on Capitol Hill, but stopping a Medicare-run drug benefit is the big one.

Medical Record

“So what would it mean if the government negotiated for lower drug prices for Medicare in a national system like the VA? It would mean having a more limited formulary…It would mean that instead of having 4,300 drugs available to them, beneficiaries would have about 1,200. If Medicare used a national formulary like the VA it would mean that 70 percent of prescription drug [sic] could not be covered by Medicare. Only 30 percent of the drugs covered today would be covered” (“Medicare Part D—How Would the Government Negotiate?” Floor statement of U.S. Senator Chuck Grassley, January 10, 2007).

“I have diabetes, fibromyalgia, arthritis and a bone disease called osteomyelitis. Out of the 11 medicines I need, I can only get one under Part D. I have been on this medicine for seven years and need to take it five times a day. But my plan put a quantity limit on it this year, so I can only take it three times a day” (Story submitted to the Part D Monitoring Project , Medicare Rights Center, February 6, 2007).

“The VA actually has more drugs (4,778) on its formulary than are potentially covered under Medicare Part D (4,300—not all plans cover all these drugs). In addition, the VA covers nonformulary drugs prescribed according to evidence-based guidelines, bringing the total number of drugs dispensed by the VA to 6,194. By contrast, people with Medicare must navigate a complex appeals process to obtain coverage of nonformulary drugs. Part D plans deny 95 percent of appeals. The Institute of Medicine concluded in 2000 that the VA formulary is ‘not overly restrictive.’ This finding is supported by statistics that show the VA does a better [job] in using prescription drugs to control their patients’ diabetes, high cholesterol and hypertension than private Medicare plans” (Myth #7, “Truth Is the Best Medicine,” Medicare Rights Center, Public Citizen and the National Legislative Association on Prescription Drug Prices, February 2007).

http://www.medicarerights.org

RH Jones: Guiding Principles for the Retirement Board

From RH Jones, February 23, 2007
Subject: Guiding Principles for the Retirement Board
To all:
Just before Dr. K. Fluke's and my presentation that just followed his at the STRS board meeting in January , I noticed the "Guiding Principles for the Retirement Board" was displayed just above the guest coffee maker. It stated this:
"The membership of the Retirement Board of the State Teachers Retirement System of Ohio are dedicated to promoting and protecting benefits and general well being of all members of the system and to that end, adhere to the following guiding principles.
Members of the Board:
  • Honor and support the values, vision and mission of the STRS Ohio.
  • Deliberate in a proactive manner in order to anticipate and prepare for change and growth.
  • Encourage and respect diversity and opinions during deliberations, but speak with one voice once decisions are made.
  • Ensure the STRS Ohio initiatives are charted through collective board action.
  • Conduct business in a courteous manner toward fellow board members, STRS Ohio members."
As a Concerned Ohio Retired Educator, it concerns me that some of these principles have not been followed in the past by some Members of the Board, but I am confident that they shall all do so in the future.
Never mind courtesy issues, our STRS just lost a chance to "grow" when the Board did not push to have the STRS included in the first section of HB 272 that mandates employers deposit their contributions monthly, rather than quarterly. The STRS would, therefore, have the funds "early on" to then invest. The OPERS was allowed to do this, but not our STRS; Why not? Baby steps count as long as it moves us forward. And moving forward does not mean being left behind. You will notice in the Executive Director's Report of Jan. 18, 2007, there was mention of the HB 272, but no mention of only OPERS being allowed to collect employers' funding monthly. All STRS members were left out and, thusly, left behind without this chance to "grow." "Growth" for STRS is growth for Ohio. Please tell me if I am wrong. I do not think so.
A CORE member of our STRS Ohio,
Robert Hudson Jones

AARP: Have you torn up your membership card yet?

From RH Jones, February 23, 2007
Subject: The AARP
To all:
I always thought that the AARP stood for the American Association of Retired Persons. But, since the AARP backs Mandatory Social Security, they should be renamed: Association After Retiree Pensions.
By the way, I tore up my membership card. I hope you do too.
RHJones, a CORE member, & proud of it!

Medical Mutual: Notices routinely sent out; December/January not too late to get a flu shot

From Don Olson, February 22, 2007
Subject: Flu Shots
Hi Kathie:
We noticed your blog and thought you should know that Medical Mutual sends STRS members a flu and pneumonia shot reminder each flu season. This year, the card was timed to reach members who still had not obtained their shot(s), but still had time. The card specifically reminds members that December or January is not too late. The card also includes tips on stopping the spread of flu and steps to take if you think you have the flu; this information is relevant throughout the entire flu season.
Medical Mutual recommends the flu and pneumonia shots based on clinical guidelines and sound medical practice to help our members stay healthy. We include our standard member disclaimer that reminds members to check eligibility and coverage for the shots and that these services are subject to the specific terms of your STRS benefit plan.
Please let me know if you have any further questions or concerns.
Thanks,
Don Olson
Medical Mutual
[Note: Mr. Olson may have been responding to Linda Meinelt's letter posted 12/28/06.]

Thursday, February 22, 2007

Michael Brush: Beware of pension-plan optimism

From John Bos, February 22, 2007
Subject: Good reading on pension assets. This is related to a STRS correction

To read this article by
Michael Brush, click here

CORE Meeting (Damon/CORE meeting)

CORE Meeting (Damon/CORE meeting)

Feb. 22, 2007

1. What is the percent of cost compared to net investment assets for STRS? We would like a comparison to the other 4 Ohio Systems and also a comparison to other teacher retirement systems. (Maybe not all, but a sampling of those that are about the same size as STRS, i.e. Michigan, Indiana, Illinois, Pennsylvania, Wisconsin, etc.)

Answer: Based upon data submitted to the Ohio Retirement Study Council, the ratio of Total Investment Expenses (internal costs, external manager costs, brokerage commissions, etc.) to Total Investment Assets is listed below. One can see that the more internally managed funds (STRS Ohio and OPERS) are much more cost efficient than the externally managed funds (Ohio Police & Fire and Ohio Highway Patrol). In addition, STRS Ohio’s ratio is slightly higher than OPERS primarily due to our much larger exposure to Alternative Investments (nearly three times more) than OPERS. Alternative Investment Managers are very expensive compared to traditional assets; however, returns (after fees) should be superior in the long run. We cannot quickly get data on other Midwestern funds.











STRS OPERS OP&F OHWP SERS

Total Investment Expenses/
Total Investment Assets
0.25% 0.19% 0.35% 0.47% n/a

2. According to a recent survey regarding pension funds that was published on the Internet, the pension fund should Never have expenses in excess of 1.7%. They recommended that the total expenses should be around 1.5%. This information should include all salaries, fringe benefits, child care, food service, utilities, board expenses, publications, etc. It should be a total bottom line ratio.

Answer: Without having the actual survey to respond to, we cannot answer this question. If the individual who asked this question could refer us to the Internet article, we will be happy to respond.

3. My husband and I attended the Retiree Health Care Series at STRS last Wed. (Feb. 7th) and sat through a two hour review explaining the different health carre plans offered currently. At no time was there a mention of any reimbursement to the retiree if he/she participated in a Weight Watchers Program. Yet in today’s Columbus Dispatch (Feb. 12th) on the front page, there is a lengthy article describing that this benefit is available to Medical Mutual of Ohio Participants with reimbursements of up to $150.00. If this program is not offered to STRS participants who have chosen Medical Mutual, then why isn’t it? If it is offered through STRS Medical Mutual, then why was it not explained at their Retiree Health Care Benefit Series last week?

Answer: STRS Ohio first learned of Medical Mutual’s (MMO) Weight Watchers benefit through the news release presented in the Columbus Dispatch on Feb. 12, 2007. Since STRS Ohio is a self-funded plan that uses Medical Mutual only as a claims administrator, it wasn’t clear that our retirees would be eligible for the new benefit. We have since talked to Medical Mutual and Medical Mutual will offer a special reimbursement incentive when members attend Weight Watchers local meetings in their communities (available only in participating areas in the United States).

In short, members who complete a 33-week session may receive a $50 reimbursement, and members who complete the 18-week session may receive a $75 reimbursement. The maximum reimbursement is $150 within a 12-month period. Members must submit a reimbursement form provided by MMO. Reimbursement will be processed and funded by MMO and sent directly to the member in the form of a check. The reimbursement is for attendance/completion of the program – independent of weight loss.

Sessions with a start date before Jan. 29, 2007, are NOT eligible for reimbursement.

Brochures and EOB (Explanations of Benefits) stuffers are being developed to promote the program to the members.

4. Alaska’s PERS and STRS combined unfunded liability is about $10 billion. Alaska wants to eliminate this problem for the Following reasons:

a. Having an unsecured “debt” handing over us could be detrimental to our credit-worthiness.

b. Alaska’s public employees and educators have provided decades of quality service to the people of Alaska. An adequate retirement package was an important part of the contract – implied or otherwise – through which those services were rendered.

c. Alaska’s constitution provides that public employees will have a retirement system, a clause that was included in the original document by the constitutional convention. They know that a quality retirement benefit [is necessary] to attract and keep quality workers.

d. The Alaska legislature knew that the responsible course of action is to begin whittling away at the $10 billion unfunded liability.

Taking action today to solve Alaska’s $110 billion dollar problem is the prudent thing to do. Since STRS’ unfunded liability is more than twice the $10 billion that Alaska has with PERS and STRS, what are we doing to solve our unfunded liability? What is STRS’ plan to solve this problem?

Answer: According to their published 2006 financial reports, the combined unfunded pension liability for Alaska Public Employees Retirement System and Alaska Teachers Retirement System is $4.1 billion. However, the combined actuarial value of assets is only $7.3 billion. The funded ratio is 65.7% for Alaska PERS and 60.9$ for Alaska Teachers Retirement. Both funds are in significantly worse funding condition than STRS Ohio.

On July 1, 2006, the defined benefit plans offered by these two systems were closed to additional enrollments; defined contribution plans were created for new hires. Consequently, in September 2006 the Alaska Retirement Management Board set the employer contribution rate for the Alaska PERS at 39.76% and the employer contribution rate for Alaska Teachers Retirement at $4.03% to amortize the entire UAAL over 25 years. (It had to be set this high because there will be no future payroll growth.) The governor of the state recommended that the state appropriate $1 billion from surplus to soften the blow of the increased contribution rates. We are not aware that any action has been taken on that recommendation.

Regarding STRS Ohio, the funding status made excellent progress during the 2005-06 fiscal year, primarily as a result of high investment returns. total unfunded liability decreased to $19.4 billion from $20.1 billion, the first decrease in the total dollar unfunded liability in more than 20 years. The amortization period for the unfunded liability decreased more than eight years, to 47.2 years from 55.5 years, and the funded ration improved to 76% from 74%. The existence of an unfunded liability does not indicate a weak pension plan as long as funds are available to pay off the liability over time.

Because the market value of assets is smoothed for actuarial purposes, STRS Ohio has more than $4 billion in deferred investment gains that will help improve pension funding in future years. Current projections show that the funding period could return to 30 years or less as early as 2008 or 2009.

Our March 2006 report to the Ohio Retirement Study Council (ORSC) on reducing the amortization period for unfunded pension liabilities to 30 years or less is publicly available on the STRS Ohio Web site at www.strsoh.org. In March 2007, we will be presenting an updated report to the ORSC that reflects the funding progress made this past year.

USA Today: Pension gap divides public and private workers

From Jim Kimmel, February 22, 2007
Subject: Re: "Pension Envy", a conservative "think tank", a conservative newspaper, and their view of public pensions
I ran into this, of all places, at my (former) church men's fellowship group. The other guys worked in private industry and were around my age (52 or so). I had just retired from teaching and they were mostly still working. They complained about my "big" pension. I did not tell them what it was and if they had known what it was they would have laughed at its small size. However, they were clearly convinced that whatever it was it was too good for a mere school teacher.
I finally said in front of all of them that, "guys like you said when I started that I was a smart young man with a college degree and I could make so much more in another job than teaching...but now you all say that I somehow am getting too much in retirement. I don't want to hear about it anymore! Why didn't you all become teachers if it is such a good deal?" A couple said they could not stand all those " snotty, spoiled, mean kids." I said, "then appreciate those of us who could!" But they never really got it and want it both ways: Have higher salaries in business, smaller in teaching and then when our money is invested well and it is a (I thought then -- 1994) good retirement take it away from us just because big business wants to screw THEIR employees -- and us, too, even though our system is better. Take ours away just so it won't make corporate employees' dwindling retirement plans look bad.
The problem is that corporations that set up a retirement plan can just cancel it to build a plant in Lower Slobovia somewhere and pull the rug from under their retirees. They don't want us to have Medicare or Social Security but they don't want to provide health care or pensions either. Like spoiled children, Corporate America wants its cake and eat it too and never mind the national problems it causes. We need for the Democrats and a Democratic president to give them a good lesson in the real world. Or take them to the woodshed. It is not public workers' fault if private employers are stingy with their employees and yes, Corporate America will point to us and say, "they have too much" when in fact private workers are not getting enough (except CEOs). It is a distraction and a case of "Let's you and him fight and I'll hold your coats and sell tickets"
Jim Kimmel
STRS Retiree
Proud Core Member
---
From John Curry, February 21, 2007
Subject: "Pension Envy", a conservative "think tank", a conservative newspaper, and their view of public pensions
I did not like what I read below (in the USA Today article) and some of you may not like to hear what I say in this commentary, but.... I think the reader needs to know how many in this country view public pensions and those who have earned them. What the article neglects to say is that many public employees knowingly chose a vocation at a public service job because of its benefits AFTER retirement. Of course this article also neglects to discuss the massive benefits (translated: golden parachutes) and pensions that corporations heap upon their CEO's and those in upper management. Every firefighter, police officer, educator, and other public servant who pride themselves as being conservatives should smell the bacon and really see who has been and is kicking them in their very own teeth..... will they? I doubt it.
If we, as public servants, don't band together and fight for ourselves and our benefits, we should realize that many of those in the private sector surely won't fight for us. They'll use the concepts stated in the article below to continue to drive a wedge between the public service workers and non-public service workers in an effort to destroy public service pensions.... you can bank on that.
John
---
USA Today, February 20, 2007
Pension gap divides public and private workers
By Dennis Cauchon, USA TODAY
Johnnie Nichols, a civilian Defense Department employee, contributes to a federal pension that will let him retire at age 56, after 32 years of service. His wife, Kimberly, a math teacher at a private business college, has no pension after two decades of teaching and running a horse farm. Their marriage reflects the new world of retirement: government employees who have secure benefits and private workers who increasingly are on their own.
"If we were both in her shoes, we'd be in a world of hurt," says Nichols, 45, an information technology manager in Middletown, Ind. "We wouldn't be able to retire until age 67."
As the first wave of 79 million baby boomers heads to retirement, the nation is dividing into two classes of workers: those who have government benefits and those who don't. The gap is accelerating in every way — pensions, medical benefits, retirement ages.
Retired government workers are twice as likely to get a pension as their counterparts in the private sector, and the typical benefit is far more generous. The nation's 6 million retired civil servants — teachers, police, administrators, laborers — received a median benefit of $17,640 in 2005, according to the Congressional Research Service. Eleven million private-sector retirees covered by traditional pensions got $7,692.
Governments' generosity could have serious consequences for taxpayers and pensioners. Some states — including Illinois, Indiana, Michigan, New Jersey, Ohio and West Virginia — have troubled retirement systems that may require huge tax increases, spending cuts or even defaulting on promised benefits. The U.S. government has a bigger unfunded liability for military and civil servant retirement benefits ($4.7 trillion) than it does for Social Security ($4.6 trillion).
The pension gap will continue to widen because governments pump far more money into employee pensions than companies do. Civil servants earn an average of $12.38 an hour in benefits, about $5 an hour more than private-sector workers, according to the Bureau of Labor Statistics. The difference was just $2.70 an hour in 1995.
Pension promises have "gotten out of hand," says Peter Hanson, 73, chairman of NAI James E. Hanson Inc., a real estate firm in Hackensack, N.J. His firm offers a healthy private pension — up to 25% of compensation, given to employee retirement accounts — but it is tied to profits and given as a lump sum, not a lifetime promise of benefits.
Supporters of government pensions say the decline in private pensions is the problem, not the generosity of public retirement plans. "Rather than lower the bar for public employees, we need to stabilize retirement programs for everyone," says Richard Ferlauto, director of pension and benefit policy for the American Federation of State, County and Municipal Employees, a union with 1.4 million members.
He acknowledges public pensions are getting more scrutiny. "People want to know, 'Why should you have more security than us?' " he says. "It's pension envy."
A sharp contrast
State and local governments have sweetened retirement benefits during the past decade at a time when corporations have soured on them because of their cost. Only 18% of private workers now have traditional defined benefit pension plans, compared with more than 80% of government employees.
Contrary to a widely held notion, the extra government benefits aren't compensation for lower pay. Most government workers are paid more than private employees in similar jobs, and the wage gap is growing.
A typical full-time state or local government worker made $78,853 in wages and benefits in the third quarter of 2006, $25,771 more than a typical private-sector worker, the Bureau of Labor Statistics reports. The difference was $7,604 in 2000. The compensation advantage holds true for all types of public workers, from teachers to laborers and managers. Better benefits for government workers is the biggest reason for the growing compensation gap.
"The government is in direct competition with us for employees. It's hard to compete against these benefit packages," says James Bellis, owner of Tree Tech, a 120-worker tree trimming company in Randolph, N.J. His company has a 401(k) plan that matches up to 2% of employee pay.
By comparison, tree trimmers working for a government in New Jersey would get a pension benefit worth more than three times that.
Superior retirement benefits for civil servants can be traced to the establishment of Social Security, which originally did not cover government employees, says E.J. McMahon, a pension expert at the Manhattan Institute, a conservative think tank that deals with economic policy. Today, three-fourths of government workers participate in Social Security, but their overall benefits have not been reduced accordingly, he says.
The boost in benefits since the 1960s reflects the rising power of public employee unions, which have thrived as industrial labor unions and the benefits they won have eroded, he says.
The growing benefit gap makes government an increasingly attractive employer.
Anneliese Crosby, 46, who codes medical records at a private hospital in Manchester, N.H., is trying to get a government job for financial reasons — better pay, benefits and job security. The hospital recently ended its pension plan for new employees. That didn't affect Crosby, but her retirement depends mostly on contributions to her tax-deferred retirement account.
"It's scary. I feel like I need a second job or to be on the lookout for a new job," she says. "I should put more in my retirement account, but I can't afford it."
Her solution: Apply for a similar job at a Veterans Affairs hospital. She'd get a pay raise, better benefits and a secure future. "My ex-husband keeps encouraging me to get a government job, and he's right about that," she says.
Pensions for civil servants often are superior to private pensions in subtle ways that make a huge financial difference. For example, government pensions:
•Generally base benefits on a worker's top three earning years. Private pensions typically base benefits on the top five years of pay, which lowers the average.
•Often let retirees add the value of overtime, unused leave and other benefits into the pension formula. The results can be extreme. Dover, N.H., Police Chief William Fenniman, 46, added more than $200,000 for severance, sick leave and other payouts into his three-year salary average when he retired in January. This will boost his retirement benefit to as much as $125,000 a year, more than he made as chief.
•Permit early retirement at age 50 or 55 with less of a benefit reduction than private pensions.
•Provide free or subsidized medical care for retirees under age 65 and supplemental coverage after that for those on Medicare.
•More often provide automatic cost-of-living increases to benefits.
Baby boomer retirements will force governments to confront the rising costs of civil servant benefits. The U.S. government's unfunded retirement obligation grew $200 billion last year to $4.7 trillion. That's the amount the government would need today, set aside and earning investment returns, to pay for promised retirement benefits.
'You have to be aggressive'
Before 1984, federal workers had a defined benefit plan and no Social Security. Today, new employees have Social Security and a pension that is part defined benefit plan (lifetime monthly payments) and part defined contribution (a lump sum at retirement).
The pension is more generous than most private pensions, but workers have to pay more to take advantage of the plan. "You have to be aggressive about making contributions if you want a good retirement," says Nichols, the Defense Department employee.
Unlike private pensions, though, the federal system still encourages early retirement. "The sweet spot for me is about age 56. When I run the numbers, the system almost forces me to retire" early, Nichols says. For example, he expects to qualify for a free supplemental annuity at age 56 that provides a benefit equal to what he'd get at age 62 under Social Security.
Another big incentive to retire early: Most governments offer health insurance to early retirees until they qualify for Medicare at 65. Massachusetts spent $377 million on retiree medical benefits last year. The state's unfunded liability for such costs is $13.3 billion, nearly as much as its actual debt of $18.5 billion, which is counted separately.
"It's a burden on taxpayers, of course," says Delores Mitchell, executive director of the Massachusetts Group Insurance Commission, which runs the program. But she doesn't foresee major benefit cuts. "States have a tradition of treating retirees well."
Medical insurance may be the most vulnerable benefit because it has fewer legal protections than pensions, which often are guaranteed in state constitutions. Orange County, Calif., recently slashed promised retiree medical benefits, cutting its liability from $1.4 billion to $600 million. The county hasn't done anything about its pension problem.
"Pension benefits are like a lobster trap. You can get in, but you can't get out," says John Moorlach, an Orange County supervisor who has tried to reduce retirement benefits for government workers.
He blames elected officials for awarding unsustainable retirement benefits to win support from employee unions. "Elected officials love to give generous retirement benefits because they don't cost anything today and they'll be out of office when the payments come due," Moorlach says. "And the public? Eyes droop with boredom when you bring up the topic."
Taxpayers on the hook
The financial soundness of civil servant pensions varies across the country. Government pensions are, on average, in a similar condition as private pensions — about 20% below the assets needed to be properly funded. But some states, especially in the industrial Midwest, have severely troubled pensions.
"The taxes needed to pay for these promises would push many of these states' economies into a death spiral," Chicago bankruptcy lawyer James Spiotto says.
He says public employee unions should not overestimate legal protections for pension benefits. Localities can shed their obligations in a bankruptcy filing, and states, as sovereign governments, can ignore the requirements, he says. "Unions can win all the litigation and still lose because the judgments can't be enforced," Spiotto says.
Tim Lee, executive director of the Texas Retired Teachers Association, says unions understand the cost of the retirement benefits. He says his association's top goal is improving the financial health of the pension fund, not winning new benefits.
As expensive as government pensions are to taxpayers, civil servants don't feel the benefits make them rich. Frank Caron, 49, maintains lab equipment at the University of Massachusetts Amherst. He makes about $40,000 a year.
He has contributed heavily to his pension, including an extra $74 a week to restore pension credit for earlier government jobs. That will let him retire:
•At 55 with 47% of pay;
•At 60 with 72% of pay;
•Or at 65 with 103% of pay.
He also will have medical benefits and be eligible for Social Security at 62. "I've worked hard to have my ducks lined up in a row for retirement," he says.

OEA to push school funding campaign proposal contrary to Governor AND GOP's wishes

OEA to vote on contributing to school-funding campaign
Columbus Dispatch
Tuesday, February 20, 2007
Joe Hallett

Roughly 1,300 delegates to the Ohio Education Association’s convention April 20 in Columbus will vote on a onetime $25 increase in membership dues to help pay for the campaign to pass a school funding constitutional amendment proposed for the November statewide ballot.

The board of directors of the state’s largest teachers union has recommended the increase to raise about $2.5 million for the school-funding proposal, which is opposed by Democratic Gov. Ted Strickland and Republican legislative leaders.

The Campaign for Ohio’s Future, a political umbrella for 12 organizations supporting the amendment, hopes to raise between $7 million and $10 million for the campaign, according to Gary Allen, president of the 130,000-member OEA.

"The other organizations are all working internally in an attempt to secure funding," Allen said, calling $2.5 million "a fair share" for the OEA.

Wednesday, February 21, 2007

FLASHBACK -- 1 YEAR AGO -- Ohio's charter schools and... are things really better today?


Who's profiting from Ohio's charter schools?

Cleveland Plain Dealer, Sunday, March 19, 2006
By Sandra Livingston, Scott Stephens and Bob Paynter
Plain Dealer Reporters

Nearly a decade after David Brennan set out to prove he could out-educate the educators and make money doing it, the godfather of Ohio's charter schools is now at the heart of what looks to many like a bungled experiment – of massive proportions.

In the name of reform, Ohio has routed more than $1.4 billion in taxpayers' money away from traditional urban schools – much of it going to profit-seekers like Brennan, the Akron entrepreneur who has dominated the charter scene here.

But with some notable exceptions, the results so far have been dismal.

At the end of the last school year, Ohio's charter schools remained far behind traditional public schools in proficiency test scores. Despite some gains, the charters continued to trail even the maligned urban districts they were supposed to outclass.

Brennan's Hope Academies have faired even worse, records show, especially in Cleveland, where they remain well behind other charters, as well as the poster child for Ohio's failing schools – the Cleveland Municipal School District.

It didn't have to be that way.

Charters elsewhere have done much better – even in some big cities where poverty-wracked school districts have been underserving mostly minority students for years.

In Boston, for example, charter schools caught up with the city's public school district within four years and have been steadily pulling away ever since, according to state test data.

Massachusetts has been recognized for its rigorous charter rules, caution in approving schools and tough regulation. And it has been willing to shutter schools that don't work.

In contrast, many experts describe Ohio's charter program as a hastily assembled, poorly funded and laxly regulated hodge-podge of educational dice-rolls.

It's a “sad situation,” says Columbia University professor Henry Levin, a national expert on privately run public schools. And the culprit, he said, at least in part, was “legislative conniving with one company in particular.”

That company is White Hat Management, the for-profit brainchild of Brennan, a Stetson-wearing tax-lawyer-turned-industrialist who blamed school failure on teachers unions and bureaucrats, and who wanted to prove that profit-seeking private enterprise could do better.

Brennan played a major role in pushing Ohio's school-choice legislation through politically polarized Columbus in the mid-1990s with waves of campaign cash. And he has been trying to capitalize on it ever since.

Today, his White Hat Management operates 34 schools in Ohio, enrolling 15,700 students last year – 5,300 of them in Cleveland – and collecting nearly $109 million in state tax money, plus millions more in federal grants.

The for-profit company's schools have collected about $350 million in Ohio tax money since the program began – roughly one dollar in every four that the state has spent on charters.

And it has earned the deep enmity of public-school educators – teachers unions in particular. As a prelude to its state convention in Columbus two weeks ago, the Ohio Federation of Teachers issued a blistering report that attacks Brennan's “education empire” in painstaking detail.

Not all is well in the empire.

Doubts about the financial viability of some of the company's schools, prompted for the first time by recent state audit reports, raise questions about how long White Hat will be willing to stand behind them.

And records show that some of the historically docile boards overseeing White Hat schools have recently grown restive and rebellious over several issues. Those include lackluster test scores and board frustrations over the company's seeming reluctance to share financial information.

Brennan and White Hat officials declined to be interviewed. They also chose not to answer most of the questions submitted in writing by The Plain Dealer nearly three weeks ago.

But the company did say in a written statement that it exceeds legal requirements for financial reporting, that its Hope Academies “are showing continuous improvement on reading and math scores” and that “we are making a huge difference in the lives of our students.”

Brennan convinced he could do better

Brennan, 74, secured his standing in increasingly Republican Columbus in the mid-1990s with generous campaign contributions. He gave more than $120,000 to – and raised at least $500,000 more for – former Gov. George Voinovich, who appointed him to chair the Governor's Commission on Educational Choice.

Brennan gave hundreds of thousands more to the Ohio Republican Party and its candidates, including key legislators who ushered through various “school choice” proposals that Brennan both lobbied for and has tried ever since to profit from.

In 1995, lawmakers created a limited voucher program in Cleveland, earmarking $5.25 million in tax money for student “scholarships” to private schools. Brennan opened his first Hope schools to take advantage.

Two years later, the legislature authorized tax-supported charters in Ohio's eight urban school districts. Brennan converted his Hope schools to charters – noting that they could get about twice as much per student in state money as voucher schools did – and started opening more.

From that foundation, Brennan launched in 1998 what has since become a multistate enterprise, fueled by tax dollars, that describes itself as “one of the premier education service delivery organizations in the United States.”

But to some, at least, White Hat seems to embody forces that help explain Ohio's lackluster charter performance so far.

Seeking a profit from education

Regardless of how much money he and his company actually make on charter schools, Brennan has made it clear from the beginning that profit is what he's after.

Charter researchers say that raises a basic question about every move the school operator makes: Who's being served, the kids or the company?

“There is an inherent conflict,” said Alex Molnar, director of the Educational Policy Studies Laboratory at Arizona State University.

Massachusetts tells would-be charter creators to be cautious when dealing with for-profit management companies. Only two schools in the state employ one. And studies by Western Michigan University's Evaluation Center suggest that states with extensive involvement by for-profit management companies tend to feature less accountability and lower test scores.

With more than half of its charter money going to for-profit companies, Ohio has an unusually heavy reliance on profit-seekers, said Gary Miron, the Evaluation Center's chief of staff.

For-profit school operators aren't necessarily a problem, Miron said, as long as safeguards exist to ensure that they're serving the public good, not just their own.

But that's precisely where both Ohio and Michigan have fallen short, he said, listing these reasons:

The movement in both states was partisan, ideological and divisive. Charters were promoted as a way to undermine urban public schools by people who thought they could never be improved.

Both states jumped headlong into charters, trying to get as many up and running as possible but without thinking clearly enough about how to make them work.

The result was inadequate funding, too rapid growth, ineffective oversight and a lack of meaningful consequences for schools that simply ignored the rules, Miron said.

Ohio education officials were entirely overwhelmed by charter activity, said Jeanne Allen, president of the pro-charter Center for Education Reform.

The state lacked a rigorous evaluation process, so some “real skunks” got in, she said, tainting the charter concept for everyone.

And Ohio has been reluctant to shut them down.

It took state officials six years to close the International Preparatory School in Cleveland, despite the school's failure to meet a single state academic benchmark during its lifetime.

In 2002, four years into Ohio's program, a state audit found “significant systemic problems” because of inadequate charter oversight, prompting several legislative efforts in recent years to tighten things up.

But with about 290 Ohio charters now in operation, it might be difficult to establish more rigorous accountability after the fact.

It's possible “if you have the political will,” Molnar said, but he hasn't seen that here. “What Ohio has is not reform,” he said. “It's the appearance of reform to solve a political problem.”

Conflict of interest in Ohio's system

Ohio faces another potential obstacle – a seemingly built-in conflict of interest involving the state's first line of oversight. Charter-school sponsors are often chosen and paid by the very schools they are supposed to be holding accountable.

Again, White Hat offers a telling illustration.

Of the company's 34 Ohio schools, records show that 19 are now sponsored by the Ohio Council of Community Schools, a Toledo group headed by the daughter of a pro-charter former state legislator who, for most of the last two years, was a registered lobbyist for both White Hat and OCCS.

This year, according to records, the White Hat schools are slated to pay OCCS more than $405,000 – about 42 percent of the agency's most recently disclosed budget – to ride herd on themselves. Through an attorney, OCCS executive director Allison Perz declined to discuss her agency's finances – saying they are not public. In a letter, Perz said Friday she will have no trouble staying loyal to the public interest, despite her agency's reliance on White Hat's schools.

But in tracing the origins and evolution of the company's schools, the question of divided loyalties comes up time and again. Consider their governing boards.

Ohio charters are supposed to be community-based schools, overseen by independent boards. They also must be nonprofit entities in order to get millions of dollars from state and federal tax coffers each year.

White Hat insists that the boards for all of its schools are independent. But during the last seven years, when the company was forming eight Hope Academies in Cleveland and two more in Akron, it enlisted the same five people to serve on the boards of all but one. (Four of the five also served as board members for the Hope Academy in Canton, about 60 miles to the south.)

The newest Hope Academy, the Northwest campus on West 116th Street in Cleveland, has a completely different board and often operates by different rules.

But as the years have passed, records show that the rest of the Hope boards have ceded ever larger chunks of money and power to White Hat, to the point where today, the for-profit company controls virtually every aspect of the schools and practically every nickel that state taxpayers send their way.

Since 2002, those boards have agreed to give White Hat at least 96 percent of all the state tax money they receive.

In return, records indicate, White Hat runs the show.

It hires and pays all teachers.

It can hire, supervise, transfer or fire the school principals – without even having to consult the board. It develops or obtains its own curriculum.

And the company buys – and owns – every book, desk and computer used at the schools, as well as all other equipment and supplies. If the schools and White Hat ever part ways, the school can reclaim this property only by buying back everything the company acquired on a depreciated basis.

Everything, that is, except the “educational model” that White Hat has developed – presumably with the aid of taxpayers' money – and which the company considers “proprietary.”

White Hat declined to say why. But it did say that each of its schools has required up to $1 million in bank loans and money “either contributed or loaned” by Brennan to get started.

Despite being collectively responsible for more than $50 million a year in tax money, the Hope board members declined, through their attorney, to be interviewed for this story.

Before the 2002 agreements, White Hat's control over the schools seemed less complete. Its management fees were typically just 10 percent of the schools' government revenues, and the boards appeared responsible for more school functions.

But records describing the founding of several White Hat schools in the late 1990s raise questions about whose interests were being served even then.

The state approved several of the early Hope schools despite deep concerns by Education Department staffers. Records show those worries included “major weaknesses” in the schools' educational plans and projected student-teacher ratios of 30 to 1. The staff also noted projected teacher salaries that were much lower than average and steady increases in potential profit margins for the company.

In some cases, community members who supposedly were developing the schools didn't show up for an initial interview with state Education Department reviewers, records show. Officials of Hope Academies LLC, White Hat's for-profit precursor, fielded the questions.

Then, there's the matter of facilities.

Thanks perhaps to Brennan's close ties to the Diocese of Cleveland, White Hat got what records show to be highly favorable terms for the use of empty Catholic schools to house its Hope Academies. But the records also indicate that it was White Hat – not the schools – that profited from the deals.

Before 2002, when the company's catch-all management agreements kicked in, records show that White Hat charged its schools at least $1.5 million more in rent than the company agreed to pay for use of the school properties.

(Also, because seven of the eight Hope Academies in Cleveland are in church-owned facilities, they have avoided as much as $700,000 in property taxes, despite being commercial ventures. The eighth school, owned outright by White Hat, does pay property taxes.)

IRS noticed 'one sided' contracts

White Hat's contracts with its schools apparently were skewed in the company's favor in other ways as well. In the late 1990s, while vetting the Hope academies for nonprofit status, the Internal Revenue Service asked the schools to prove that their contracts “are not so one sided as to be considered primarily for the benefit” of White Hat.

For instance, the company had negotiated an incentive fee for itself, apparently for keeping costs down, without regard to student performance. The IRS noted that the 25 percent fee was “completely arbitrary,” unrelated to school services and “not in the best interests” of the school. (The incentive fee was later eliminated, replaced by a “student performance bonus.”)

The contracts also required the schools to pay the company a 2 percent fee for national advertising, which the IRS concluded was “solely for the benefit of White Hat.” (It was later cut to 1 percent, then eliminated.)

The IRS also raised questions about an agreement calling for the company to buy classroom computer equipment and lease it to the schools at cost plus 10 percent. The arrangement, records show, entitled the company to charge the schools $186,500 in interest between 1998 and 2001.

As originally written, the contracts also allowed the company to retain title to the equipment even after the schools had paid off the leases. That was changed only after the IRS raised questions.

Records also show that White Hat collected at least $288,400 in additional interest from its Hope schools on operating loans it extended to the schools at 10 percent interest, a higher rate than was available elsewhere.

White Hat declined to address such contract provisions, except to say that it made changes suggested by the IRS and that it has amply demonstrated its commitment to its schools – even those that lose money.

But others specifically warn against taking operating loans from for-profit management companies, saying the loans can make the schools overly dependent on those companies.

“It's a problematic relationship,” said Arizona State's Molnar. “It gives them [the companies] a kind of unlimited hold on the schools.”

When the for-profit companies are involved in starting a school, adds Western Michigan's Miron, they can enjoy the upper hand in contract negotiations with school boards. And with oversight as lax as Ohio's, he said, there may be no one to ensure that the public is being properly served.

Little access to 'community schools'

One way of serving the public is by giving it easy access to the school board.

In 2000, state officials noted the lack of parents at Hope meetings. White Hat said it would try to schedule the board meetings in the evenings or on weekends to accommodate parents. (The Cleveland school board meets at 6:30 p.m. on Tuesdays.)

But five years later, records show that the boards for all Hope schools but one have continued to meet on weekday mornings.

Unlike many nonprofit schools, the Hope boards also pay their members tens of thousands of dollars a year to attend these daytime meetings and perform other duties.

White Hat officials also attend in abundance, minutes show. But parents rarely – if ever – do.

(Hope Academy Northwest, on West 116th Street, has a different board and does hold some of its meetings in the evening. But more often than not they are in Akron, near the White Hat headquarters, 40 miles away. That school's board has chosen not to pay its members. Its president did not return a phone message.)

Perhaps most significantly, however, the possibility of divided loyalties crops up in White Hat schools on the issue of student performance.

Last year, in an effort to address the persistently lagging test scores at several Hope schools, minutes show that White Hat officials tried to interest the boards in hiring two company subsidiaries – Brilliant Learning and NCLB Tutors – to help with remediation efforts.

The boards declined to hire the White Hat affiliates, according to board attorney April Hart, one of several examples of what she described as board attempts to establish more independence from the company.

According to minutes, at least one board member seemed to voice a deepening frustration with White Hat's performance.

Why, the board member wanted to know, was the company suggesting these extra services when the schools are “still trying to get the basics right.”

Low teacher pay a common criticism

A common criticism of Ohio's charters – often lodged by teachers unions, which have an incentive to keep teacher pay high – is that they compromise quality to save money by putting inexperienced, unqualified and underpaid teachers in the classroom.

If that's true, it appears especially so for White Hat.

Last year, charter teachers made an average of about $20,000 less per year than teachers in Ohio's urban districts, according to data submitted by schools to the state. Teachers at Hope schools made nearly $26,000 less. And board minutes show that teacher turnover has been a recurring problem since the first Hope schools opened.

White Hat says its teacher-pay schedule is competitive with the districts in which it operates, even though its schools get no local tax money. With potential student-performance bonuses, the company says, its starting teachers have the chance to make more.

But at one of White Hat's oldest and most stable schools – the Hope Academy Cathedral campus, on Cleveland's East Side – recruiting and retaining teachers has been a problem for years.

And unlike in Boston, where charter students as a group have been scoring well above those in Boston's traditional public schools, scores at Cathedral and the other Hope Academies in Cleveland have lagged well behind the public school district.

You don't need to go all the way to Massachusetts to find alternatives, however.

White Hat says its students were behind when they first arrived, failed by Cleveland's schools. But not far from Hope Cathedral, Citizens' Academy, a nonprofit charter, gets its students from the same place.

Records show its students are more likely to be poor than Cathedral's, and more likely to suffer some form of disability.

Citizens' teachers are paid an average of $7,500 more than those at Cathedral, according to state data, and tend to have considerably better credentials.

DPS board votes to close White Hat charter school

"Charter schools are public institutions that are privately operated under contract with school districts. Life Skills Center is run by an Ohio-based for-profit company, White Hat Management. But the students are still Denver kids, and DPS's responsibility."
Denverpost.com editorial
February 21, 2007
Charter school fizzles, sadly
Charter schools are too often the final destination for at-risk children before they drop out of the school system entirely and become the grim statistics we continue to wring our hands about.
The Life Skills Center of Denver is one of those schools, accepting some 260 students who, for whatever reason, could not succeed - or even survive - in a traditional public school. But the school hasn't show improvements in student performance, and its attendance rate of 45 percent is the worst of all alternative-education schools in Denver Public Schools.
So last week, DPS board members voted to close the school at the end of the spring semester. It was a tough call. A few tears were shed as the board cast its 6-1 vote.
Tears should be shed. These students are among the city's most vulnerable, and their futures are important to all of us. What's next for them? Certainly they are at risk in traditional pubic schools, which, for multiple reasons, didn't work for them.
Board member Kevin Patterson, who represents northeast Denver, voted to keep the school open.
"I feel like we're punishing the child more than the adults," he said at the time, adding that he didn't feel there was a "viable alternative" for many of the students who had already dropped out of other schools.
The school will appeal DPS's decision to the state Charter School Institute, which can grant permission to run a charter school even if a district wants it closed.
We don't quarrel with DPS's decision to shutter the Life Skills school, but now officials must offer alternatives that give these teens a fighting chance. When leaders closed Manual High, DPS officials worked double-time to make sure those students didn't fall through the system's proverbial cracks. They must do the same for these students.
Charter schools are public institutions that are privately operated under contract with school districts. Life Skills Center is run by an Ohio-based for-profit company, White Hat Management. But the students are still Denver kids, and DPS's responsibility.
Charter schools can play an important role as DPS develops its reform agenda, should the district embrace them. If not, it's up to DPS to come up with a better plan for kids who struggle in traditional schools.

Tuesday, February 20, 2007

Minutes of February 20, 2007 CORE meeting

From Glenna Barr, February 20, 2007
Minutes of the February 2007 CORE meeting

The February 16, 2007 CORE meeting was held in the cafeteria room behind the Sublett Room at the STRS Building. Officers present were: President, Dave Parshall; Vice president, Mary Ellen Angeletti; Secretarry, Glenna Barr. Trustees present: Betty Bell, Chuck Angeletti, substitutions for Chuck Chapman (Marie Fetters), Nancy Boomhower, (Liz Ebbing), Nancy Hamant (Herman Fisher).
Dave Parshall, president, called the meeting to order. The January, 2007 minutes were approved with a motion from Mary Ellen Angeletti and seconded by Regina Swisshelm. The treasurer, CJ Myers, had e mailed the report to Dave Parshall. A $100 contribution was made to the Moody Scholarship, valentine cards were sent to Dennis Leone and John Lazarus. Mary Ellen had sent a planter to John Lazarus. The report was accepted.
COMMITTEE REPORTS:
(1) The Website report was given by Dave Parshall. It is up and going.
(2) The Contacts and Regional Reps committee was discussed by Dave Parshall. He commended Molly Janczyk on her good job on organizing the list. He suggested we have a rep list to get info and fliers passed out especially during the STRS board elections.
(3) The CORE Committee meeting with Dr. Asbury will meet February 22,2007, 1:00 PM. The CORE Committee will meet prior to the Asbury meeting in the STRS Cafeteria room behind the Sublett Room at 11:00 AM to discuss the questions to be presented to Dr. Asbury. Anyone is invited to attend.
NEW BUSINESS:
Dave commented on Dr. Asbury's comments telling CORE they need to be more active in the HCA. Educators need to work together for the Health Care and legislative issues. Dave made the comment that HCA had turned down CORE's offer of help three years ago (things are changing).
Mary Ellen Angeletti attended the 3 day STRS Board Retreat. We wish to thank Mary Ellen for taking the time to attend this event and making a wonderful report on the retreat. You have read her report on your e-mails. The important observations at the retreat is that there is an attitude change of the Board members toward each other as a result of the self evaluation results. Finally Dennis Leone's and John Lazarus' past and present opinions on STRS problems are being accepted by the other board members. She thought the conference was outstanding.
The STRS Board came to a realization that they are responsible for events and policies made by the STRS Board after the STRS board and staff attended a conference."Forum for Retirement" held at the Hilton Easton. Comments and observations by other CORE members were: there is more commonality with the board and that STRS must tell the legislators what they are doing to curtail their expenses.
Dave Parshall stated he would like a new study of the 88%/35 year legislation. The STRS board may study this in the coming year. A change in the STRS board compensation of the use of credit cards, computers, and cell phones as to they do not have to have permanently but check them out according to their need. Tai Hayden, new board member, brought up the subject of the 3 minute speech limit of participants at the board meeting. However, this policy will not be changed.
Buck Consultants gave their report. Mr. Mitchell of the investment department stated his department is working on a contingency plan (another one of Dr. Leone's prior suggestions) in case of another Wall Street downturn.
OLD BUSINESS:
(1) CORE Constitutional Article IX ( how CORE's monies will be dispersed in case of CORE dissolution) was voted on and the 12 CORE members present approved.
(2) Another CORE Constitution problem was discussed. When writing the Constitution, the office of the Vice President was not listed as one of the officers who was granted access to the CORE data/base and needs to be added to the Constitution. Betty Bell made a motion to have Article III amended to include the vice president's office and Kathie Bracy seconded the motion and all approved. At the March 15, 2007 meeting a discussion will be held on this motion.
(3) Dave Parshall discussed the trends of the Wall Street market shift from US Market to world markets due to the Iraqi War and growing US debt. STRS investment department will have to take this into account. Active teachers will have to vote more intelligently on financial issues other then social issues on the state and national levels.
(4) A reminder was given to members to write their legislators and the governor to appoint Dr. Tom Hall to the STRS board. HB 66 alert was discussed as it shifts more tax to the residents.
ORTA was represented by Louis DiOrio and Ann Hanning. Ann Hanning discussed the ORTA Spring Legislator Day at the Statehouse on April 24, 2007, and the registration fee is $20.00. There will be speakers on AARP, Health Care, Charter School bills and the state budget. Former teachers who are now legislators will be recognized. Jim Reed stated that speaking or writing to the legislators or congressmen could be a deterrent to our objectives and maybe we should disconnect for a while.. Chuck Angeletti said letter writing is the best method to communicate with legislators [especially HANDWRITTEN letters, not typed]. Mary Allen Angeletti stated that Ohio legislator Wachtmann said the bill on increasing the active teachers' contribution for HC would go nowhere. The meeting was adjourned so that everyone could attend the STRS Board PM meeting. The next CORE meeting will be at the STRS Building, March 15, 2007.
Submitted by Glenna Barr,
Secretary

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