Comments from Dennis Leone, Molly Janczyk and Alice Marson re: $25 billion loss

From Dennis Leone, October 19, 2008
Subject: RE: A $25 billion dollar loss

Well said, Molly, and here is what everyone will eventually hear from STRS in response: You will hear it said that we are saving huge dollars because if we managed our stocks externally, we have to pay much, much more than we paying in bonus checks to internal staff. I am tired of hearing this. Here is why: Many, many years ago, STRS made a conscious decision to hire 100+ investment staff members to manage our stocks. We are paying these people handsome base salaries and nice fringe benefits. We are paying them to manage our stocks. This is their job. Don’t tell me that we are saving money because it would cost more to do something a different way. That’s like saying that I because I never chose to hire 2 additional assistant supts in Chillicothe, then I was saving the salaries of people who were never planned to be hired. I wonder how my school board would have reacted if I told them I wanted a bonus because I was “saving” money in this way? I guess STRS is saving money because we are no longer spending money on booze, parties, entertainment and trips to Honolulu. I guess we are saving money because SB 133 restricted the number of out-of-state trips that pension board members can take.

I’ll take this another route: Since STRS laid off 8 employees in the IT Dept recently, perhaps we should spread out their salaries among those who were not laid off. I am tired of hearing that we save money because we choose not to do something less costly or in a different manner. Never mind that a provision of ORC 3307.15 commands the board to make decisions that “defray the reasonable expenses of administering the system.” ORC 3307.15 does not go on to say that we are to use “savings” from such actions to pay others bonus checks. Having said all of this, I will always support bonus checks for STRS investment staff members when they produce positive investment returns for the pension system. I will never support them when the overall pension fund loses money – let alone $25 billion in just 12 months.

STRS will argue that investment staff members should not be “penalized” (meaning no bonus checks) by external factors affecting the stock market beyond their control. This logic seems to forget that for the past 3 years, when very positive investment returns were realized, huge bonus checks were awarded. Now, however, if an investment staff member’s negative returns are less than the overall market losses, this somehow is to translate into said person deserving a bonus check. Would any teacher in America qualify for a bonus check if he/she argued that since the decline in student test scores in his/her class was less than other classes in the building, then a bonus check is deserved. It also isn’t going to fly if said teacher also argues that external environmental factors have unfairly contributed to lower test scores.

Dennis Leone

From Molly Janczyk, October 19, 2008
Subject: RE: A $25 billion dollar loss

I have sent a sampling of comments to the STRS Board and Exec. Direc. When people are hurting, it is not time for huge bonuses. Consider AIG and their lavish trips while taking enormous sums from the government.

Yes. We want the best investors and realize many can make much more in private, corporate jobs. We are NOT private corporation competitive and STRS paid Consultants advised STRS long ago stated if NO GAINS made, then NO BONUSES were in order. STRS never heeded that advice.

STRS will say these investors didn't lose as much as could have been lost so bonuses are in order. Retirees don't understand that and when we lose, we only get deeper in debt. Those investors we lose to corporations, leave anyway, whether we comp them or not. It is said, the average time spent at STRS for our best investors is 2-3 yrs. They will be lured away by compensations STRS can never compete with on salary scales.

Alice Marson to Molly Janczyk, October 19, 2008
Subject: RE: A $25 billion dollar loss

I was just reading what Dennis, Bev Rice, Rich D., and Debbie Roush have written about the STRS Board’s latest clandestine capers. I reiterate 100%. They have said it much more eloquently than I could have.

Alice Marson
Summit Co.