Kathie Bracy's Blog: Bonus Deja Vu Part II -- a trip back in time..."when the system is struggling and member benefits are being cut"

From John Curry, November 17, 2008

Isn't the STRS "struggling" today and haven't member benefits been "cut" once again? Five years ago seems to be repeating itself, doesn't it? John

He said the investment managers deserved bonuses because they kept the portfolio from losing more than it did. (Herb Dyer - former STRS Executive Director) You remember, the one who had his contract bought out (for a half million) and was sent packing?

Public retirement system painting an ‘ugly picture’

By PAUL E. KOSTYU
Copley Columbus Bureau chief
June 12, 2003

COLUMBUS — Lawmakers who oversee Ohio’s five public retirement systems were hot Wednesday over revelations that the state’s teachers retirement system spent nearly $15 million on bonuses and artwork at a time when the system is struggling and member benefits are being cut.

Herbert Dyer, executive director of the retirement system, said Wednesday that the money spent on bonuses and art “belongs to the board,” not the teachers who contributed to the system and can be spent “as the board sees fit.”

That wasn’t good enough for Rep. Michelle G. Schneider, R-Cincinnati, Sen. Kirk Schuring, R-Jackson Township, and Rep. John Boccieri, D-New Middletown, who are members of the Ohio Retirement Study Council.

Using investment returns on bonuses, artwork, subsidized child care, travel to Hawaii and Alaska, among other places, and other expenses of the retirement system board, Schneider said, was “wrong. It’s shocking. It’s a distorted perspective on whose money this really is.”

The system gave out nearly $1 million last year to 65 employees not associated with managing its financial portfolio. Thirteen got bonuses of more than $20,000, seven more than $30,000 and one topped $50,000. The investment staff received more than $13 million in bonuses even as the system’s portfolio lost $12.3 billion during the past three years.

Dyer told council members that upcoming changes to health-care benefits will cost retirees and their families more so that part of the system remains solvent.

Dyer would not apologize, however, for the spending spree, saying the staff deserved the raises. He said its effort was “superior if it was better work than average.”

He said the investment managers deserved bonuses because they kept the portfolio from losing more than it did.

“We didn’t lose the money by misplacing it,” Dyer said.

“I am most disturbed by the increases to employees,” said Schneider, who also questioned spending $869,000 on artwork.

“I collect artwork,” she said, “but I don’t do it with other people’s money.”

“Good artwork is expensive,” Dyer responded. “It’s what artists expect for their work. It was designed specifically to complement the decor (of the system’s building).”

At one point, Boccieri said to Dyer, “The more I listen to your testimony, the more agitated I get.”

Schuring, who was not present for Dyer’s testimony because he was attending another meeting, said later that he is convinced there has to be more oversight of the state’s retirement systems. He said the council is ill-prepared to provide oversight because overseeing spending is not part of its responsibility.

“How are we going to stop these things from happening again?” he said. “It might take legislative action. They have to be fiscally prudent and fiscally conservative. Bonuses and increases in staff are not needed.”

Council members also listened to Dennis Leone, the superintendent of Chillicothe City Schools, whose investigation of the retirement system led to the disclosures about spending. While teachers are being affected by the retirement system board’s decisions, he said, so are Ohio’s taxpayers. He noted that matching contributions to the retirement system come from school boards that use taxpayers’ dollars.

“That’s 944 employers who contributed $1.2 billion,” he said. “That’s taxpayer’s dollars.”

Leone said he closed three schools and laid off 45 employees “and I don’t get a bonus.”

Since 1998, the retirement system increased the number of its employees by 42 percent to 707.

He said the retirement system board “just doesn’t get it. They just don’t understand how it looks. They just don’t understand how wrong it is.”

Dyer insisted that the money to employees, which included a $41,000 bonus for himself, was needed “for getting (and keeping) a good staff.” He said it was necessary for board members to travel to meet “face to face” with fellow board members from other state systems to learn how to run the retirement system effectively and efficiently.

Leone said after the meeting that Dyer “danced all around” council members’ questions. He said the system’s spending “is completely foreign to me.”

A Sampling of STRS Bonuses

The State Teachers Retirement System gave out nearly $1 million in bonuses last year to 65 employees ranging from the executive director to the director of the employee day-care center. The bonuses do not include more than $13 million in bonuses given to the managers of the system’s investment portfolio.

Thirteen noninvestment employees got bonuses of more than $20,000, seven more than $30,000 and one topped $50,000.

Here are the positions that topped $30,000:

[Click image to enlarge]