Leon Knore to STRS stakeholders: More changes needed at STRS

From Leon Knore, February 16, 2009
Subject: STRS improvements needed

Hi STRS Members,

Educators and retirees writing to STRS Board members seems to have had a positive effect in getting the Board to act in suspending employees bonuses temporarily. Yet, more changes are needed in the administration of STRS. I have attached a copy of a letter that I mailed to the Board members. If you agree with any of the points in the letter, I encourage you to write a letter to the Board members too. Letters can be sent to each Board member at the STRS address:

STRS
275 East Broad Street,
Columbus, Ohio 43215-3771

The Board members are:

Mary Ann Quilter Cervantes, Chair
Mark H. Meuser, Vice Chair
Jeff Chapman - retired teacher member
Taiyia L. Hayden
Dennis Leone - Retired teacher member
Tim Myers
Constance K. Ramser
Steve Puckett - representative for Superintendent of Public Instruction
Craig C. Brooks - Appointed by the treasurer of state
Regina F. Burch - Appointed by Governor Strickland

Michael J. Nehf - Executive Director

[E-mail addresses: E-mail contacts at STRS
General address that goes to all Board members: board@strsoh.org;
Michael Nehf: nehfm@strsoh.org]

From Leon Knore, February 16, 2009

Mary Ann Quilter Cervantes, Chair
Ohio State Teachers Retirement System
275 East Broad Street
Columbus, Ohio 43215-3771

Dear Mrs. Cervantes,

Please seriously consider all of the following ideas to improve the STRS. Some of these changes need immediate attention but some would require STRS inspired actions by the legislature. I know many STRS retirees who strongly agree with these recommendations.

• The STRS Board and officials need to establish a new leadership attitude in accomplishing their mission. STRS leadership needs to consist wholly and directly in orientation toward an unpretentious attitude to “discharge their duties with respect to the funds solely in the interest of the participants and beneficiaries...with care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims” as stated in the Ohio Revised Code 3307.15, rather than consisting of an arrogant attitude of greedy entitlement and self-enhancement for employees.

• All STRS Salaries need to be frozen and hiring new employees should be frozen where possible until investments show an annual gain. The goal for STRS investors’ salaries seems to be the 25%ile of the private sector, plus the prevalent attitude of the current STRS board and administrators is that the present investors are irreplaceable! The fact is, no one is irreplaceable. STRS needs to try to keep their experienced investment associates and maintain a staff of good in-house investors. However, these investors do not have to compete for clients like private investors do. They have an automatic income from public tax funds and educators’ salaries. Hence the STRS investors’ salaries should be set, keeping in mind the salaries of their clients (educators), and in comparison to salaries paid by other and similar public retirement systems in the state (PERS, SERS, etc.) and throughout the nation. STRS Retirees have difficulty understanding the justification of paying STRS investors and administrators salaries of $225,000, $270,000, etc. with 96% to 98% bonuses when the average state teachers’ salary is $49,157, the Governors salary is $144,830, and the State Supt. of Education’s salary is $194,500, all with no bonuses. STRS Investment Associates’ Bonuses (PBI) are outlandish and out-of-control. Here again, the same principles stated above for salaries should hold true for PBIs. Whatever happened to working for a salary? The STRS board adopted a bonus plan in January, 2009, that my state senator (lawyer) cannot fully understand. Why is this so complicated? STRS lost one third of their assets last year. If this would happen this year and next, we are busted! Bonuses should never be paid when the system is losing value. Why not pay a reasonable salary plus a simple commission of 5 or 6% on the value of the assets gained? Who started this bonus asininity for investors, Enron or Merrill-Lynch? Can you tell this situation produces anger?

• For the sake of transparency, all STRS salaries above the state teachers average salary (without personal names) need to be published annually to the membership. (state average salary in 2007-2008 = $49,157)

• Establish a “self-sufficiency” safety net for retirees. No pension for a retiree with 30 or more years should be less than the federal “Self Sufficiency” income (defined as 200% of the federal poverty level, approximately $21,660 presently) We now have 769 retirees who taught 30 or more years receiving pensions below this amount!

• Establish hospital insurance premium discounts for verifiable good health practices such as gym memberships, verified weight management within the AMA prescribed range for height, for verified non-smoking, etc.

• All retirees Cost-of-Living-Allowances (COLA) need to be compounded. Until this COLA compounding for retirees occurs and an annual gain in investments becomes a reality, all STRS salaries should only be increased annually at a rate that is not more than the annual percentage increase for retirees’ pensions. That is, STRS salaries would only increase at the rate of inflation according to the Consumer Price Index (CPI) up to a maximum of 3% of the employee’s entry year at STRS.

• All retirees’ pensions (before and after the year 2000) should be determined according to the same calculation chart, that is, at the same 2.2% rate for each year of experience, plus the increase in additional percentages for each year of experience over 30 years should be limited as follows [click to enlarge]:

Previous retirees with pensions figured at a higher rate would be grandfathered into the calculation to keep their current pensions. To maintain positive public relations for educators (on which public educators depend) the practice of “double dipping” by STRS retirees needs to be eliminated as a choice in the future. Presently, pensions are all over the place according to when one retired.

• Re-institution of the 13th check program for retirees as soon as the following conditions are met: (1) Unfunded liability stands at 30 years and (2) the amount of dedicated revenue from employers for retiree health care is increased back again from 1% to at least 3%.

Sincerely,
Leon Knore, Ph.D.