Dr. Leone speaks in Mansfield

From John Curry, April 14, 2009
Mansfieldnewsjournal.com
http://www.mansfieldnewsjournal.com/article/20090414/BUSINESS/904140311
April 14, 2009
State board member not optimistic about teachers' pensions
By JAMI KINTON
News Journal
MANSFIELD -- Although Dennis Leone didn't come bearing good news, he left Monday's Richland County Retired Teachers Association meeting to a standing ovation.
Leone, a retired educator and board member of the Ohio State Teachers Retirement System, visited the Mansfield-area Masonic Temple to break bad news to a crowd of about 100.
He said STRS does not have enough assets to guarantee future pensions.
"Two years ago when I came here, I told you our total assets at STRS were peaking at $80 billion -- that's billion, not million. We were having wonderful returns on our stock market investments," Leone said. "By the end of March this year, we were at $48 billion, so we dropped $32 billion. Something that very much upset me with our board is that for about six months, we kept sending out newsletters that said, 'Your pension is fine, don't worry.' All that time I was yelling at them to stop.
"We'd be a public relations nightmare if everyone knew the truth."
He noted that 70 percent of STRS holdings are in stocks.
Leone said the delay in the matter wasn't the only issue causing strife with the board, whose members are split on a number of concerns. The divide, he said, mainly pitted active teachers against those who are retired.
One of the more contentious issues is trying to decide when teachers can retire. The current retirement age is 51.
"The retirement age should be at least 55 for teachers," Leone said. "I think that will be raised in the future. I'm sure if that does happen, we would phase it in. A lot of states have the '85 rule,' which means you can't retire until your age and service add up to 85."
Leone said bonus checks for the 90 STRS in-house investment staff members is another hot issue. The board could approve as much as $3.3 million in bonuses for fiscal year 2009.
"I get told we save so much because we don't have external money managers. I say, 'So? It's their job,' " he said. "I think we should get to a minimum of, like, $60 billion before we start passing these (bonuses) out. That's like, when I was superintendent, a teacher coming up to me and saying, 'Well, even though my students test scores went down from last year, there are other classes that did worse than mine, so I should get a bonus.'
"I supported bonuses when we were doing well financially, but not when we're losing money like this."
He said bonuses will likely average around $50,000 per person for staffers earning an average base salary of more than $150,000.
In an April 1 letter to board members and the retirement system's executive director Mike Nehf, Leone said approving bonuses for millions of dollars while the board is taking steps to preserve pension solvency and the health care stabilization fund could push state officials to take action to stop them in the future.
Legislation on the matter, he said, "is around the corner in Ohio."
In that letter, and another dated April 3, Leone pointed out how Massachusetts and Colorado recently passed legislation that would prohibit their states' pension funds from issuing employee bonuses during a year when the funds lose money. Three other states -- Pennsylvania, Texas and Wisconsin -- already had closed such loopholes.
Before leaving, Leone took several questions from the audience, including why he wasn't going to run again when his four-year term ends this year.
"I was hoping no one would ask that," he said with a laugh.
"We need you!" the woman said.