Missouri's counterpart to the 'old' Ohio STRS model...

From John Curry, April 10, 2009

Those involved in and/or familiar with the Leone-initiated reform at Ohio STRS will certainly crack a smile when they read about another retirement system housecleaning in its infancy stage. At least now we can almost say, "Been there, done that!" Almost......but not quite!

John

Bonuses given to all employees at Mo. state agency

BY Virginia Young
ST. LOUIS POST-DISPATCH
STLtoday.com
Friday, Apr. 10 2009

JEFFERSON CITY — Investment staff members weren't the only employees at the state government's pension system who received bonuses last year.

All 72 employees at the Missouri State Employees Retirement System — from the records equipment operator to the deputy director for operations — drew bonuses, even as the system's stock market losses mounted.

The 58 operations staffers received about $160,000 in one-time "incentive payments" last June. Employees got the money — up to 10 percent of their salaries — if they and the agency met certain targets, such as processing pension applications promptly.

The Post-Dispatch reported Sunday that the system's 14-member investment team pulled down $300,000 in bonuses in February. Last year, the system's investments lost $1.8 billion. But the portfolio fared better than the market over the last five years, triggering the payments.

The bonuses surprised Gov. Jay Nixon and have cast a spotlight on the obscure agency, known as MOSERS. While funded from tax dollars, it operates without the usual public scrutiny.

Its salaries are not listed with state employees' wages in the Official Manual or the online Missouri Accountability Portal. Legislators have little say over the agency's operating budget.

Critics are calling for more oversight and transparency. Nixon has vowed to change the "smoky system" that shielded the employees' bonuses from public view.

"They get state health care, they get benefits from the state, they manage public money," Nixon said. "Setting up a smoky system where they get to hide behind some odd bonus program does not comport itself to the openness that government service should have."

Both Nixon and Senate Appropriations Chairman Gary Nodler, R-Joplin, said they opposed rewarding administrators when the pension fund lost 23.9 percent of its value. This week, Nodler's committee reduced MOSERS' appropriation by $300,000 to send a message that the bonuses were inappropriate.

Headquartered in a modern building outside Jefferson City, MOSERS usually draws little attention. The Legislature sets pension levels, but an independent,
11-member board oversees the system, which covers about 55,000 state employees and 30,000 retirees.

State employees make no contributions to their pensions. The system is funded entirely from tax money and investment income. Thus, taxpayers pay more when stock market returns decline.

State law requires the Legislature to appropriate enough money to pay the pensions. The board sets the amount, expressed as a percentage of the state payroll for participating employees. Next year it is 12.75 percent, or about $260 million. Folded into that budget is about $7 million for salaries and benefits for the staff members who run the program.

MOSERS officials contend that by setting goals and awarding bonuses, the agency is following a successful business model that helps retain talented employees and improve performance.

"Having some portion of your pay at risk is a motivator," said Gary Findlay, executive director of MOSERS. The bonuses "aren't a gimme. It's something people really have to earn."

Findlay cited surveys that have ranked the agency at the top of similar systems for customer service and cost-efficiency. The surveys measure everything from how many newsletters are sent each year (four) to how long callers must wait when they telephone the agency (65 seconds).

But at a time when the term "bonus" is a dirty word nationally because of executive pay at bailed-out companies, the pay boosts have hit a nerve in the Capitol. Because of declining tax revenue, the state's rank-and-file employees will get no raises in the next budget year.

Some legislators said MOSERS should be brought in line with the rest of state government.

"It's not good to treat those (MOSERS) state employees fundamentally differently from other state employees," said Democratic Rep. Chris Kelly of Columbia, a member of the House Budget Committee. "There is widespread concern about that."

Most state agencies have no authority to give out bonuses. Their workers are part of the merit system, which uses a standardized pay grid.

MOSERS, by contrast, sets its pay levels and conducts a market study every other year to update salaries to keep them competitive.

For example, last year, Deputy Director Karen Stohlgren got an 18.7 percent raise. Her salary now is $127,847. The across-the-board raise for the state rank and file, signed by then-Gov. Matt Blunt, was 3 percent.

Stohlgren also got the largest bonus of all the operations employees last June — $10,767.

The bonuses for operations staff began in 2005. A different program rewards investment staff for beating a market benchmark. Over five years, Missouri's annualized return was 3.9 percent; the benchmark was 1.84 percent.

The investment staff got bonuses in February. The largest check went to Chief Investment Officer Rick Dahl, whose bonus of $114,000 was half of his regular salary of $228,000.

Board members said Dahl is well worth the money.

"I've just got all the faith in the world in him," said Rep. Bill Deeken, R-Jefferson City, and one of four legislators on the board. "When the bottom falls out of everything and we still do better than anybody else, there's a reason for that."

At least one other state agency offered performance-based incentives this year. The constitutionally independent Missouri Department of Transportation distributed $1.5 million to 16 percent of its staff members, who were deemed "exceptional" or "outstanding." The average bonus was $1,348.

At MOSERS, Findlay, the executive director, said incentives help maintain a stable staff, avoiding the high cost of constantly retraining employees. Turnover this year is running only 4 percent.

Sen. Tim Green, D-Spanish Lake, a MOSERS board member, wasn't surprised.

"The thing I have learned is, that's the place people want to work," Green said. Along with the Conservation Department, which benefits from an earmarked tax, MOSERS is known for "the dream jobs in state government."