From Dennis Leone, April 1, 2009
Subject: You Must Read This -- Like it or Not !
Without a doubt, if the STRS Board approves $3.3 million in bonuses in a few months for FY 09, even though we have dropped $33.8 billion in assets (which is 42% of all that we have) legislation like this will move forward in Ohio, for sure. The STRS Board could have stopped the FY09 bonuses this past September when $6 million was handed out for FY08 (even though we had already $15 billion in FY 09), but the board did not. All is fine, pensions are secure, trust us, don’t overact, no knee jerk reactions, we’re in this for the long haul……..this is what STRS said over and over and over again.
So there was no effort to stop the bonuses in September, October, November, or December. Then on January 16, 2009, we suspended them effective 2-1-09, sort of. Even though the bonuses were “sort of” suspended effective 2-1-09, the “value added” nonsense will still produce giant bonus checks in a few months. Never mind that the STRS investment staff, no matter how poorly STRS might do in the stock market in FY 09, is receiving an AVERAGE BASE SALARY of over $150,000 (with spectacular benefits). No one on the board, except yours truly, understands that THIS pays for what the rest of you consider “value added.”
The “sky will fall” if the board approves $3.3 million in bonus checks for FY09 while the board is taking major steps to preserve pension solvency and the health care stabilization fund. The legislation summarized below is around the corner in Ohio. In fact, an STRS Board action to approve $3.3 million in bonuses for FY 09 will trigger it – I guarantee it.
Senate bans certain pension fund bonuses
By Kyle Cheney and Michael Norton/ State House News Service
Wed. Apr. 1, 2009
Maynard [Mass.] - Before voting 40-0 to approve legislation wiping out loopholes that have allowed public employees to game the pension system, the state Senate on Tuesday approved an amendment that prohibits the state pension fund from issuing bonuses to its employees during a year when the fund loses money.
The Pension Reserves Investment Trust, overseen by Treasurer Tim Cahill, has adjusted a program instituted under former Treasurer Shannon O’Brien under which bonuses are possible if certain investment benchmarks are hit.
The fund has taken a hard hit during the recession — its value dropped from a peak of $53.7 billion to $36.1 billion since the start of 2008 — but several employees netted bonuses last September based on the fund’s performance in fiscal 2008.
Pension fund executive director Michael Travaglini, for instance, received a $35,000 bonus, Treasury officials confirmed late Tuesday, and a pair of other senior fund officials also received bonuses.
The pension fund lost about $1 billion in fiscal 2008 but its performance ranked in the top 10 percent of public pension funds across the country.
Treasury aides could not provide information about other bonuses received by pension fund employees last September, or the total amount of those bonuses.
Bonuses are based on the average return over a three-year period and kick in if the fund exceeds its benchmark by 75 basis points. Top managers can earn up to 40 percent of their salaries as bonuses, while other staff may receive up to 30 percent of salary, under a program aimed at retaining and rewarding staff.
“It is very unlikely that anyone at PRIM will be getting a bonus for fiscal year 2009 given the current economic climate,” said Treasury spokeswoman Francy Ronayne.
The bill passed by the Senate shortly before 5:30 pm would also prohibit public employees from counting toward their pension any years in which they earned under $5,000. Lawmakers said this would end the practice of town moderators, for example, from racking up creditable years and growing lucrative pensions based upon years when they performed minimal public duties.
Lawmakers said they hoped passing the bill would restore public confidence to the system in the face of headline-grabbing abuses and efforts by public employees to exploit loopholes to fatten benefits.
Senate President Therese Murray said too many public employees “cheat the system by taking advantage of ambiguities in the law” and the bill aims to shut off loopholes.
The Senate rejected 11-27 a GOP-led effort to cap pension benefits at four times the average payout of $24,000 a year. Sen. Robert Hedlund, who sponsored an amendment to implement a cap, said it would only affect the state’s highest earners and still provide them with pensions of at least $96,000.
“I think it’s time, we say good-bye to golden parachutes,” said Hedlund (R-Weymouth).
In thwarting the amendment, Democrats said that setting a fair cap was too complex to deal with on a short-term basis. Sen. Steven Panagiotakos, the Senate’s budget chief, made this argument despite having a bill of his own to cap pension benefits. During debate, he said the amendment should not pass because “What’s reasonable to me might not be reasonable to anyone else in this body.”
Sen. Ken Donnelly, a freshman Democrat from Arlington, wondered how the state would recruit top-quality professors or doctors if pension benefits are limited. He also noted that if pensions are capped while employee contribution rates remain the same, some high-earning employees would end up paying more into the system than they receive upon retirement.
Instead, Donnelly and Panagiotakos punted the cap issue to a special commission authorized in the bill to study a variety of more complicated pension issues. That commission is due to report back in September when lawmakers say they hope to pass “pension reform II.”
Lawmakers also turned down a GOP effort to expand the special commission’s purview to include an examination of contributory pension systems, rather than the state’s current “defined-benefit”
system. Making his maiden speech to the chamber, Donnelly said workers were not expert enough to make investment decisions necessary in a contributory plan and that the state saves Social Security dollars with its current system.
Sen. Michael Knapik (R-Holyoke) said the amendment would simply enable the special commission to examine the issue to ensure taxpayers were being well-served by the current system.
“This is simply about gathering data. Let us not be fearful of gathering data. Information sets us free,” he said.
The bill, which heads to the House and a supportive Speaker Robert DeLeo, prohibits public employees from claiming a full year of a service for working a single day in a calendar year, from claiming credit for working in unpaid public positions, and from claiming dual pensions from more than one public retirement system.
Officials overseeing the state retirement system say it supports 56,000 retirees and contains 86,000 actively contributing employees.
Under the proposal, elected officials would also no longer be able to claim increased “termination” benefits for failing to win reelection and public employees filling in for supervisors would be prohibited from claiming a higher rate of disability compensation if they are injured.
The bill, generated by the Senate Ways and Means Committee without a formal public hearing, will not affect current retirees, senators said.
The two-and-a-half-hour session took an unusual turn when, after about 20 minutes of debate, Senate President Therese Murray asked all members to repair to the Senate Reading Room for a private discussion. Staff was forbidden from attending the meeting and no explanation was given. After a 30-minute recess, the Senate resumed its session at 3:14 p.m.
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