Another reason to have more investment people on a teachers insurance fund board? I think so!

From John Curry, May 23, 2009

"The Indiana State Teachers Association, the state’s union of public school teachers, tapped educators for all the positions on the trust’s board—seven current or former teachers, a superintendent and an elementary school nurse. "

Indianapolis Business Journal, May 23, 2009

ISTA trust lacked expertise

Led by educators instead of investment specialists, state teachers fund fell into $67M hole

J.K. Wall - jwall@ibj.com
IBJ staff
Click on images to enlarge.

The people overseeing the ISTA Insurance Trust had no background in investments or insurance, likely leaving them ill-equipped to grasp the ever-larger amounts of complicated investments the trust was buying.

The Indiana State Teachers Association, the state’s union of public school teachers, tapped educators for all the positions on the trust’s board—seven current or former teachers, a superintendent and an elementary school nurse.

But by the time insurance consultants combed through the trust’s records this spring, 88 percent of its $19 million in assets were stakes in privateequity investments and hedge funds—high-risk investments not easily sold or understood.

The value of the trust’s assets plunged 55 percent in the last 20 months, leaving it $67 million short of its liabilities, according to the Indiana Department of Insurance. The ISTA asked its parent organization, the National Education Association, to assume temporary control of the state-level operations—though not of its local affiliates.

Even before the big investment losses, the trust had been running at a deficit at least three years, according to information filed with state and federal regulators.

The trust, which launched in 1986, provided health insurance to about 7,000 school employees around the state and long-term-disability coverage to nearly 30,000 others.

The ISTA Insurance Trust is by no means the only insurance entity to suffer huge losses in the last year. Life and health insurers around the country were hammered last fall as the meltdown on Wall Street sent the values of their assets into a nosedive.

But the lack of investment expertise on its board left the ISTA trust especially vulnerable to the volatile markets and the rapid-fire trades of the trust’s broker, Morgan Stanley’s David Karandos. During a nine-month stretch last year, Karandos made 4,000 trades involving the ISTA trust’s investments.

“You had people [on the board] that had no idea about investments or risk,” said Marty Wood, vice president of the Insurance Institute of Indiana, a trade group of insurance companies.

Insurance companies seek to turn profits by earning more money in premiums and investment returns than they pay out in claims and administrative costs. Most insurance companies include board members with investing experience because of the complexity of their investment decisions.

Karandos and former ISTA Executive Director Warren Williams made all investment decisions for the trust, according to a report by Indianapolis-based Noble Consulting Services, which examined the trust at the request of the Indiana Department of Insurance.

It’s not clear how much information Williams shared with his fellow trustees. He stepped down this month.

ISTA Deputy Executive Director Dan Clark said he did not know how much investment information was shared with the other trustees.

“It would have taken an extraordinary amount of independence to overcome the advice that they were given,” he said.

However, he added that even highly sophisticated boards have done nothing to stop the monumental collapses of such for-profit companies as American International Group, Enron Corp. and others.

“Corporate governance in general may appear not to have as stringent qualification guidelines as it ought to,” Clark said.

Phone calls to the trustees were not returned. Indianapolis attorney Mark Maddox is representing the trustees, who have received subpoenas as part of investigations into the ISTA Insurance Trust being conducted by the FBI and the Indiana Secretary of State’s Office.

The ISTA Insurance Trust had bled $5 million in cash from August 2005 to August 2007, according to the most recent records filed by the trust with the U.S. Department of Labor. The trust has yet to file a 2008 report.

Clark admitted those results didn’t look good. He said, “That’s partly why the NEA is in here.” The NEA, he said, will bring in actuaries, accountants and attorneys to review all aspects of the trust.

ISTA had agreed to shift all its health insurance business to Minnesota-based UnitedHealthcare, but that decision is now on hold.

The deficits of the trust point up a common problem with insurance trusts or pools, according to Wood of the insurance institute. For example, in 2006, the state Legislature gave public school corporations the right to form their own self-funded pools to buy property and casualty insurance.

“The sales pitch that they do is, ‘We can save them money.’ And they show it that first year,” Wood said. “But insurance is about down the road.”

The ISTA marketed the insurance trust as a low-cost plan. In an April 28 memo to school corporations, ISTA attorney Richard Darko touted the ISTA Insurance Trust as offering one of the “least expensive” long-term-disability policies in the country.

Asked whether the ISTA Insurance Trust should have raised premium levels earlier, Clark said, “They employed actuaries to do that. And the actuaries recommended the premiums rates, and I think all of that is under review.”

ISTA was able to keep premiums low as long as its investments were producing good returns. However, in recent years, the trust’s operating deficits had been eating away at its reserves—even before the Wall Street meltdown.

But what alarmed Indiana Insurance Commissioner Jim Atterholt was that the ISTA was sticking to its “least expensive” ways even once the Insurance Department informed the trust it had a $67 million shortfall.

“That is just a recipe for disaster,” Atterholt said.

~ ~ ~ ~ ~

From Tom Curtis, May 23, 2009
Subject: 052309 ISTA Trust Lacked Expertise
"The Indiana State Teachers Association, the state’s union of public school teachers, tapped educators for all the positions on the trust’s board—seven current or former teachers, a superintendent and an elementary school nurse. "
Exactly the point I have made for many years! Our Ohio board is overstocked with well meaning, but unqualified people; seats bought and paid for by the 2 Ohio unions! Most are only qualified in their own minds (Connie, Jeff, Mary Ann, Mark & Tim). The reality is, they are all educators, not business and finance people. Let's get real and start electing qualified people!
Tom Curtis

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STRS Flashback - 6 Years Ago - A Culture of Secrecy and..... the OEA was also "under fire" back then!

From John Curry, May 21, 2009 "The OEA is already under fire for its position supporting former Executive Director Herbert Dyer and the board’s decisions regarding artwork, a fancy headquarters, extensive travel, bonuses and other spending." Culture of secrecy still pervades STRS operations Canton Repository, August `5, 2003 By PAUL E. KOSTYU Copley Columbus Bureau chief COLUMBUS -- Aristotle is credited with writing, “All men by nature desire to know.” On the same subject, Patrick Henry wrote, “The liberties of a people never were, nor ever will be, secure, when the transactions of their rulers may be concealed from them. ... To cover with the veil of secrecy the common routine of business, is an abomination in the eyes of every intelligent man.” We might excuse Aristotle’s and Henry’s gender problem. Today, it would be more appropriate to use “people” or “persons” or “men and women.” But their underlying message is still sure — secrecy is an abomination. As far as we know, George Washington never said, “No comment.” In all his writings, Thomas Jefferson never left for history the phrase “this is off the record” or “don’t quote me on that.” In fact, Jefferson wrote, “My own opinion is that government should by all means in their power deal out the material of information to the public in order that it may be reflected back on themselves in the various forms into which public ingenuity may throw it.” Our country’s founders would surely be disturbed with the position the State Teachers Retirement System has taken to keep information from its 413,219 members. Despite being asked repeatedly by at least two newspapers, STRS will not release the names of those active members who have asked to be considered for an open seat on the nine-member board. Lawmakers and educators — members of STRS — alike call that position a mistake and unbelievable. Instead, in the STRS version of representative government, the eight remaining board members will decide in secret who the finalists will be. It could be one person; it could be as many as eight. They decided last night, and, today we are supposed to learn who those will be. Members then can contact the board to offer their preference. But members will not be given an opportunity to comment on everyone who applied. Actually, the decision on the final replacement is already made. Though board members deny it, the state’s two large teachers’ unions will heavily influence the final decision. Reportedly, the Ohio Education Association, which has two of its state and national officers already on the STRS board, is allowing the Ohio Federation of Teachers to decide who the union preference is. The OEA is already under fire for its position supporting former Executive Director Herbert Dyer and the board’s decisions regarding artwork, a fancy headquarters, extensive travel, bonuses and other spending. So to deflect accusations that it has undue influence, OEA cut a deal with the smaller union to come up with a candidate. The federation has interviewed candidates and will recommend a woman for the position. She will be the foregone leader in the selection process if there is more than one candidate. And there will be, so the board can deflect criticism that the selection process was undemocratic. It’s a smokescreen. No one will know who the other candidates were, nonetheless their qualifications. The STRS board will continue to operate as it has for years, ignoring its members and deciding for itself what those members will get. The Dyer culture remains. Instead of saying “it’s the board’s money and they can spend it any way they want,” the board’s attitude is “we know what’s good for our members; who cares what they think?” Why should nearly a half a million people be kept in the dark? What does STRS have to hide? This conspiracy doesn’t stop with STRS and the unions, but includes Attorney General Jim Petro, who told STRS it can keep the list secret because of his skewed interpretation of the Ohio Revised Code. Of course, none of us will know exactly what Petro said because that communication is also secret. This is the same Petro who tells the public he wants more accountability at STRS. This is the same Petro whose representative on the board was asleep for eight years while the board was spending money hand over fist as the pension fund lost billions. This is the same Petro who complained about the tone of a letter from the Copley Newspapers’ attorney asking for the names. This is the same Petro who in a year or so is going to want all the teachers and retirees to vote for him when he runs for governor. To paraphrase Abraham Lincoln, “Let the people know the facts and STRS will be saved.”

A 2007 letter from Dennis Leone re: ORTA's refusal to publish his column; Seamon, Bright & Hanning don't even respond to his inquiry on WHY

Hey, duh!! GREAT LEADERSHIP over there......and the beat goes on!!

Dennis Leone to Ronald Catron, April 11, 2007
Subject: Re: Letter To The ORTA Executive Committee

Thank you, Ron, for sending me a copy of the letter you wrote to ORTA. Here are 3 other amazing things regarding this issue:

1. I asked ORTA publications director Tom Seamon to please tell me why I wasn't informed that ORTA expected me to keep secret any column I write until AFTER ORTA publishes it. ORTA could not accept the fact that in the 6-8 weeks I am supposed to wait for it to appear in print (after I submitted it) that I shared with some retirees and RTAs that asked me to speak. The point is that I was never told about any gag order..........had I been told, I would have agreed, even though the whole notion is silly. I have not received a response to my question.

2. I asked ORTA President Don Bright if the rejection decision could be reconsidered given the above. He never responded. I also told him that I felt either he or Ann Hanning could have shown a little respect by calling me regarding this entire matter. In fact, neither have contacted me about anything in my first 19 months on the STRS Board -- not about any of the motions and initiatives I pushed for and advanced.

3. I asked ORTA's Ann Hanning, in writing, if I could write another column as a substitute since this one was rejected. No response. This is proof to me that ORTA really did not want to publish what I wrote in the first place.

I recall when I wrote my first column, ORTA had a disclaimer notice next to my column -- saying that my comments did not reflect an ORTA position. However, when fellow retiree Jeff Chapman wrote his column three months earlier, there was no such disclaimer statement with his column. After I complained about this, ORTA then put a disclaimer statement with Chapman's second column.

Dennis Leone

From Tom Curtis, April 6, 2007
Subject: 040607 To The ORTA Executive Committee

April 6, 2007

To The ORTA Executive Committee,

I received my ORTA newsletter yesterday and found that the column Dr. Dennis Leone, (one of two retiree representatives on the STRS board) submitted to ORTA for publication this quarter had been omitted.

Shame on all of you who made this decision! This is such a travesty on your part and shows that ORTA is clearly only a social organization and nothing more. This act is the final straw in a long series of failures to support the one person that had the courage and knowledge to step forward and begin a reform process that might save our retirement system from insolvency in the not to distant future.

This decision is a childish act by each of you who perpetrated such a cause. It clearly shows that the mind bank running this organization does not have the capability or vision of being anything greater then a lunch group. ORTA has continually shown me that it is not a strong advocate for the retired teachers’ benefits, simply by not supporting Dr. Leone on the many changes he has brought about to date. If it were not for Dennis Leone, our retirement system would be in a far greater financial situation then it is currently, as other states that have had poor management throughout the years.

Those of you that voted for this decision are a disgrace to your profession and violate your statement for existence as an organization. I have lost complete confidence in the ORTA leadership and will strongly advise people to join the only true advocate for STRS retirees, which is CORE (Concerned Ohio Retired Educators).

ORTA Life Member,
Thomas Curtis
Stark County

Dennis Leone's report which ORTA refused to publish, yet wouldn't give him a good explanation as to why (March 2007; the beat goes on.....)

Ohio Retired Teachers Association (ORTA)
QUARTERLY REPORT*
By Dennis Leone,
STRS Retiree Board Member
March, 2007

After my last column was published in October of 2006, the Board agreed to re-visit a motion I made months earlier to prohibit Board action on vendor contracts unless the Board first had an opportunity to review a summary of the proposed contracts. My original motion, as you may recall, was defeated 8-2, with only John Lazares joining me in support. Many retirees, in the months following, expressed their consternation over the 8-2 vote.

I am pleased to report that on October 20, 2006, the Board voted 7-2 to approve a motion I made (seconded by Lazares) that will require the STRS staff to provide a summary of all proposed contracts for services provided directly to the Board, and for any proposed contract in excess of $100,000. Former Board member Geoffrey Meyers and current Board member Mark Meuser voted against this initiative.

I am also pleased to report that 13 changes I desired in the Board’s travel and expenditure policies were adopted 9-0 on February 15, 2007. The changes were long overdue. Here are some highlights:

1. There will be no reimbursements for meals in the future unless itemized receipts are provided. This is the only way to make sure that pension money is not being used to purchase alcohol.
2. Airplane tickets must be purchased 30 days in advance, and Board members who choose not to do this will pay the difference in cost between the two tickets. Also, Board members – not STRS – will personally pay for any additional fees charged by the airline if ticket reservations are changed for personal reasons.
3. The previously adopted $6,000 maximum for individual Board members to spend on out-of-state trips per year did not include the conference fee for registration or tuition. Now it does. Board member Conni Ramser last year spent well over $6,000 on out-of-state trips, but this was not in violation of Board policy because her conference registration fees weren’t part of the calculation. They will be now.
4. Meal reimbursements are now limited to $10 for breakfast, $15 for lunch, and $25 for dinner. Previously, Board members could spend up to $60 per day, which meant that if Board members passed on breakfast and received a free lunch, they could – and did – spend $40 or $50 on a single dinner. My original proposal called for spending limitations of $5, $10, and $20, but the majority disagreed.
5. No overnight lodging will be provided by STRS on the day that Board meetings end or the day after conferences conclude. I will never understand why the previous policy permitted this. It was so wrong.
6. Board members will not be reimbursed for expenses while attending in-state meetings unless they are a formally invited speaker or an official participant at the meeting, or unless the Board votes to approve attendance in advance. There were examples in the past when some Board members would decide on their own to attend an association meeting and expect to receive a travel reimbursement.
7. STRS funds will not be used ever again to purchase credit cards, fax machines, fax lines, or lap top computers for Board members. Also, Board members cannot expect STRS to pay for their personal long distance phone calls when they are attending meetings. It was an embarrassment that Board policies permitted these things, and that – up until a few months ago – several Board members still were contending that such expenditures and reimbursements were reasonable.　

*This report will not appear in the ORTA Quarterly, as originally planned, as ORTA is refusing to publish it.　

Two points of irony regarding the above changes:

No. 1: Three weeks to the day after the Board adopted the revisions, Gov. Strickland ordered a meal reimbursement freeze for certain state agencies like the Ohio Board of Regents – a group that used taxpayer money for a $1,000 dinner. (Sound familiar?)

No 2: My push for the travel policy changes was triggered after Gary Hollow, from OEA-R and NEOEA-R, made a public records request for the travel expenditure report of one Board member – me. He did not express any interest in seeing what the other Board members were spending. He wanted to see what only Dennis Leone was doing. Damon Asbury then produced a travel expenditure report for all board members. What did it show? Credit cards had been purchased for Board members Conni Ramser, Michael Billirakis, Jeff Chapman, Mary Ann Cervantes, and Steve Puckett. A fax line, with a monthly fee, had been purchased for the home of Michael Billirakis. STRS paid for the long distance phone calls Steve Puckett made when he attended a conference in Orlando. Single meals costing in excess of $40 existed for several board members. I wonder how Mr. Hollow and OEA would have reacted if the travel reports for only Dennis Leone or John Lazares had shown these types of expenditures? I think I know.

I wish to explain why John Lazares and I were the only board members who voted no on November 16, 2006, when the board set the reimbursement rates for Medicate Part B retirees, and therefore increased the out-of-pocket costs for said retirees. We both felt: (A) The Board needed to first consider other options for change, like the $1.4 million dollar premium fee STRS pays yearly to provide a small $1,000 life insurance plan for all retirees; and (B) We couldn’t support such an increase for Medicare retirees when STRS money still was being used for things like Board member credit cards, fax lines, lap tops, and phone bills. ORTA, in my opinion, should have supported Lazares and me on this issue.

Finally, I have an obligation to share with retirees why I disagree with published projections by STRS that our current 47-year unfunded liability is projected to hit the desired 30 years by 2009. Note the charts below:

(Click image to enlarge.)

............................................................................

The increase of about 3,500 retirees per year is what we expect. However, the average decrease of 1,626 active teachers per year over the past three years was not expected. Another decline not expected has been the payroll growth in the past three years. STRS budgets for an anticipated payroll growth of 4.50% per year – not the 2.71% average we’ve received over the past three years. The staff projects only a 2.50% increase for fiscal year 2007. What’s keeping our heads above water? The fantastic investment returns we’ve received – averaging a whopping 14.45% over the past three years. Through eight months in fiscal year 2007, we’re receiving another 12.50%. (STRS budgets for returns totaling 8.0%.) My point is simply this: Absent a continuation of the great investment returns, we will not offset the realities (if they continue) of the other three areas shown above. I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn. More on this, and my recommendations for such a plan, later………

Defined Benefits Pensions...a Better Bang for the Buck!

From John Curry, May 21, 2009
Recently CORE members attended a presentation in Columbus which discussed the concept of "Pension Envy." No, this term has nothing to do with Psychology 101 but does address a concept that is beginning to creep into the lexicon of public service workers/retirees who really do understand the fact that many out there (especially some politicians) would like nothing more than to do away with all defined benefits pensions.

During this meeting, the following presentation, Defined Benefits Pensions, a Better Bang for the Buck, was shown to the attendees in a Power Point format. This is an excellent presentation and I would urge all to read. It is in the format of an Adobe Acrobat Reader presentation. Here is the link to this presentation. Please take the time to read it. You can bet that those who "envy" our defined benefits retirements are! Here is the link to this presentation:

http://www.nirsonline.org/storage/nirs/documents/better_bang_for_the_buck_ppt.pdf

Cincinnati Pension System and some ugly news

From John Curry, May 20, 2009

Cincinnati.com, May 18, 2009

City pension workers suspended

By Jane Prendergast jprendergast@enquirer.com

Cincinnati’s pension fund supervisor and an employee face discipline for the latest in a string of problems with the department, including that the city paid benefits for five years – to a dead person.

Keith Giles, supervisor of pension plans and a 28-year employee who earned $98,000 last year, remains on paid leave until an administrative hearing Wednesday. So does Norma Haywood, who reported to him. Neither could be reached Monday.

They allegedly violated rules regarding personal loans from their pension contributions and have been on paid leave – their union contract requires that pay continue, city officials said – since late January.

The $1.83 billion Cincinnati Retirement System, which has been in the news lately for losing $854 million last year, allows contributors to take out loans of up to $50,000 of their contributions and pay them back for up to five years. There also are limits to the number of loans.

Giles took out 20 loans in the past seven years, according to one audit, though the CRS handbook states a third loan must be paid in full before any subsequent loans can be taken out.

The loans carry a 7 percent interest rate. The up side for employees is that the city does no credit check, considering the employees’ contributions as collateral. About 1,500 employees currently have loans from the fund, totaling about $15 million, said John Boudinot, the system’s executive director.

Police investigators continue their work on the case, said Mark Ashworth, the city’s internal audit manager. However, Boudinot, who is leaving this week for a new job in St. Louis, said he is confident no theft occurred.

One employee has already paid back the loan and the other loan is being repaid, said Meg Olberding, spokeswoman for City Manager Milton Dohoney. Haywood earned $61,000 in 2008. She has been with the city since 1988.

Their cases brought to light two audits, in February 2007 and November 2008, of the retirement system operations. The audits list several office missteps:

• Not enough internal controls to make sure the system isn’t continuing to pay benefits to dead people. Auditors found payments to 14 dead people and beneficiaries, according to the 2007 audit, for a total of more than $102,000. Auditors recovered most of it, with retirement losing $3,463. The system had access to a Social Security Administration database employees could use to check for dead members, but it wasn’t being used, the audit said.

• Loan preparers and loan approvers signing off on their own loans;

• One retiring employee was given 22 days’ worth of working days he or she didn’t earn, which was enough to allow that person to qualify for the early retirement incentive package offered in 2007, which gave a two-year bonus to service time. The employee, just after retiring, was hired back as a contractor.

“Once we discovered there was a problem, we placed them on leave and we looked at the processes and straightened them out immediately,” Boudinot said Monday.

Of paying dead people, he said, “We’re not doing that anymore.”

Additional Facts

Executive director leaving

The executive director of Cincinnati's struggling pension fund system is leaving the job just as he has been warning that the fund's already significant losses will worsen.

John Boudinot, executive director for about three years, plans to return to Missouri, where his family has continued to live while he has been in Cincinnati. This is his last week in the job.

His departure has nothing to do with the pending allegations against two Cincinnati Retirement System employees, said Meg Olberding, spokeswoman for City Manager Milton Dohoney.

http://news.cincinnati.com/apps/pbcs.dll/article?AID=/20090518/NEWS0108/905190311/&template=printart

~ ~ ~ ~ ~

Cincinnati.com, May 20, 2009

Top pension official a financial wreck

By Jane Prendergast jprendergast@enquirer.com

The long-time Cincinnati pension system supervisor accused of improperly loaning himself money from his contributions faces a host of personal financial problems - including bankruptcy, an Enquirer investigation shows.

Gordon Keith Giles, a 28-year city employee, was originally scheduled to hear the official allegations against him at an administrative hearing today and be able to respond. That hearing was postponed.

He and a subordinate, Norma Haygood, were put on leave with pay in January after audits discovered they might have violated rules about how much pension money can be taken out and for how long.

Giles earned more than $98,000 in 2008. His three-bedroom house on Samson Lane in Silverton went into foreclosure last year, a process held at bay by his filing for bankruptcy in February. The bankruptcy filing lists his assets at $122,610, but his liabilities at more than $177,000.

• http://news.cincinnati.com/assets/AB135184520.PDF">Read Giles' bankruptcy petition (PDF)

• http://news.cincinnati.com/article/20090518/NEWS0108/905190311/">City pension workers suspended

Among his debts: more than $14,000 in state and federal taxes; almost $18,000 in federal student loans; and thousands to credit card companies, payday lenders, collection agencies and department stores. The bankruptcy filing also listed child support, but did not say how much Giles pays or owes.

Giles' money problems are prompting the city's internal audit manager, Mark Ashworth, to propose that the city's policy on financial disclosure be strengthened and applied to more employees. He's working on a plan that will suggest a financial records check for "anybody who's got a decision to be made that could be corrupted by money."

Now, the city requires department heads to file financial disclosure forms, but the forms focus on whether the employee has personal money tied to any city contractors.

The $1.83 billion Cincinnati Retirement System, which has been in the news for losing $854 million last year, allows contributors to take out loans of up to $50,000 of their contributions and pay them back over five years. There are limits to the number of loans.

Giles took out 20 loans in the past seven years, according to one audit.

The Enquirer requested from the city Tuesday the personnel files of Giles and Haygood, but has not yet received them. Haygood has worked for Cincinnati since 1980. She earned more than $61,000 last year.

Neither Giles nor Haygood could be reached for comment. Giles' bankruptcy lawyer, Eric Steiden, also could not be reached.

Ashworth's office did the 2007 and 2008 audits that found the discrepancies in Giles' and Haywood's personal loans. His auditors found that Giles essentially refinanced his loans repeatedly, taking out 20 loans in seven years. Rules required a third loan to be fully paid before any subsequent ones.

http://news.cincinnati.com/article/20090520/NEWS01/305190073/Pension+official+in+debt

In Ohio, where does one draw the line between reasonable profit and highway robbery?

From John Curry, May 21, 2009

http://pnohio.3cdn.net/1098314890b67c233e_com6bhs7u.pdf

Congressional Budget Office - Public Pension Plans - Risk

From Mario Iacone, May 20, 2009

I have repeatedly expressed for some time that STRS has too high of a percentage of risk based investments. I have also communicated such to STRS and Board to no avail.

STRS is NOT a WALL STREET INVESTMENT FIRM! STRS members are not stock investors knowingly and willingly taking risk to accumulate wealth.

STRS IS a TEACHER PENSION FUND! STRS members make mandatory contributions saving money for their pensions believing that they are not taking risks and will receive guaranteed benefits.

For sometime now, I have been trying to point out a serious problem affecting STRS members as a result of the fund being so heavily weighted in risk equities. Risk equities such as stocks may produce higher returns in the long term, but serious short term decline in the markets or a serious downturn in the economy, such as the current one, causes problems for the fund and its members.

The serious short term downturn in STRS investments appears to necessitate current changes and cuts in the pension plan which will result in reduced benefits for the entire membership, active and retired.

That situation led me to observe and conclude,

Increased Risk may provide Better Long Term Gains, but has also caused Short Term Cuts for the members, many of whom will not benefit from future long term success. That statement is based upon my personal opinion and observation.

However, recently I was referred to a letter written by the CBO to the PBGC advising PBGC against increasing risk in their investment portfolio and stating why such should not be done.. Their advice and guidelines regarding too much risk in public pension plans is very similar to my personal observations of the STRS situation.

This Congressional Budget Office (CBO) risk level guideline for public pension funds was issued in April, 2008, before the 2008 crash.

The advice was not given in hindsight. Much more detailed information is available on CBO website. Type PBGC in the search box. Also check out their guidelines for public pension funds. Government Accounting Office (GAO) basically ruled the same.

CBO issued a letter today reviewing a new investment policy recently adopted by the Pension Benefit Guaranty Corporation (PBGC). As part of its analysis, CBO reviewed the assumptions underlying PBGC’s decision and assessed the revised policy’s potential for affecting the corporation’s ability to meet its obligation to retirees and for increasing costs to taxpayers.

Prior to February of this year, PBGC’s investment strategy was to hold about 75 percent of its portfolio in bonds, with the duration of those assets matched to the corporation’s obligations. The remainder of the portfolio was invested in equities. PBGC’s new strategy reduces to 45 percent its allocation to fixed-income assets, in order to increase the proportion devoted to equities (45 percent) and to further diversify into alternative asset classes (10 percent).

The change in investment strategy represents an effort on the part of PBGC to increase the expected returns on its assets and to diminish the likelihood that taxpayers will be called on to cover some of its liabilities. The new strategy is likely to produce higher returns, on average, over the long run. But the new strategy also increases the risk that PBGC will not have sufficient assets to cover retirees’ benefit payments when the economy and financial markets are weak. By investing a greater share of its assets in risky securities, PBGC is more likely to experience a decline in the value of its portfolio during an economic downturn — the point at which it is most likely to have to assume responsibility for a larger number of underfunded pension plans. If interest rates fall at the same time that the overall economy and financial markets decline, the present value of benefit obligations will increase, and the pension plans likely to be assumed by PBGC will be even more underfunded as a result.

The effect on taxpayers of the change in PBGC’s investment strategy depends on assumptions about future premiums and benefits and expectations about the government’s ultimate responsibility to covered retirees. Although the Employee Retirement Income Security Act of 1974 (ERISA) explicitly states that the federal government does not stand behind PBGC’s obligations, an implicit expectation exists among many market participants and policymakers that taxpayers will ultimately pay for benefits should PBGC be unable to meet those obligations. If policies governing future premiums and benefits remain unaffected by the new investment policy, taxpayer’s increased risk of substantial losses will be balanced by the higher expected returns that the new policy allows. However, if the higher expected returns mean that premiums are reduced or benefits increased relative to what would otherwise occur, plan sponsors or beneficiaries will reap some of the benefits of the change in investment policy, but taxpayers will bear the added risks.

OEA Salaries from the U.S. Department of Labor

I have had several requests for the latest OEA salary listings and also some "newbie" readers haven't seen this one so.....................

OEA salaries.....Latest Dept. of Labor posting 11/2008

From John Curry, March 13, 2009

Below is a summary of the top OEA salaries as reported to the U.S. Dept. of Labor from their website. This posting was presented to the U.S. Dept. of Labor in November of 2008 and covers a time period from 9/1/2007- 8/31/2008. Just as public school educators' salaries are public domain, the salaries of the OEA associates are also public domain. I have listed all salaries at or above $50,000, there are some less than 50K but this may or may not be due to a part time position or a person who was hired during this time period or resigned during this time period or....could just be a salary lower than 50K.

John Curry

a member of CORE (Concerned Ohio Retired Educators)

If you wish to access the full report please follow this procedure:

1. Go to this page (this link opens in a new window): http://erds.dol-esa.gov/query/getOrgQry.do

2. Enter this employer number: 512-490 in the box listed as "File Number."

3. Click the "Submit" button.

Now, here's the summary. Please note the term "LRC" listed as a job description - this stands for Labor Relations Consultant....the OEA people that you probably see when they visit your school. These names/salaries can be found listed on schedules 11 & 12 of the U.S. Dept. of Labor document should you decide to click on the link above and do your own search.

I have left out the dollar signs. The first group listed are officers of the OEA and are on a separate schedule from the rest of the associates. Salaries in excess of 100K are in boldface print. These figures are from column (D) Gross Salary Disbursements (before any deductions).

Frost Brooks, Patricia---President---172,574

Leibensperger, William---Vice-President---151,451

Timlin, James---Secertary-Treasurer---151,382

Allen, Gary---Former President---97,502

Allison, Mark---CIS Consultant---118,901

Arrigi, Geraldine---Admin. Secretary II---58,821

Austin,Jolynn---Staff Consultant I---59,215

Avouris, John---LRC---91,314

Babcock, Susan---AED Strategic/Workforce---136,209

Heitzman, Lynn---LRC---54,663

Gee, Karen---LRC---54,574

Barbu, Alex---CIS Technician---55,732

Bartlo, Lynn---Admin Secretary II---58,887

Bayou, Ann---LRC---118,668

Bell, Marla---LRC---118,690

Bibler, Timothy---LRC---118,634

Biddle, Susan---LRC---118,536

Bird, Rodney---LRC---121,805

Blanden, Lee---LRC---107,062

Boerger, Katherine---LRC---72,695

Botz, Gail---Communications Tech.---61,654

Bozovich, George---LRC---124,050

Brooks, Lisa---Ex. Assistant-Counsel---66,286

Busby, Robin---LRC---118,369

Carlisle, Gary---LRC---118,917

Chandler, Elizabeth---LRC---119,904

Chanfrau, Graciela---Dir. Human Resources---85,826

Chavez, Peggy---LRC---124,235

Chute, Danielle---Staff Accountant II---60,790

Clark, Melissa---Lobbyist---86,002

Clar, Airica---LRC---86,213

Cline, Cathy---Admin. Secy. II---60,615

Clum, Darren---CIS Consultant---118,692

Cohagen, Joseph---Dir. Accounting---116,872

Colbeck, Tad---LRC---72,586

Coyler, Shelley---Admin. Secy. II---61,189

Cooper, Jeanette---Dir. Region 4---113,458

Cooper, Shawn---LRC---109,938

Constantino, Mark---LRC---106,966

Crawford, Douglas---LRC---118,621

Crumrine, Margaret---Admin. Secy. II---58,691

Dalton, Donald---LRC---118,580

Davis, Demetrice---Education Reform Cons.---101,237

Davis, Elaine---Admin. Secy. II---60,084

Davis, Robert---Lobbyist---106,625

Davis, Vicky---LRC---118,525

Dotson. Matthew---Lobbyist---114,386

Doubledee, Arlene---Admin. Asst.---55,048

Eichelberger, Donna---Admin. Secy. II---58,123

Elias, Dawn---Ex. Asst. Human Resources---77,814

Elling, Betty---LRC---96,394

Facchiano, Joyce---Admin. Secy. II---60,363

Fekete, Fritz---Dir. I/S & Research---140,258

Field, Ann---LRC---120,498

Fiely, Linda---Dir. Legal Services---111,075

Flanagan, Kevin---Dir. Region 3---137,692

Flora, Randall---Dir. EI&I---123,764

Fulton, Karen---Dir. EI&I---54,220

Gallagher, Kathleen---Admin. Asst.---68,625

Garlits, Lenna---Admin. Secy II---58,968

Gascon, Gregg---Research Cons.---121,534

Grafton, John---LRC---106,981

Graham, Stuart---CIS Consultant---121,518

Harris, Russell---Ed. Research Cons.---118,658

Hart, Jonathan---CIS Consultant---105,003

Helvey, Edward---LRC---101,457

Holub, Donald---Research Consultant---105,482

Hornacek, Anthony---CIS Consultant---86,782

Howell, Lynette---LRC---118,857

Hutchins, Talmadge---LRC---118,715

Jackson, Schalet---LRC---76,904

Jewell, Paul---Research Consultant---118,658

Johanson, Barbara---Admin. Secy. II---59,112

Johnson, Charles---LRC---118,633

Johnson, Rachelle---Counsel---111,171

Jones, Esther---Admin. Secy.II---59,040

Jones, Jan---LRC---118,658

Joseph, Bonnie---Political Consultant---139,822

Jowhar, Thomas---LRC---118,671

Kaliszak, Teresa---Membership Accounting---70,011

Kappes, John---Tech. Operator---74,868

Kaszar, Suzanne---Communications Cons---118,064

Keller, Rosemarie---Manager Legal Services---90,995

Kelm, Linda---Admin. Secy. II---63,488

Kestner, Jeffrey---LRC---131,935

Kidwell, Sally---Staff Accountant II---69,957

Kirdwood, Amber---LRC---96,485

Kovach, Gary---LRC---93,826

Kubiske, Annette---LRC---118,595

Lane, Kimberly---LRC---120,191

Leidy, Chloann---LRC---112,771

Lester, Donna---Admin. Secy. II---59,252

Linder, Mark---LRC---110,354

Lindsey, Linda---LRC---119,438

Lobert-Edmo, Lavonne---:RC---109,355

Mahoney, Mike---Dir. Communication---117,098

Marchese, Victor---LRC---112,885

Marcum, Connie---Admin. Secy. II---58,986

Martin, Beverly---Admin. Asst.---53,208

Martin, James---AED Business Services---148,249

Matkowski, Robert---LRC---121,120

Matusick, Michael---LRC---53,672

May, Linda---LRC---118,658

Maynard, Debbie---LRC---81,809

Mceachern, Michael---LRC---102,680

McMurray, Bonnie---LRC---120,157

Messer, Darlene---LRC---101,614

Messer, Donald---LRC---119,224

Miller, Diane---LRC---118,631

Miller, Tim---LRC---118,642

Miller, Vickie---LRC---101,900

Mills, Linda---Accountant Asst.---52,902

Mueller, Daniel---LRC---72,548

Munoz-Nedrow, Cristina---LRC---97,929

Murdock, Patricia-Director Region 1---126,006

Musilli, Henry---LRC---118,617

Navin, Lori---Admin. Secy. II---59,121

Nelson, Alfred---LRC---111,526

Nelson, Judy---Admin. Secy. II---64,674

Newhall, Julie---Editor---119,324

Nolasco, Jeffrey---LRC---106,810

Norris, Parry---Director Region 2---123,068

Obrien, Sharon---Admin. Secy. II---59,206

Oconnell-Burt, Kathleen---LRC---101,735

Odonell, Tina---Ex. Assistant---81,582

Otten, William---LRC---118,540

Patrick, Maureen---Prod. Consultant---159,087

Pearson, William---LRC---127,356

Peltola, Dennis---LRC---121,881

Peterson, Cynthia---Education Reform Cons.---125,441

Phillips, Crystalle---Admin. Secy. II---59,558

Picker, Barbara---Admin. Secy. II---58,681

Pipe, Herman---LRC---101,517

Prater, Michelle---Communications Cons.---107,679

Puterbaugh, Debra---Admin. Secy. II---58,393

Quesada, Dinica---Education Reform Cons.---88,836

Radel, Sam---LRC---81,994

Rapp, Ron---Director Governmental Svc.---73,384

Ray, Patricia---LRC---72,305

Reardon, Dennis---Executive Director---176,317

Reed, Phyllis---Admin. Secy. II---59,420

Reimund, Marci---LRC---118,681

Renaud, Thomas---LRC---118,670

Rivera, Daniel---AED Member Services---133,466

Roberts, Debra---Admin. Asst.---59,254

Rosa, Miriam---Admin. Secy. II---59,703

Rumsey, Lora---LRC---91,369

Saad, Sheila---LRC---127,606

Shoulders, Venita---LRC---135,677

Simonini, Laura---Admin. Asst.---66,634

Slaughter Rebecca---Mgr. Governance Relations---96,687

Smith, Peggy---Admin. Secy. II---58,717

Smolik, Carrie---LRC---118,665

Soto, Charlene---Reprograhics Tech.---53,847

Squires, Jerry---LRC---119,424

Starcher, Connie---Admin. Secy. II---60,424

Stephenson, Edward---LRC---118,653

Stewart, Joyce---Admin. Secy. II---54,648

Suchy, Mary---Dir. of Membership---135,321

Terman, Melodie---LRC---107,278

Thomas, Anne---LRC---68,629

Thompson, Angela---Admin. Secy. II---59,895

Tieman, Diane---LRC---123,962

Trapp, Helen---LRC---101,428

Tufaro, Dolores---LRC---80,960

Turner, Patricia---Research Cons.---118,750

Urban, Eric---LRC---98,610

Villamagna, Rebecca---LRC---118,624

Volz-Costell, Jerrilyn---Mgr. Admin. Svcs.---82,567

Walters, Saundra---Admin. Secy. II---58,815

Watson, Diana---LRC---77,486

Webster, Michelle---Staff Accountant II---79,438

Weldon, Cecelia---LRC---120,466

White, Cathy---LRC---117,624

Whitney, Theresa---LRC---76,220

Williams, Don---LRC---118,742

Williams, Kent---LRC---52,729

Wilson, Jada---Admin. Asst.---59,352

Wing, Debra---LRC---103,862

Winters, Deborah---Data Entry Tech.---50,505

Wittemire, Leroy---Ex. Asst. Business Svc.---83,431

Yevincy, Amy---LRC---61,118

Yoder, James---Director Region 5---166,254

Young, Alice---Admin. Secy. II---59,655

Young, Norman---LRC---127,705

Hey, Board, are you SURE you want to keep this one? You might want to reconsider before it gets out to the members.

From Dennis Leone, May 19, 2009

One thing I have seen circulating, somewhat inaccurately, pertains to the Severance Policy for laid off STRS employees that Herb/Damon developed and used without the board approving it as a policy. Eliminating the Severance Policy (because it was never board approved) was one of the 6 policy recommendations I made on the same day 2 years ago. Four were ultimately adopted (after much blood on the sidewalk) but this one was never approved.

My motion ultimately was rejected 7-3. The policy adopted by the board, with me objecting strenuously, formally gives the executive director the ability to give out cash and free health insurance to people laid off in the future. I lost on this one. Still bothers me that very few board members really cared that Damon did this before he left.

Ralph Roshong's speech (outline) to STRS Board, May 14, 2009

May 14, 2009
To: STRS Board Members
Fr: Ralph Roshong, Retiree
Re: Comments

Both our pension fund and healthcare fund are in extremely poor positions. Ironically, our Social Security and Medicare Funds are both in the same or worse condition. Our two funds need immediate attention with changes that will improve the life of the funds and the type of changes that the Legislature will support immediately. It can be done if the Board and Staff make the HARD DECISIONS promptly.

1. Thoughts on Pension criteria changes:

a. A minimal retirement age must be established, 60 would be prudent. Rule of 90 would not be prudent, as it would allow retirement at 57 with 35 years. No savings.

b. Establish FAS over at least 5 years.

c. Reduced COLA to 2%

d. Retirement formula must be changed to straight 2.2 %

e. Additional revenues must come from teachers not boards of education. Additional funds should be split between healthcare and pension.

2. It is extremely unfortunate that the Board has failed to put in place an investment bonus program that is appropriate. Now the Legislature is involved.

3. Bonus program must be modernized. No bonuses awarded if the annual goal for the pension fund is not met, currently 8%. Then a very simplified formula should be devised if the goal is exceeded, again currently 8%.

4. You must review staff benefits, and provide the same healthcare coverages that are going to be imposed on the retirees, higher deductibles, increased premiums, etc.

5. When and if the pension fund is healthy, the 13th check program should be reinstituted to provide a boost to retirees.

6. If there is one area that should be protected, in my opinion, it is those retirees whose benefit might be below the government’s Self Sufficient income level, which I understand to be about $20,000. I also understand there might be approximately 769 of such retirees. For those, I propose they be protected from any further increases in their healthcare premium costs.

7. If at all possible, I would propose consideration be given to making Medical Spending Accounts available to retirees. This tax protections would certainly assist many in cushioning their out of pocket medical expenses.

8. Most all of these drastic changes must be approved by the Legislature. We know they do not move quickly. Consequently, you must move quickly and without delay, and recommend changes the Legislature will promptly support.

XC: State Legislators

Letter from Sondra Stratton to three Columbus "Honorables"

From Sondra Stratton [contact info included in original]
May 18, 2009

Dear Honorable Bubp, Neihaus, and Strickland; I am writing to you in regard to some needed legislation for the state pensions funds, particularly STRS. In the past 6-7 years many retirees have been fighting what seems like an endless and battle over the ridiculous spending of the OUR retirement money !!!!

We need regulations to control the out of control BONUSES that have been given and are continuing to be given to employees even though they lost a large part of our money. NO EMPLOYEE should receive anything other than their huge salary when money has been lost! AND, they should receive much less than employees have been receiving. It is time for those employed at STRS to have their era of ENTITLEMENT ended!! Teachers are people who could have gone into industry or other means that would have garnered they higher wages instead of sacrificing to teach the children of Ohio. Most recently, a raise was given to the executive director of STRS in the amount of $39,500. Almost $40,000 for ONE year. That is almost what I made at the END of my 30-31 year career!!!!!!!!!!!!!!! This is so ridiculous!!!!!!!!!!!!!! This kind of raise and millions of dollars in bonuses MUST STOP!!!!!!!!!!!!!!!!!!!!!!!

We are now hearing that we might lose part of our 3% COLA (3% of what we each made the day we retired just gets us further and further behind each year…….you see it does NOT begin to keep up with the cost of living!) and it has been discussed that should be not buy generics ( some of us have problems with fillers in generics and can not take them!) we could be responsible for up to $300 for the cost of EACH medication!!!!! Do you have any idea what this will do to retirees???? All the fat cats in Columbus are living high on the hog at our expense!!!!!!!!!!! The United States pays for the whole world’s development and testing of drugs and we can not even buy them!!!!!!!!!!!! We are being forced to take older less effective drugs!!!!!!!!!!!!!!!!!!

We need you to legislate the bonus and yes, also the raises for STRS employees!!!!! We have continuously been told “We need those employees, they are the best, and they will leave.” Well, with all the people out of work., as far as I am concerned, they should not let the door hit them where the good Lord split them because there are people out of work, who would be happy to work at STRS for less, and would do just as good a job, probably better, as those who have taken advantage of teacher retirees all these years. Here’s one who does not feel the present employees have done such a darned good job over the time I have been retired (9 years).

PLEASE do something about this ASAP!!!!!!!!!!!! It is long overdue. Retirees can work and fight and fight and get no where. When we lost John Lazares and soon, Dennis Leone, our allies are gone. OEA has no concern for retirees. As we were told early on, we don’t pay dues any more and we got what we paid for. YEAH!!!! RIGHT! If I knew then what I know now about OEA, here is one person who would have saved her dues money for her retirement!!!!!!!!!!

Another thing that rubs salt in the wounds of retirees is the STRS employees getting Health care insurance far superior to retirees….and I believe it is free or nearly so. JUST NOT RIGHT!!!!!!!!!!!!! STRS employees should be a part of the retirees’ HC insurance program, getting the exact same benefits at the exact same cost!!! They should also be paying their retirement money into STRS not into another pension system for that gives them absolutely NO INCENTIVE TO WORK FOR STRS!!!!!

Other states have recognized these problems and have put legislation into effect to protect both the pension system and retirees. PLEASE DO THIS FOR STRS RETIREES ASAP as our pension is in grave danger!!!!!!!!!!!!

I would like to hear from you and to learn what you are doing about this situation.
A constituent,
Sondra K. Stratton

NOTE TO GOVERNOR STRICKLAND:

I was one Republican who was so sick of Bob Taft that I was happy to see you run for this office. I have known of you for many years dating back to the time when Darlene McCall Herrell helped with your campaign early in your political career. I thought you would do a great job for Ohio. However, for me, you have been a great disappointment. I do not think you have always acted in Ohio’s best interest (or that of the nation for that matter) and with you backing Jennifer Brunner in not having the computers ready to clean out those who have filed to vote improperly, I am sorry to say that as of the present, I do not think I will be able to vote for you in the future. I would think that anyone who would run for office would want to win fair and square. I would. I take my voting rights and responsibilities very seriously and do not take voter fraud lightly or anyone who commits or acts in any way to keep from sorting out those culprits !

Take care!
Sondra