Friday, July 17, 2009

STRS COLA STATISTIC


From Mario Iacone, July 17, 2009

Tim Myers, Chairman of the STRS Board recently stated

that only 79 out of 109 pension systems give COLAs (cost of living adjustment), that most COLAs were in the 1.5 - 2% range, and that the 3% COLA was virtually unheard of.

There are NOT 109 U.S. Teacher Pension Systems.

At most there are 50.

How many of the Teacher Retirement Systems DO NOT PAY COLA?

TO BE FAIR, STRS Ohio should only be COMPARED TO OTHER TEACHER RETIREMENT SYSTEMS

What are those comparisons?

Ross County RTA President Don Gatchell to Kevin Boyce: Please appoint Dennis Leone

From Don Gatchell, July 17, 2009
Subject: Appointment to the Ohio STRS executive Board
The Honorable Kevin Boyce
Treasurer, State of Ohio
Dear Treasurer Boyce:
I respectfully request that you consider appointing Dr. Dennis Leone as your representative to the Ohio STRS Executive Board. He has served as a member of the Board ( his term ends August 31), as a superintendent of schools and as a college professor. Dr. Leone's knowledge of the budgeting process is outstanding. He believes in fiscal discipline by STRS and is also well-versed in the strategy of investments by public entities. Finally, he has the trust of retired educators that he will act in the best interest of retirees, STRS and the state of Ohio.
Sincerely,
Donald Gatchell
President
Ross County Retired Teachers Association
Chillicothe OH

From an OSBA member: 'Hemming and hawing and no action'

Date: July 13, 2009
Re: John Curry's letter [posted 7/9/09] "Ann...it's time to step up to the plate"
I think your letter is wonderful. I go to the OSBA conferences in November and have spoken to Ann and her associates many times. Never saw so much hemming and hawing and no action. They just smile and talk about they only have time for legislative issues. I joined OSBA as a life member so will probably keep my membership since I am a life member, but to tell the truth I certainly would not encourage anyone else joining. They are something else.

Charles Varney to Kevin Boyce: Please appoint Dennis Leone

From Charles Varney, July 16, 2009
Subject: STRS Appointee
Mr Kevin Boyce,
Treasurer State of Ohio
Mr. Boyce,
I am a retired educator, having served the children and youth of Ohio for more than 45 years. Thank you for your time in reading this letter.
I am joining those who are calling for you to enter the name of Dennis Leone as your appointee to the Board of Ohio State Teachers Retirement System and my reasons are stated below. Please afford me the courtesy of reading through them.
• Dennis is a retiree who has served the children of Ohio as a respected teacher and administrator for many years. His integrity is (in the opinion of hundreds of us) of the highest caliber and he is one who will stick by his word once he gives it. He is tough minded and persevering in the face of obstacles.
• Dennis is something of a "gad-fly", which in our opinions is a necessary part of a Board such as this. He not only asks the tough questions, but is ready to be tenacious in his search for the true "answer" in the face of opposition that is at times unreasonable and personal. He has for the past four years been the Board's "voice in the wilderness" calling out for reason and transparency of action against entrenched policies of contracting and abuse of power displayed so blatantly in former administrations.
• He worked tirelessly to move the Board to a more responsible and responsive plateau of action in the face of outright personal attack and opposition. An example would be his fight to have the opportunity to read and understand contracts to be voted on by the Board before the vote was called for. Unreasonable? I think not and I'm sure you as a fiscal officer would agree, especially in terms of the size of those contracts. His recent work regarding the payment of PBI's is another example. His calls to suspend such payments began in mid-2008 with the administration and Board members heaping ridicule on his motions. The Board did, however, in May of 2009, finally admit the correctness of the motions and moved to approved what had been suggested by Dr. Leone a year earlier.
Mr. Boyce, can an agency such as this one afford to be without such a "gad-fly" as Dennis Leone? We are talking of the responsible handling of billions of dollars here, sir, and there has to be a place on this Board for the "loyal opposition", a role that Dr. Leone would be able to fill admirably. Please name Dr. Dennis Leone your appointee to the Ohio STRS Board.
Thank you for taking the time to read this and I wish you well.
Charles P. Varney,
Immediate Past President
Scioto County Retired Teachers Association

An STRS FLASHBACK- 6 YEARS AGO - Mirror, mirror on the wall and who was Beth Foley? By the way...pour me a double, Damon! Also an unanswered question

From John Curry, July 17, 2009
Note from John...I just happened to be cleaning out some odds and ends and to my surprise, I found an oldie and goodie that was not on my master STRS saved articles CD! Glad I did.....you can read about a "professional courtesy" and you can check out this $4,100 dinner (at your expense)!
"Foley was assured it wasn’t extravagant, but wasn’t told of the cost. Case said Foley questioned whether she should go because of the issues raised about STRS spending. She went as a “professional courtesy” after Sidaway personally invited her."
"Damon Asbury, deputy director for administration, said retirement system executives personally covered the $110 tab for the wine served with the meal and an open bar, with more than 20 bottles of whiskey, vodka and other spirits, proceeding the dinner. They also paid for a $129 wall mirror as a gift for Sidaway, and board members split the cost of a $310 bracelet with an STRS charm attached to it."
STRS board wines, dines
Canton Repository, June 25, 2003
By PAUL E. KOSTYU
Copley Columbus Bureau chief
COLUMBUS — $4,100.
That was the food tab for a three-hour, invitation-only party Thursday evening at the State Teachers Retirement System for Hazel A. Sidaway, a Canton teacher who is leaving the pension board.
Twelve hours later and just feet away from where the party was held on the sixth floor of the pension board’s headquarters, Chairwoman Deborah Scott of Cincinnati publicly chastised STRS Executive Director Herbert L. Dyer for excessive spending, particularly on staff bonuses and travel.
Scott attended the buffet dinner with 60 retirement system officials, former and current board members and staff, their spouses and guests. They dined on beef, fish, potatoes, salad and dessert prepared by Michael Jones Personal Chef Services, a Columbus caterer.
The retirement system is paying for the meal.
“That’s outrageous. It’s unbelievable,” said Rep. Michelle G. Schneider, R-Cincinnati. “They have built their own little fiefdom and it’s out of control. That aggravates me.”
“That is entirely too much money,” agreed Sen. Kirk Schuring, R-Jackson Township, when he heard about the cost of the dinner.
Damon Asbury, deputy director for administration, said retirement system executives personally covered the $110 tab for the wine served with the meal and an open bar, with more than 20 bottles of whiskey, vodka and other spirits, proceeding the dinner. They also paid for a $129 wall mirror as a gift for Sidaway, and board members split the cost of a $310 bracelet with an STRS charm attached to it.
Sidaway attended her last retirement system meeting last week after 17 years on the board. She’ll retire Monday from her Canton City Schools teaching position; that makes her ineligible continue to serve as a teacher representative on the STRS board.
Schuring and other lawmakers, teachers and retirees have been calling for Dyer’s resignation ever since news reports revealed millions of dollars have been spent on bonuses, artwork, travel and subsidized child care.
Sidaway spent the most on travel of all board members, $54,217 in the last three years.
The retirement party is “another reflection of the posh, opulent behavior of the board,” Schuring said. “It’s a culture created by the director. It’s a culture so deeply embedded that they’re oblivious to the real world.”
Representatives of Ohio Auditor Betty Montgomery and State Superintendent of Schools Susan Tave Zelman, who are members of the STRS board, attended the party and then criticized Dyer on Friday at the board meeting.
“The department thought it was proper to attend the retirement event for a fellow board member,” said J.C. Benton, a spokesman for the Department of Education. “But Steve (Puckett) stands by his comments to the board (on Friday).”
Joe Case, a spokesman for Montgomery, said the dinner was not something the board voted on. He said Mary Beth Foley, Montgomery’s representative, told STRS staff that she would not attend if the dinner was “champagne and lobster.”
Foley was assured it wasn’t extravagant, but wasn’t told of the cost. Case said Foley questioned whether she should go because of the issues raised about STRS spending. She went as a “professional courtesy” after Sidaway personally invited her.
Case said Foley’s attendance did not change Montgomery’s view that “everything needs to be subject to close scrutiny. The administration and the board need to be looking at expenses like this. They need to be sensitive in these hard economic times on where pensioners’ money is spent.”
Attempts to reach Scott for comment were unsuccessful.
Now, for Hazel....this comes from the Ohio Ethics commission website and also begs another question....just who were the "investment advisors?" Isn't there such a thing called "complicity?"
Ohio Ethics Commission Press Release
May 12, 2006

http://www.ethics.ohio.gov/PressReleases/05122006.html
FORMER STRS BOARD MEMBER SENTENCED FOR ETHICS VIOLATIONS
On May 11, 2006, Franklin County Municipal Court Judge Carrie E. Glaeden sentenced former State Teachers Retirement System (STRS) Board Member Hazel Sidaway to two years probation and 200 hours of community service on convictions for two conflict of interest charges for accepting $670 worth of tickets to sporting and entertainment events from investment advisors to STRS.
The criminal conflict of interest charges were filed by the Columbus City Prosecutor's Office after an investigation and referral by the Ethics Commission. On April 14, 2006, a Franklin County Municipal Court jury deliberated and returned guilty verdicts against Sidaway on charges that she unlawfully accepted four tickets worth $120 to a Cleveland Indians baseball game in 2001 from Salomon Smith Barney and two Broadway musical tickets worth $550 to a New York City performance of Hairspray in 2003 from Frank Russell Investment Company. Both investment firms provided investment services to STRS at the time they paid for entertainment events for Sidaway and various members of her family. (The jury had acquitted Sidaway on a remaining conflict of interest charge and three related financial disclosure falsification charges.)
For her unlawful acceptance of the Cleveland Indians tickets, Judge Glaeden sentenced Sidaway to 180 days in jail, suspended on the conditions that Sidaway pay a $120 fine and costs, and reimburse the Ethics Commission $5,381 towards its costs of investigation. For her unlawful acceptance of the Hairpray tickets, Judge Glaeden sentenced Sidaway to 180 days in jail, which the Judge suspended, placing Sidaway on probation, requiring she pay a $550 fine and costs, and perform 200 hours of community service. 100 hours of the community service is to be performed at the Canton City Schools and the other 100 hours is to be served at a Canton-area senior citizen center or retirement home. (Sidaway resides in Canton, Ohio and is a former teacher in the Canton City School District.)
Sidaway apologized for the ethics violations, but asserted that except for the "two instances," she had attempted to best represent teachers in her 17 years on the STRS Board, and was unaware of ethics restrictions. Judge Glaeden questioned Sidaway's professed lack of awareness of the Ethics Law, citing several individual and widely publicized ethics convictions since 1997. Judge Glaeden accepted Sidaway's apology, but challenged her assertion that her failure to best represent the interests of STRS members was limited to the two ethics violations for which she was convicted. Based upon trial testimony that included Sidaway's, the Judge urged her to reconsider her statements, noting extensive travel funded by contributions made to the retirement system, and meals and entertainment, not only for Sidaway, but her family members, and questioning the underlying necessity of the extent of her travel in what the Judge said simply appeared to be "junkets." The Judge further indicated that the idea of community service in a senior center or nursing home was actually suggested by retired teachers in letters to the Judge regarding sentencing.
"The Ethics Commission cares that protections under the Ethics Law against personal enrichment, or some misguided notion of entitlement, for service to the public, are enforced," said David E. Freel, Executive Director of the Ethics Commission. "That is exactly what Judge Glaeden did here."
The Ohio Ethics Commission is an independent state agency that applies and administers the Ethics Law for state and local public officials and employees outside of the General Assembly and judiciary. It has the power to investigate allegations of unethical conduct of public servants. The Commission was created over 30 years ago upon the enactment of the Ohio Ethics Law in 1973.

STRS - STOCK MARKET DOWNTURNS


From Mario Iacone, July 17, 2009

It is obvious that the latest stock market downturn has been the worst in a long time. However, significant market downturns are always with us.

Without proactive Risk Management and True Diversification, all one does is ride up and slide down and would have to hope that he is lucky enough to be up when he retires.

It is even worse for a pension system because they are never going to cash out. Their only option when they are down is cut pensions and increase contributions.

1974 – DOW falls 45% (1051 to 577)

1982 – DOW falls 25% (1024 to 776)

1987 – DOW falls 36% (2722 to 1738)

1998 – DOW falls 20% (9338 to 7539)

2001 – DOW falls 28% (11,338 to 8236)

2002 – DOW falls 29% (10,635 to 7286)

2009 – DOW falls 54% (14,164 to 6547)

STRS members have to work to influence STRS to implement asset allocation which minimizes the effects of stock market downturns.

Thursday, July 16, 2009

ORSC gives "thumbs down" on HB 177 and also gives a lame excuse for doing such!

From John Curry, July 16, 2009

"Based on the precedent this bill would set, the legislature could find itself being asked to set the actuarial assumptions."
ORSC
Oh really? The legislature finds itself asked almost daily (when in session) for dozens of changes to the Ohio Revised Code and doesn't use the excuse of setting precedents, do they? If they don't like the bill...they just put it on the shelf, don't they? Methinks HB 177 will collect lots of dust, don't you? Who should one complain to about this position paper? Well, here they are - the legislators on the ORSC who agreed to this position paper below. You might want to remind them that some of them will be up for election next year and...you have a long memory.
John
P.S. I am of the understanding that Sen. Faber disagreed with this position paper so...you might want to cut him some slack.
John
Legislative memers of the Ohio Retirement Study Council:
Senator Keith Faber
Senate Building Room #138, First Floor
Columbus, Ohio 43215
Telephone: 614/466-7584
Email: SD12@senate.state.oh.us
Senator Sue Morano
Senate Building Room #056, Ground Floor
Columbus, Ohio 43215
Telephone: 614/644-7613
Email: senatormorano@maild.sen.state.oh.us
Senator Kirk Schuring, Vice-Chair, ORSC
Senate Building Room #137, First Floor
Columbus, Ohio 43215
Telephone: 614/466-0626
Email: SD29@senate.state.oh.us
Representative Todd Book, Chairman, ORSC
(District: 89; Term: 4th; Term Limit: Not eligible to run for another two-year term)
77 S. High St
11th Floor
Columbus, OH 43215-6111
Phone: (614) 466-2124
Fax: (614) 719-6989
Email: district89@ohr.state.oh.us
Representative Dan Dodd
(District: 91; Term: 2nd; Term Limit: Eligible to run for another two-year term)
77 S. High St
11th Floor
Columbus, OH 43215-6111
Phone: (614) 466-2500
Fax: (614) 719-6991
Email: district91@ohr.state.oh.us
Representative Lynn Wachtmann
(District: 75; Term: 2nd; Term Limit: Eligible to run for another two-year term)
77 S. High St
10th Floor
Columbus, OH 43215-6111
Phone: (614) 466-3760
Fax: (614) 719-3975
Email: district75@ohr.state.oh.us

Aristotle L. Hutras,
Executive Director
The Ohio Retirement Study Council
88 East Broad Street, Suite 1175
Columbus, OH 43215-3506
Phone: (614)228-1346
Fax: (614)228-0118
Website: www.orsc.org
OR
SC
Analysis
H.B. 177 – Reps. Huffman and Bubp
(As Introduced)
July 8, 2009
ORSC Position
Anne Erkman - Contact Person
(614)228-1346
H.B. 177 – Reps. Huffman and Bubp
July 8, 2009
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H.B. 177 would prohibit the State Teachers Retirement System (STRS) from awarding performance-based bonuses to investment officers in years in which the system experiences an overall negative return from its investments and declares an emergency. Current law gives the board the authority to establish the compensation for all personnel. Staff Comments - The bill would prohibit STRS from awarding performance-based bonuses to investment personnel in years in which the system experiences an overall negative return from its investments. “Investment officer” is defined as a person employed by the STRS board for purposes of engaging in securities transactions or making any other investment of funds on behalf of STRS. The bill would apply only to contracts and employment agreements entered into, amended, or renewed on or after the effective date of the bill. The legislature established all five statewide retirement systems and vested each board with the general administration and the management of the system. (R.C. §§145.04, 742.03,
3307.04, 3309.04, 5505.04.) The board’s duties include administering the statutory pension benefits and discretionary healthcare benefits. Another one of the board’s duties is to approve the compensation for the system’s employees (R.C. §§145.09, 742.10, 3307.11, 3309.14,
5505.07). In 2004, the legislature passed S.B. 133, which added the additional requirement that each board must establish a policy regarding bonuses (R.C. §§145.092(B), 742.102(B)
3307.041(B), 3309.041(B), 5505.062(B)). STRS manages approximately 80% of its investments internally, whereas PERS manages approximately 60% of its investments internally. SERS’ assets are 100% externally managed, however, they have a small number of investment staff working at SERS. All three systems provide performance-based incentive plans for their investment staff in order to attract and retain qualified personnel, however, H.B. 177 applies only to STRS. Investment bonus incentives are common in both the public and private investment sectors. They are used to attract and retain the necessary investment expertise to manage prudently investment assets. According to an article appearing in the January 8, 2007 issue of Pensions & Investments, they are even more widespread among private investment firms than public pension funds and the level of bonus incentives at public pension funds are significantly lower than those at private investment firms. McLagan Partners, a leading investment compensation consultant for both public and private investment management entities, has conducted numerous surveys that substantiate the findings above. According to CEM Benchmarking, a global benchmarking company, the use of internal management versus external management saved more than $100 million for STRS and over $30 million for PERS in 2007, even after the payment of bonus incentives. The ORSC investment consultant, Evaluation Associates, has concurred that internal management saves the systems money. At its January 2009, meeting the STRS board voted 9-1 to suspend its Performance-Based Incentive (PBI) program for eligible employees as of February 1, 2009. This plan called for a H.B. 177 – Reps. Huffman and Bubp July 8, 2009
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20% reduction of an eligible employee’s bonus if the total STRS investment fund does not earn a positive absolute return. Any PBIs that had been earned prior to the discontinuation of the plan will be calculated based on the performance results for the first seven months of the fiscal year (July 1, 2008 – January 31, 2009) and the award will be limited to 7/12 of these results if the board approves the payments. The board voted 8-0 at the May 2009 board meeting to implement a new PBI program for fiscal year 2010. The new program prohibits the payment of PBIs if the total STRS investment fund has a negative absolute return for the fiscal year. If the total fund earns a positive absolute return but the total market value of investment assets is less than $65 billion by the end of the fiscal year (June 30, 2010), incentive awards will be reduced by 3% for every $1 billion of the shortfall from $65 billion. Further, the board adopted a motion stating that in future years, when the total investment fund returns are negative, no Investment Department staff will receive PBIs. This will be effective in fiscal year 2011 going forward. This bill would diminish the authority of the STRS board to manage the system and instead give some of that authority to the legislature. Traditionally, the legislature has provided oversight of all five retirement systems but has declined to involve itself with the day-to-day management of the systems. There are a number of instances in the Revised Code that require the STRS board to adopt specific policies, but the details of the policies are left to the board. As noted above, the bonus policy is one example. Additional examples include investment policies (R.C. §3307.04), policies for the operation of the system (R.C. §3307.04), travel policies (R.C. §3307.041(A)), and ethics policies (R.C. §3307.042). Although the boards have the authority to manage the retirement systems, they are subject to oversight from the legislature. The legislature currently provides oversight in the form of the Ohio Retirement Study Council. The Council has representatives from both houses of the legislature (three representatives and three senators) and the Governor (three governor’s appointees). The Ohio Revised Code mandates that the Council shall perform the following statutory duties:
(1) Make an impartial review from time to time of all laws governing the public retirement systems and makes recommendations to the legislature on any changes the ORSC finds desirable with respect to benefits, sound financing of benefit costs, and prudent investment of funds [R.C. §171.04(A)];
(2) Report to the governor and legislature on its evaluation and recommendations with respect to the operations of the public retirement systems and their funds [R.C. §171.04(B)];
(3) Study all proposed changes to the public retirement laws and reports to the legislature on their probable costs, actuarial implications and desirability as a matter of sound public policy [R.C. §171.04(C)];
(4) Review semiannually the policies, objectives, and criteria of the systems’ investment programs [R.C. §171.04(D)];
(5) Have prepared, at least once every ten years, an independent actuarial review of the annual actuarial valuations and quinquennial actuarial investigations prepared by each system [R.C. §171.04(E)];
(6) Have conducted a fiduciary performance audit of each system at least once every ten years [R.C. §171.04(F)]; H.B. 177 – Reps. Huffman and Bubp July 8, 2009
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(7) Provide each Council member with copies of all proposed rules submitted by the retirement systems and submit any recommendations to the Joint Committee on Agency Rule Review [R.C. §171.04(G)];
(8) Review the police and fire contribution rates and makes recommendations to the legislature that it finds necessary for the proper financing of OP&F benefits [R.C. §742.311]; and
(9) Prepare an independent actuarial study every three years on the required employer supplemental contribution to be made on behalf of academic and administrative employees of higher education electing an alternative retirement plan [R.C. §171.07]. Additionally, the retirement systems are required by statute to submit various documents to the ORSC to assist the Council in its oversight duties. The law provides legislators with an opportunity to review these items and ask for any additional information. The following is a listing of reports the retirement systems are required to submit to the ORSC:
• Annual Actuarial Valuation
• Annual Report on Discretionary Health Care
• Quinquennial Evaluation
• Audit Committee Report
• Annual Report on Disability Experience
• 30-Year Funding Period in any year the system's funding period exceeds thirty years
• Actuarial Analysis of Legislation
• Investment Managers and Brokers
• Budgets (includes personnel, bonuses)
• Rules
• Deferred Retirement Option Plan Neutrality Report (OP&F, HPRS)
The rationale for providing these reports to the legislature and for the Council’s statutory duties is to provide the legislature with the tools it needs to adequately oversee the pension funds in conjunction with the boards’ statutory authority to manage them. It is important to note that the Council does not approve any of these reports because that is the duty of each system’s board. The STRS board is comprised of 5 active members elected by the active membership and disability retirees; 2 retiree members elected by service retirees; 1 investment expert appointed by the Governor; 1 investment expert appointed jointly by the Speaker of the House and Senate President; 1 Treasurer of State investment designee; and 1 Superintendent of Public Instruction designee. The Board’s composition allows the opinions of the various stakeholders to be heard during the democratic voting process the board uses to make decisions. If the legislature chooses to involve itself in the day-to-day management of the funds by limiting compensation in the manner proposed by H.B. 177, this would establish a precedent for overriding the board’s authority on other issues. For example, the boards of each system have made unpopular changes to the health care benefits the systems offer, as they are authorized to do by law. In 2007, the systems paid over $2.1 billion combined for health care. If the legislature involves itself in matters that traditionally have been part of the board’s administrative and/or managerial responsibilities, members dissatisfied with the board’s H.B. 177 – Reps. Huffman and Bubp July 8, 2009
4
decision to increase health care premiums may expect the legislature to intervene by enacting a law to prohibit any changes to health care. Another example is the actuarial assumptions used to determine the actuarial soundness of the system. Currently, the Board relies on its actuary to develop actuarial assumptions, which the board approves. Based on the precedent this bill would set, the legislature could find itself being asked to set the actuarial assumptions. Fiscal Impact – This bill would have no actuarial impact on the system. ORSC Position – The Ohio Retirement Study Council voted at the July 8, 2009 ORSC meeting to recommend that the 128th General Assembly disapprove H.B. 177.

David Balto: Another Dennis Leone (for consumers)?

From John Curry, July 16, 2009
Subject: David Balto and 20 pages....if you ever read anything about consumer protection and healthcare, PLEASE read this......
..testimony to the U.S. Senate by a former Federal Trade Commission's attorney re. healthcare insurance companies and pharmacy benefits managers. It WILL open your eyes. It is a long read but it is earthshaking.
We retirees owe it to ourselves to become informed of the practices (many of which are not to our benefit) that affect our lives and, in this case...our wallets. I'll end this by saying that David Balto is the Dennis Leone of the healthcare consumer protection movement....if you like Dennis, you'll like David!
John

Wednesday, July 15, 2009

New kid on the blog: Ray DeColibus (Welcome, Ray!!)

From Rich DeColibus, July 15, 2009
Subject: Blogging
"I marvel at the whole STRS management. How a pension fund could put most of its investments in risky assets like derivatives, emerging market stocks, real estate, hedge funds, private equity etc is nothing short of gross mismanagement. The board should fire them all and with a half dozen people invest in safe stuff like AAA bonds, Treasuries and S&P500 stocks."
~ Ray DeColibus
Hi Kathie,
If you're bored (and I know you're not, especially with Lakeside coming up), here's a potential bloggable. My brother (Ray) has zero connection to STRS; he's a retired Ph.D. chemist from Dow Company, but he's also an astute financial observer. Your readers might like to see how someone who has nothing to gain or lose from STRS sees it. He wrote:
"I marvel at the whole STRS management. How a pension fund could put most of its investments in risky assets like derivatives, emerging market stocks, real estate, hedge funds, private equity etc is nothing short of gross mismanagement. The board should fire them all and with a half dozen people invest in safe stuff like AAA bonds, Treasuries and S&P500 stocks.
The overall yield of a portfolio like that would be perhaps 6 - 10%/yr and only in the worst of situations would it lose money - perhaps 5% in the meltdown of 2008. The fact STRS probably lost 30 - 40% of its worth shows a distinct lack of knowledge of basic risk analysis which to my mind shows gross incompetence.
Does STRS put out a list of its investments on any sort of timely basis? I would guess they were disciples of the Yale/Harvard system of endowment investing where they have invested in all sorts of private equity, real estate, hedge funds etc which promise big returns in good times but which get crushed in a market collapse like we just had. To my mind not the type of stuff you should be investing people's retirement money in.
No doubt compensation was tied to returns though and big returns bring big bonuses. The downside for the management is low because if they lose big it's due to "bad markets" not bad investment decisions and like AIG maybe they'll get their bonuses anyway. Of course, it's not management's fault completely because the board had to know what was going on and didn't do anything to stop it so they have to share the blame for the fiasco."
He also added later:
"The people running STRS have basically fallen for a fad that no doubt hit many other pension and endowment systems. The pure and simple fact is that the higher the returns you make the higher the risk you take. You can get away with it for a while sometimes and the way the compensation for most of these investment managers is set up there is great incentive to take risk because the upside results in big bucks for them while the downside doesn't really hurt them that much.
Hence all the risky stuff like private equity, hedge funds, commodity trading, emerging market stocks, forex etc that is done with investors money. If it goes up you get a great big payday and if it tanks well too bad for the investor. In a way it's not all that bad for people in their 20s and 30s because with luck they can build a capital base and become more conservative with their money as they get older.
But for retirees (and pension funds) to risk your capital is a very bad idea because there is no way to build it back. You should ask what STRS's unfunded liabilities are and it will give you a feeling for how bad their losses really are. Make sure they tell you the rate of return they are implying when they give you the number - anything more than maybe 6 or 7% seems unrealistic (at least to me anyway).
If they have big unfunded liabilities they will have to do something to cover them - cut benefits, raise inflows from the state or teachers. This is good info to have when they go to cut your health care or COLA."

July report from STRS

From STRS, July 15, 2009

Although the State Teachers Retirement Board does not meet in July, we are issuing an update this month to provide current information on several important items to our members.

OPERS CONTRIBUTION REDUCTION PROPOSED TO HELP STATE BUDGET
On June 19, 2009, Gov. Ted Strickland proposed that the state's contribution to public employees' pensions be reduced from 14 percent to 8 percent for two years, with a payback to the Ohio Public Employees Retirement System (OPERS) to occur over the subsequent 10 years. This proposal was made as a way to help balance the state's budget. In voicing its strong opposition to the proposal, OPERS noted that reducing contributions would put OPERS outside the 30-year period required by law to fund pensions and would reduce the solvency of the fund that pays for all retiree health care to 10 years.

While STRS Ohio and the other public pension systems in the state were not included in the proposal, the executive directors of STRS Ohio, School Employees Retirement System (SERS) and the Highway Patrol Retirement System sent a joint letter to the governor and the members of the Ohio General Assembly also voicing their opposition. In it, they noted, "... if this funding reduction proposal goes forward, other public employers facing fiscal distress will want the same funding reduction. We believe this is short-sighted because if the public retirement systems cannot provide basic retirement, access to health care coverage, and safety net benefits for public employees, the costs to other state and federal programs will increase."

The proposal was eventually rejected by lawmakers and was not part of the state's final budget. Going forward, all the systems will need to be vigilant to ensure such proposals do not surface again.

SPECIAL HEALTH CARE PROGRAM NEWS ON ITS WAY TO PROGRAM PARTICIPANTS
Current enrollees in STRS Ohio's Health Care Program should watch their mailboxes for additional information about the 2010 health care program changes. A four-page newsletter is on its way that will provide details about enrollment options (including the new Aetna Medicare Plan), the new single prescription drug plan for Aetna, Medical Mutual and Paramount Health Care Plans, premiums and upcoming fall meetings around the state. This same information is already posted on the STRS Ohio Web site (http://www.strsoh.org/whatsnew/news14.html).

In late October, all current enrollees will also receive personalized information that outlines their 2010 plan options and monthly premiums in preparation for the fall open-enrollment period, which extends from Nov. 1-24, 2009.

LONG-TERM CONTINGENCY PLANNING WORK CONTINUES
In preparation for the August Retirement Board meeting, STRS Ohio staff is continuing to work on various scenarios designed to restore the pension fund to a 30-year funding period in a reasonable amount of time, while also allowing additional employer contributions to go to the Health Care Stabilization Fund and extend the life of the STRS Ohio Health Care Program. As noted in previous communications, STRS Ohio, along with pension plans around the country, has been severely impacted by the historic downturn in the markets and the accompanying recession. But before the economic downturn, STRS Ohio was already being impacted by other economic and demographic factors. For example, the life expectancy of STRS Ohio members has increased over time, but age and service requirements have not changed since 1976, resulting in pension benefits being paid for longer periods of time. Additionally, there has been steady growth in the benefit formula (including the enhanced 35-year benefi
t) over the years. Finally, improvements to already granted retiree benefits, such as ad hoc increases to various groups of retirees in 1984, 1988, 1990, 1997 and 1999, as well as supplemental lump-sum payments (often called 13th checks) from 1980 through 2000, have increased the system's liabilities over time.

Looking long term, the reduced level of investment assets, coupled with future expected investment earnings and current contributions levels, will result in a funding shortfall. Unless changes are made, STRS Ohio will eventually be unable to pay members' projected benefits.

The Ohio Retirement Study Council (ORSC), which is the legislative oversight body for Ohio's five public pension systems, directed each system in May to present board-approved plans for achieving or maintaining a 30-year funding period at the ORSC's Sept. 9, 2009, meeting.

STRS Ohio will continue to use its newsletters, Web site and e-mail news service to share the results of the board's and the ORSC's discussions in the coming weeks. In addition, once future changes are more defined, STRS Ohio will be holding meetings around the state to provide additional information to active and retired educators.

A review of the member comments received at STRS Ohio reveal a few misperceptions about the work being conducted by the Retirement Board and staff. We would like to address these below.

PERCEPTION: The Retirement Board is looking at reducing my pension benefit.
FACT: The Retirement Board is not looking at changing current pension payments.

PERCEPTION: The only option for change being considered by the board is the cost-of-living adjustment (COLA).
FACT: Although reducing the COLA is the most effective means for preserving the pension fund because it impacts both current and future retirees, the board has been looking at an extensive list of potential options since beginning its discussions in March. Other changes under consideration that would impact current and future teachers include:

- Increasing contributions from the current 10% from active teachers and/or 14% from employers;

- Instituting a minimum retirement age (none currently exists);

- Increasing the number of years used to calculate final average salary to five from three; and

- Changing the formula for calculating pensions.

In its discussions, the board has also been taking into account the impact of delaying implementation of some changes, as well as the possibility of phasing-in plan design and/or contribution increases. However, the longer it takes for changes to be implemented, the more severe they will need to be to have the same monetary impact.

PERCEPTION: The COLA is calculated on a member's final average salary at retirement. For example, if a member's final average salary is $50,000 a year, then each year in retirement, the member would receive 3% of the $50,000 or $1,500 per year. The COLA is never compounded.
FACT: The COLA is not calculated on the final average salary, but rather the member's final retirement benefit, which is based on the member's age at retirement, total years of service credit, final average salary and chosen plan of payment. It is true that the annual 3% COLA is calculated on the original benefit and is not compounded over the previous year.

PERCEPTION: A change to the COLA will affect past COLAs.
FACT: Any change to the COLA would not impact past COLAs that have already been added to a benefit.

PERCEPTION: Changing the COLA only affects current retirees.
FACT: As noted previously, changing the COLA would affect all STRS Ohio members - future, current and retired educators. But it actually has a greater financial impact on future retirees than current retirees because current retirees have already been receiving an annual COLA throughout retirement. Those increases would not be taken away. A change in the COLA would only affect future COLA payments. For members who have yet to retire, they will be financially impacted by a change in the COLA throughout their entire retirement.

PERCEPTION: Eliminating the $1,000 lump-sum death benefit is being considered by the board.
FACT: The board has not yet discussed the $1,000 lump-sum death benefit and whether to make any changes. Eliminating the $1,000 lump-sum death benefit was included on a list of possible changes that the staff of the ORSC asked all five Ohio public pension plans to consider. The ORSC list includes increases in member and employer contributions; increasing age and service requirements; changing the benefit formula, as well as eliminating the 35-year incentive that applies to STRS Ohio; changing final average salary to five years from three; eliminating the lump-sum death benefit; looking at either eliminating, delaying or reducing the cost-of-living adjustment; and increasing the number of days to earn one year of service credit to 180 from 120.

PERCEPTION: There is no need to make drastic changes; the stock market will eventually improve.
FACT: One of the first things the board looked at when it began its long-term contingency planning was the investment return assumption. This was part of an Asset Allocation Study the board recently conducted to evaluate its current allocations to different asset classes and the accompanying expected risk and return. In the past, STRS Ohio has assumed an 8% return on its investments over rolling 20-year periods. A higher investment return would result in a reduction in unfunded liabilities. The board worked with its investment consultant and examined future investment return projections. The Asset Allocation Study confirmed its 8% long-term assumption is appropriate going forward, but it cannot be increased. In short, STRS Ohio cannot "invest" its way out of the funding challenge it faces.

PERCEPTION: If STRS Ohio would just "tighten its belt," no changes would be necessary.
FACT: Reducing STRS Ohio's operating expenditures is always important - regardless of the status of the pension fund. Potential reductions - both large and small - are pursued year-round by STRS Ohio associates, as evidenced by final year-end financial reports that show expenditures continue to be reduced.

Some of the more significant and recent steps taken to reduce the STRS Ohio budget include freezing salaries for all STRS Ohio associates through June 30, 2010; implementing a standard 40-hour workweek across the organization as of Jan. 1, 2010, with no additional compensation provided to associates currently working 37.5 hours per week; limiting business travel; reducing the use of outside professional and technical services; eliminating the payment of Performance-Based Incentives to eligible Investment Department associates whenever STRS Ohio's total investment fund return is negative for fiscal year 2010 and beyond; and putting a cap on the number of STRS Ohio associates. As of July 3, 2009, STRS Ohio had a total of 589 associates, of whom 558 are full time and 31 are part time. This represents a decline of more than 140 individuals since 2003.

STRS Ohio's operating budget for this year is the lowest operating budget in four years and totals $87.9 million. It represents a $10.9 million decrease from last year's budget and a more than $2 million reduction from actual expenses last year. If all STRS Ohio associates worked for free, all communications to members was stopped, and critical member services, such as the call center, were shut down, STRS Ohio would still face a pension funding shortfall that would require the same kind of long-term changes now being considered.

STRS Ohio's unfunded liability as of July 1, 2009, is $38.3 billion. Completely eliminating all operating expenditures will not lower that number. And, if this unfunded liability is allowed to keep growing, STRS Ohio will eventually be unable to pay members their earned benefits. In short, reducing operating costs alone cannot solve the long-term issue of funding pensions and a viable health care program for future generations of teachers.

STRS COLA SOUND BITE


From Mario Iacone, July 15, 2009

Tim Myers, Vice Chairman of the STRS Board recently stated

that only 79 out of 109 pension systems give COLAs (cost of living adjustment), that most COLAs were in the 1.5 - 2% range, and that the 3% COLA was virtually unheard of.

There are two sides to every set of statistics. But, we may be hearing only the side which supports reduction/elimination of COLA.

That quote of that statistic is just a meaningless sound bite without presenting clarification.

At least, two important questions would have to be answered with respect to those statistics.

How many of the systems with 1.5-2% COLA have a compounded COLA which STRS does not have?

What is the employee/employer contribution rate of the systems with less COLA and NO COLA? Do they approach almost 25% as STRS does?

Tuesday, July 14, 2009

STRS FLASHBACK - 6 years ago - They were also painting a rosy picture back then, weren't they? Some things just don't change...do they?

From John Curry, July 14, 2009
"In other words, Ecklar was saying the STRS board could be criticized for not keeping members informed if Scott and Norris didn’t respond to media reports. And it could be criticized for responding.
Why?
Preparing, printing and mailing 325,650 letters cost STRS $129,779."
~ Paul Kostyu
Rest of the story sounds a lot like what we already know about STRS
Canton Repository, July 18, 2003
By PAUL E. KOSTYU
Copley Columbus Bureau chief
COLUMBUS -- Folks at the State Teachers Retirement System have been involved in damage control in light of reports about the pension fund’s operation.
The damage control has moved to at least two fronts.
First, it seems obvious the STRS board will get rid of Executive Director Herbert Dyer. The board held its second closed meeting in as many weeks Thursday to talk about personnel. This is just a guess, but the meetings are likely briefing sessions by the board’s attorney about his negotiations with Dyer’s attorney. In other words, both sides are trying to find an exit for Dyer that is financially palatable. Of course, we don’t know this for sure because the meetings are secret and board members are loath to talk about what goes on behind closed doors.
The obvious thinking, of course, is that if Dyer goes, then perhaps some of the heat on the pension fund and the board will evaporate as well. That remains to be seen.
Another tactic is to spin the news in a more positive direction. On June 20, board Chairwoman Deborah Scott and Vice Chairman Eugene E. Norris sent a two-page, single-spaced letter to STRS members. The letter went to most of the 400,000-plus members, and several were willing to share the correspondence.
“For 83 years, the State Teachers Retirement System has provided an exceptional level of retirement benefits to Ohio’s public educators,” the letter began. “As members of the Retirement Board, we have been entrusted with maintaining the quality of this system. This is a duty that none of us take lightly. We want you to know that your pension is secure and STRS Ohio continues to be financially sound.”
They continued, “Recently, there has been media attention in some parts of the state focusing on the spending practices at STRS Ohio. We understand that some of our members and the public-at-large have questions and concerns about these issues. ... While what has been reported in some papers has generated questions, it is by no means the whole story.”
Thus, the reason for the letter — to reveal the whole story.
The letter says it’s true that compared to other pensions funds “we do often have a larger investment staff and a larger operating budget than systems that have more members and/or assets.” But that’s because “we save millions of dollars each year by managing more than 80 percent of our investment assets in-house ...”
Of course, of the millions saved, $18.8 million since August 2000 through March this year didn’t help teachers but were given as staff bonuses.
“Our operating budget is higher because the compensation and benefits paid to these investment associates are included.”
The operating budget couldn’t be higher because of the cost of maintaining a $94.2 million building?
STRS recruits and retains “qualified, service-oriented and high achieving associates,” the letter said. “Associates receive the incentive award only for achievements over and above their current job responsibilities — and only if accomplished.”
The letter doesn’t say that some of those achievements sounded more like routine job descriptions than “push goals.”
As a result, the compensation package “has resulted in consistently high levels of performance and consistently high levels of member satisfaction. It also results in low employee turnover.”
Scott and Norris said the board suspended the bonus program because of the impact that the declining stock market had on STRS revenue. They don’t mention public pressure because of extravagant spending.
Instead, they said the administrative budget was reduced for the current fiscal year by $2.8 million while a way also was found to extend the health care program to 2014. Would that be by boosting members’ costs?
Laura R. Ecklar, a spokeswoman for STRS, said the letter was necessary in light of media reports. “We’re damned if we do and damned if we don’t,” she said.
That’s a fair assessment.
In other words, Ecklar was saying the STRS board could be criticized for not keeping members informed if Scott and Norris didn’t respond to media reports. And it could be criticized for responding.
Why?
Preparing, printing and mailing 325,650 letters cost STRS $129,779.

Brown County RTA Meeting

July 13, 2009
The Brown County Retired Teacher Association met today, Monday, July 13th at the Ohio Veterans Home near Georgetown. President Carolyn J. Carr could not attend due to health concerns at home; Kenneth ("Duke") Snider was asked by Carolyn to conduct the meeting. He collected letters from the retirees in attendance which will be sent to Governor Strickland, Representative Danny Bubp, Senator Tom Niehaus, and Representative Deborah Newcomb.
The point of the letters was to urge legislators to terminate the bonuses of STRS investment staff when the pension fund does not make a profit and to NOT reduce retiree COLAs. Mr. Snider also discussed the Ohio Retirement Study Council members who oversee the five Ohio pension systems. He suggested that the retirees also send letters of concern about the investment bonuses and possible COLA reductions to the six members of this Council. There was agreement to do so. He shared the contact information below:
Senator Keith Faber
Senate Building
Room #138, First Floor
Columbus, Ohio 43215
Telephone: 614/466-7584
Email: SD12@senate.state.oh.us
Senator Sue Morano
Senate Building
Room #056, Ground Floor
Columbus, Ohio 43215
Telephone: 614/644-7613
Email: senatormorano@maild.sen.state.oh.us
Senator Kirk Schuring, Vice-Chair, ORSC
Senate Building
Room #137, First Floor
Columbus, Ohio 43215
Telephone: 614/466-0626
Email: SD29@senate.state.oh.us
Representative Todd Book, Chairman, ORSC
(District: 89; Term: 4th; Term Limit: Not eligible to run for another two-year term)
77 S. High St
11th Floor
Columbus, OH 43215-6111
Phone: (614) 466-2124
Fax: (614) 719-6989
Email: district89@ohr.state.oh.us
Representative Dan Dodd
(District: 91; Term: 2nd; Term Limit: Eligible to run for another two-year term)
77 S. High St
11th Floor
Columbus, OH 43215-6111
Phone: (614) 466-2500
Fax: (614) 719-6991
Email: district91@ohr.state.oh.us
Representative Lynn Wachtmann
(District: 75; Term: 2nd; Term Limit: Eligible to run for another two-year term)
77 S. High St
10th Floor
Columbus, OH 43215-6111
Phone: (614) 466-3760
Fax: (614) 719-3975
Email: district75@ohr.state.oh.us
Several visitors from other county RTAs discussed the fact that Dr. Dennis Leone had agreed to accept appointment to the STRS Board if offered to him by Kevin Boyce, Treasurer of State. Treasurer Boyce's appointee would be the last remaining unfilled seat on the STRS Board. It was agreed that this information would be shared with all members of the Brown County Retired Teacher Association. Members will be encouraged to send letters of support for Dr. Leone's appointment to:
Kevin L. Boyce,
Ohio Treasurer of State,
9th Floor
30 East Broad Street,
Columbus, OH 43215-3461
Email: treasurer@tos.ohio.gov
Fax: 614-644-7313
http://www.ohiotreasurer.org/
NOTE: When you write, please keep in mind that whoever fills this Board seat is appointed by the State Treasurer, but does not represent him in any way.

By Mary Ellen Angeletti and Kathie Bracy

Monday, July 13, 2009

Tom Curtis to Mike Nehf: How are STRS retired employees' (OPERS members) COLAs calculated?

From Tom Curtis, July 13, 2009
Subject: 071309 Curtis To Nehf, How Are COLA's Figured
Hello Mike,
I was wondering, since you and all STRS employees pay into OPERS, how is the COLA they pay their retirees figured.
Is OPERS' COLA one simple base amount one retired with, as is the case for an STRS retiree, or is it a compounded COLA, as so many others receive? Would you kindly respond?
Tom Curtis
P.S. I await a response from my prior email as well.

Ralph Roshong: Letter to Kevin Boyce

From Ralph Roshong, July 13, 2009
TO: Kevin L. Boyce,
Ohio Treasurer of State
9th Floor,
30 East Broad Street
Columbus, Ohio 43215-3461
Representatives and Senators
Ohio Newspapers
OSBA
BASA
Dear Sir:
I am writing to recommend to you that, if at all possible, please appoint Dennis Leone to the Ohio STRS Board. I know you have criteria to meet for your appointment, but I would hope that you have some interpretive flexibility within the guidelines. I have included below, an email that lists many of Dr. Leone’s qualifications, experiences, and accomplishments during his four year term on the Board. This term expires at the end of August. Dr. Leone has been an extremely active member of the Board for his four year term plus three to four years prior to his term as an vocal observer. He would be a great asset to the Board to return under your appointment and I am sure, represent your office admirably. Thank you for your consideration.
Respectfully,
Ralph Roshong
1991 STRS Retiree

Sunday, July 12, 2009

Click image to enlarge.

John Curry: Letter to Senator Keith Faber

From John Curry, July 12, 2009
Subject: Ohio Retirement Study Council decisions
Dear Senator Faber,
I am writing to you, as you are a member of the Ohio Retirement Study Council. Soon, changes will be made to most, if not all, state retirement systems. The downturn economy has affected all Americans as well as just Ohioans.
I am asking your particular attention to be aimed at the State Teachers Retirement System of Ohio and a comparison to your retirement system, the Ohio Public Employees Retirement System. There are vast differences between the benefits currently provided by these two systems.
As a retiree in the STRS (I retired from teaching in 2000 with 30 years) system, I am currently looking at a 2010 monthly healthcare premium (for an 80/20 PPO Med. Mutual) that will be over $1,150 per month (my cost) for my spouse and myself. This is the same healthcare package that you would be eligible for through OPERS had you retired in the year 2000 for less than $100 per month next year. In other words, STRS rates will be over 14 times as much as the OPERS rate next year. This is not equitable nor is it fair to Ohio retired educators.
At the same time that the STRS monthly healthcare insurance rates for a person who retired in 2000 will be over 14 times as much as OPERS, STRS continues to pay out, for 35 years of service retirees, 88% of their final average salaries...a percentage rate that OPERS retirees could only dream of since, with 35 OPERS years, one would only be eligible for a 77% payout of their final average salaries. STRS never could afford the 88/35 benefit and still (more than ever) can't afford this vast difference in FAS payouts.
There are tens of thousands of STRS retirees in my shoes who are facing and will continue to face this vast inequity. For their sake and mine, I beg of you to not touch our retirees' current 3% Cost of Living allowance. ...it is all we retirees have left to fight inflation and increased healthcare costs. If you need to cut anywhere, at least make the STRS 88% equal to your retirement system's 77% for 35 years of service. Current active educators will have time to plan and make life/job decisions as they are younger and have time to do what is necessary for their future. Retirees of my age (61) have far fewer options and far more health problems that would prevent them from making similar decisions.
In any event, please considering grandfathering, something STRS didn't do when they "trashed" all subsidies for spouses of retirees in the STRS system inthe early part of this decade and, unlike OPERS, didn't resume the spousal healthcare insurance subsidy at age 55 for the spouses of OPERS retirees. Our system lost far more than five former board members and a former executive director to criminal convictions of Ohio ethics violations, we also lost the foresight that could have been given by fiduciaries who really cared about my future and the future of my fellow STRS retirees. They were fiddling while Rome burned. We are now paying the price.
Thank you for your consideration in this matter.
Sincerely,
John Curry
Wapakoneta, OH
The letter you can't afford NOT to write.........
From John Curry, July 12, 2009
We can write, call or fax Ohio Retirement Study Council members who are elected legislators. (The ORSC can exert pressure on STRS to force changes in our COLA.) A listing of their pertinent info is below. Please share this list with fellow retirees/actives.
Remember, a change in our COLA (which is currently written in the Ohio Revised Code), requires legislative action. The legislators listed below are the ones who would contact other legislators to enact this change THAT WE CAN'T AFFORD in our COLA! We need to let them know how we feel!
John
Senator Keith Faber
Senate Building Room #138, First Floor
Columbus, Ohio 43215
Telephone: 614/466-7584
Email: SD12@senate.state.oh.us
Senator Sue Morano
Senate Building Room #056, Ground Floor
Columbus, Ohio 43215
Telephone: 614/644-7613
Email: senatormorano@maild.sen.state.oh.us
Senator Kirk Schuring, Vice-Chair, ORSC
Senate Building Room #137, First Floor
Columbus, Ohio 43215
Telephone: 614/466-0626
Email: SD29@senate.state.oh.us
Representative Todd Book, Chairman, ORSC
(District: 89; Term: 4th; Term Limit: Not eligible to run for another two-year term)
77 S. High St
11th Floor
Columbus, OH 43215-6111
Phone: (614) 466-2124
Fax: (614) 719-6989
Email: district89@ohr.state.oh.us
Representative Dan Dodd
(District: 91; Term: 2nd; Term Limit: Eligible to run for another two-year term)
77 S. High St
11th Floor
Columbus, OH 43215-6111
Phone: (614) 466-2500
Fax: (614) 719-6991
Email: district91@ohr.state.oh.us
Representative Lynn Wachtmann
(District: 75; Term: 2nd; Term Limit: Eligible to run for another two-year term)
77 S. High St
10th Floor
Columbus, OH 43215-6111
Phone: (614) 466-3760
Fax: (614) 719-3975
Email: district75@ohr.state.oh.us
Larry KehresMount Union Collge
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