Saturday, August 14, 2010

PD editorial re: public records

From John Curry, August 14, 2010
Dispel the shadow over Ohio public pension funds: editorial
Cleveland Plain Dealer, August 14, 2010
Fifty years ago this December, the state Supreme Court said, "public records are the people's records, and . . . the officials in whose custody they happen to be are merely trustees for the people."
Someone should tell the pension systems. They collect $347 a year per Ohioan in tax money -- a grand total of $4 billion. But in recent moves as legally dubious as they are politically dim, the funds are stonewalling data requests by Ohio newspapers, including The Plain Dealer, on phony "privacy" grounds.
In fact, the newspapers are not seeking specific identifying information on the funds' 400,000 beneficiaries. But they do want to know retirees' working-years' pay, current benefits, ages, years of service and pension contributions. Among other things, such a review could detect "wild swings in [annual] pay . . . that can artificially boost retirement benefits," The Plain Dealer's Patrick O'Donnell reported Sunday.
Pension managers should know their systems have a serious image problem with taxpayers, the "public employers," who pay a plump share of the pension tab.
Rightly or wrongly, some taxpayers think the General Assembly (whose members can join the Public Employees Retirement System) has let public employee retirement plans become extremely cushy, compared with the private sector. Others think loopholes that easily could be closed -- when there's a will, there's a way -- allow some public employees to retire way too young on pensions that are way too generous.
Two Democrats, Reps. Matt Lundy of Elyria and Stephen Dyer of Green, are planning legislation to force the pension systems to disclose the data. That's commendable and, given the systems' mulishness, probably necessary.
Unless the systems let the sunshine in, there's no reason for legislators to increase taxpayers' share of pension costs -- something at least two systems (Police and Fire, and Teachers Retirement) want.
When bureaucrats seal off files from taxpayers, taxpayers should seal off their wallets.

Friday, August 13, 2010

Donna Seaman to Mansfield News Journal

From John Curry, August 13, 2010
Pension system's belt-tightening confined to retired teachers
August 13, 2010
The articles in the July 25 News Journal about Ohio's five retirement systems explained many similarities and differences between the public pension systems and potential problems faced by the systems, their retirees and Ohio taxpayers.
First, the full page chart outlining eligibility, membership and other facts includes the proposals submitted by the pension systems to the Ohio Retirement Study Council last September. These proposals haven't yet been approved by state Legislature and aren't in effect currently.
Second, while State Teachers Retirement System is the second largest retirement system after the Ohio Public Employees Retirement System (which lost $24 billion in value during this recession), STRS losses in portfolio asset value were $42 billion, nearly half its total value before the recession, losses that were far higher than losses experienced by other systems.
Third, STRS maintains its own in-house investment staff. Even while in the throes of major losses in asset value, those 90 plus individuals continued to receive a total of $3 million to $6 million bonuses annually. (STRS management calls bonuses performance-based incentives.) Until this calendar year, STRS did little if anything to reduce operating costs or reduce staff. It did, however, make significant reductions in health benefits for retirees. Co-pays were raised, deductibles and monthly premiums were increased and the health insurance provider was changed.
Finally, if you read the letter to the editor by Michael Nehf (STRS executive director) he states: "Our plan was developed working side by side with individuals representing both active and retired educators. ..." The public reading his statement would believe retirees were consulted about these reductions/changes. We were not. I repeatedly asked Nehf, during board meetings and in face to face meetings, to reduce the tremendously inflated operating budget ($10-plus million annually) of this particular pension system. The answer is always the same: STRS must pay those six-figure salaries to STRS staff to retain the "best and brightest," -- all while losing billions of dollars in the value of the fund. No belt-tightening for the STRS staff, just belt-tightening for its retirees.
This additional information, most of which relates specifically to STRS only, was not included in the article's overview.
Donna Seaman
Shelby

Report on STRS August board meeting

From STRS, August 13, 2010
This week, the State Teachers Retirement Board held its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. As a member of STRS Ohio with an e-mail address on file, you will also receive this report each month. The August report follows.

AUGUST BOARD NEWS

RAMSER RECOGNIZED FOR BOARD SERVICE During its August 2010 meeting, the State Teachers Retirement Board passed a resolution recognizing the dedicated and tireless service provided by Conni Ramser during her tenure as a board member. Ramser was selected to fill a contributing member seat on the board in August 2004, and was subsequently elected to a four-year term in May 2006.

STAFF REPORTS 13.54% INVESTMENT RETURN FOR FISCAL YEAR 2010 The STRS Ohio total investment fund returned 13.54% for the 12 months ending June 30, 2010, outperforming the composite benchmark return of 13.28% by 0.26%. After all direct internal investment costs and external manager costs are subtracted from this gross active management return, the net value added was 0.15%, or about $50 million. This represents the additional value brought to the STRS Ohio investment fund through active management by STRS Ohio associates and external managers, above and beyond the passive benchmark. At the end of the fiscal year, the market value of investment assets totaled $56.9 billion.
During the August Retirement Board meeting, Callan Associates, the board's investment consultant, noted that all STRS Ohio investment fund asset classes posted a positive return for fiscal year 2010 except for real estate. However, despite falling below its benchmark return, the STRS Ohio real estate portfolio ranked in the 12th percentile versus its peers for one-year returns. (Note: 1st percentile = best; 100th percentile = worst.)
The information below can be viewed as a chart at the following link: https://www.strsoh.org/boardnews/bn_current.html#chart
STRS OHIO INVESTMENT RESULTS (FISCAL YEAR 2010)
LIQUIDITY RESERVES STRS Ohio Return: 0.30% Benchmark Return: 0.12% Relative Return: 0.18%
FIXED INCOME STRS Ohio Return: 13.28% Benchmark Return: 10.60% Relative Return: 2.68%
DOMESTIC EQUITIES STRS Ohio Return: 14.94% Benchmark Return: 15.72% Relative Return: -0.78%
INTERNATIONAL STRS Ohio Return: 13.09% Benchmark Return: 11.45% Relative Return: 1.64%
REAL ESTATE STRS Ohio Return: -0.67% Benchmark Return: 6.50% Relative Return: -7.17%
ALTERNATIVE INVESTMENTS STRS Ohio Return: 20.04% Benchmark Return: 20.04%* Relative Return: 0.00%
TOTAL FUND STRS Ohio Return: 13.54% Benchmark Return: 13.28% Relative Return: 0.26%
Less Costs to Arrive at Net of Fees: -0.11% Total Fund, Net of Fees: 0.15%
*No benchmark exists for this asset category; actual returns are used.
OPERATING EXPENDITURES COME IN BELOW BUDGET Final figures for fiscal year 2010 (July 1, 2009-June 30, 2010) show that total operating expenditures for STRS Ohio were $8.5 million less than budgeted and $9.4 million less than fiscal year 2009 expenditures. Less-than-expected expenditures for associate salaries and related fringe benefits, custodial banking fees and outside services contributed to the majority of the savings. Operating expenditures for fiscal year 2010 totaled about $79.4 million.

RETIREMENTS APPROVED The Retirement Board approved 1,559 active members and 182 inactive members for service retirement benefits.

OTHER STRS OHIO NEWS
MEMBER SERVICES COMPLETES BUSIEST YEAR SINCE FISCAL 2004 Demand for services this past fiscal year surpassed all previous years since fiscal 2004 in STRS Ohio's Member Services area. The Member Education staff presented 312 programs to more than 20,000 members, which was a record high for member participation. This exceeded the previous high year of 287 meetings for about 10,000 members. For the first time since fiscal 2004, benefits counselors met with more than 18,000 members, while the Member Services Center exceeded 300,000 calls. The heavy call volume has increased since Jan. 1, 2010, and is currently running at a 15% increase over last year.
WORK CONTINUES ON LONG-TERM CARE PROGRAM CHANGES The transition to Prudential as STRS Ohio's long-term care (LTC) vendor is proceeding. In June, 12,033 Aetna LTC enrollees received a customized transfer offer from Prudential that provided recipients with a one-time opportunity to transfer to Prudential from Aetna without evidence of insurability. To date, Prudential has received acceptance forms from 5,126 (42%) enrollees. Prudential's coverage for these individuals begins Oct. 1, 2010. The policies of individuals who remain with Aetna LTC become individual LTC policies under a trust that continues to be regulated under the enrollees' State Department of Insurance. Staff continues to work with Prudential on the open-enrollment period for full-time active teachers, which is targeted for Feb. 14-March 4, 2011. All active teachers who work at least 20 hours a week can enroll with Prudential without medical underwriting during this one-time open enrollment. Staff is also finalizing the process to notify new retirees of their op tion to enroll in Prudential LTC, effective Oct. 1. 2010.
STRS OHIO WEB SITE NOW FEATURES PENSION PLAN REFORM INFORMATION The home page of the STRS Ohio Web site (https://www.strsoh.org) now features a section titled "Special Pension Plan Reform Coverage." In addition to sharing the details of the proposed plan approved by the Retirement Board in September 2009, it includes information about the value of defined benefit plans, an ongoing recap of the board's long-term planning work, a link to the National Institute on Retirement Security and other pertinent information. STRS Ohio also continues to respond to various newspaper articles focusing on Ohio's public pension plans. Copies of these "Letters to the Editor" can also be found in this section of the Web site. Additional information will be added to the site on an ongoing basis.
LEGISLATIVE NEWS INCLUDES OVERVIEW OF FEDERAL FINANCIAL SECTOR REFORM BILL In July, President Barack Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act - a measure that many consider the most sweeping reform of the financial sector since the Great Depression. The August 2010 issue of STRS Ohio's Legislative News includes an overview of the issues within the reform package that have the most direct impact for STRS Ohio. This newsletter also includes a report from the National Association of State Retirement Administrators (NASRA) on reforms to public pension plans in progress around the country. The newsletter can be accessed via the STRS Ohio Web site at: https://www.strsoh.org/quicklinks/legislative.html.

Some interestng OEA news.....

From John Curry, August 12, 2010
In what is becoming a perennial event, the professional employees of the Ohio Education Association authorized a strike if a contract settlement is not reached prior to September 1.
Bargaining between OEA employees and managers has been contentious for many years, resulting in a strike in 1997, and last-minute settlements in 2006 and 2009.
The support staff union is also bargaining with OEA, though it has not taken a strike authorization vote (to my knowledge). If OEA’s UniServ directors and other professionals strike, however, it is extremely unlikely the support staff will cross the picket line.
August 12th, 2010, posted by Mike Antonucci

Thursday, August 12, 2010

RH Jones' speech to STRS board August 12, 2010

Re: Education fuels the American Dream
August 12, 2010
As a professional teacher who happens to be retired, I would like to set the record straight: 100 years ago, in 1910, merely 21 years before I was born, only 2 out of 10 adults could read and write. Only 6% had graduated from high school and the average worker made between $200 and $400 per year. Empirical evidence tells us today, these figures are much greater. In 100 years from now, it will be much greater still – that is, if we taxpayers continue to properly fund public school district education. Presently, the retired teacher’s 3% COLA and HC/Rx is part of that package of funding for education which, if continued, is the key to forward economic growth; and, the key to an expanded diverse middle class necessary for the continued condition of prosperity and security.
Before WWI, as people left the farms to move into cities, education spending began to move forward and has culminated into right now 40% of our younger adults has a college degree (Dallas Morning News, 08/09/10, Gilman). In a speech in Texas Monday (NY Times, 08/10/10, Stolberg), President Obama stated, and I quote: “education is an economic issue”. Reasonable people can concur with that fact.
For the last 100 years education has given Ohio and the nation its economic prosperity. Yet, across the state and nation there are media and wealthy politicians who do not credit an educated public as a source of economic strength that purchases, reads and views their products. After their recent attacks, particularly on the Ohio defined benefit pensions, perhaps we, who are educated, should boycott their company stocks. Recently, some of them demanded and some have begged that we purchase their stocks. It only makes sense that staying together we can overcome their harm to our retirement system. We are not obligated to purchase their stocks and products but they cannot benefit for long without our combined value of assets. In more ways than one, our numbers is our power; unfortunately, they do not understand informed reasoning, only power.
Robert Hudson Jones

Wednesday, August 11, 2010

Can they legally take your COLA back? 'History is on [our] the employees' side!'

From John Curry, August 10, 2010

History is on the employees’ side. State statutes, constitutions and case law consistently define a public pension as a contract between the state and its employees that cannot be impaired. For example, Alaska’s state constitution makes it clear that “membership in employee retirement systems of the state or its political subdivisions shall constitute a contractual relationship. Accrued benefits of these systems may not be diminished or impaired.” Eight other states protect workers in their constitutions. They are Arizona, Hawaii, Illinois, Louisiana, Michigan, New Mexico, New York and Texas.
In states without constitutional guarantees — Colorado, Minnesota and South Dakota fall into this category — statutes and court cases consider retirement benefits an unbreakable contract between the state and workers. That same protection is in the contract clause of the U.S. Constitution, which says: “No state shall … pass any … law impairing the obligations of contracts.”
Tuesday, August 10, 2010
States test whether public pension benefits given can be taken away
By Stephen C. Fehr, Stateline Staff Writer

Stateline State legislators are beginning to challenge one of the ironclad tenets of public pension policy: that states cannot legally reduce pension benefits for current and future retirees.
Lawmakers in Colorado, Minnesota and South Dakota voted earlier this year to limit cost-of-living increases they previously had promised to thousands of current and future retirees, who courts historically have protected from benefit reductions. Not surprisingly, retirees in each state have filed lawsuits asking judges to restore their annual benefit increases to what they were previously.
Lawmakers, state retirement systems, public employee unions and others in the pension policy arena are closely watching the outcome of the legal challenges. If the courts do not reinstate the retirees’ benefits, a flood of states could follow the lead of Colorado, Minnesota and South Dakota. The reverse also would be true. “If the plaintiffs are successful, it may discourage legislators in other states from attempting to diminish benefits,” says Keith Brainard, research director at the National Association of State Retirement Administrators.
California Governor Arnold Schwarzenegger and New Jersey Governor Chris Christie, among other officials, favor scaling back pension benefits already promised to current employees and retirees. And a lively debate on the issue is underway in Illinois, where lawmakers reduced the cost-of-living adjustment for newly hired workers. Interest is keen everywhere: Lawmakers from around the country packed a session on modifying public pension benefits at the recent annual meeting of the National Conference of State Legislatures in Louisville.
Up to now, states trying to trim the rising cost of worker retirement benefits have taken the legally safer — and politically easier — approach of targeting benefit cuts at newly hired employees. Steps states have taken this year include increasing the amount employees contribute toward their own pensions, raising the retirement age and adjusting the formula upon which benefits are based.
But many state lawmakers and pension administrators have concluded that cutting benefits for new employees alone will not save enough money in the short term to keep pension plans solvent over time. So they are searching for ways to zero in on the benefits of current retirees and employees.
Colorado lawmakers, facing projections showing the state’s pension system would run out of money within 30 years, approved a package of benefit reductions that lowered the annual 3.5 percent cost-of-living increase for retirees in 2010 to zero. In future years, the increase will be set at 2 percent, barring another sharp decline in investments. If the changes stand, the average retiree would lose more than $165,000 in benefits over the next 20 years, the retirees say in court papers.
South Dakota reduced the cost-of-living increase from 3.1 percent to 2.1 percent this year; future-year amounts will be tied to how well the system’s investments perform in the market. Minnesota eliminated a 2.5 percent cost-of-living increase and set it at between 1 and 2 percent for its different employee pension funds.
Case law and state constitutions
History is on the employees’ side. State statutes, constitutions and case law consistently define a public pension as a contract between the state and its employees that cannot be impaired. For example, Alaska’s state constitution makes it clear that “membership in employee retirement systems of the state or its political subdivisions shall constitute a contractual relationship. Accrued benefits of these systems may not be diminished or impaired.” Eight other states protect workers in their constitutions. They are Arizona, Hawaii, Illinois, Louisiana, Michigan, New Mexico, New York and Texas.
In states without constitutional guarantees — Colorado, Minnesota and South Dakota fall into this category — statutes and court cases consider retirement benefits an unbreakable contract between the state and workers. That same protection is in the contract clause of the U.S. Constitution, which says: “No state shall … pass any … law impairing the obligations of contracts.”
Courts have determined that cost-of-living increases, which keep pension income on pace with inflation, are part of a worker’s benefits that cannot be diminished. (Generally, increasing benefits faces no legal hurdles.) The principle of safeguarding the purchasing power of pension income through a cost-of-living adjustment is well established. Social Security, the federal government’s retirement program, instituted automatic annual cost-of-living increases in 1975. The amount of the increase has averaged about 3.3 percent a year, although for the first time in 2010, there was no increase because the consumer price index did not rise.
The Colorado, Minnesota and South Dakota lawmakers are hoping that the courts will agree that the current financial turmoil facing states imperils public pension systems as never before and calls for a new approach. If legislatures are not permitted to cut retirement costs now, the argument goes, the ability of the public pension systems to pay future benefits will be jeopardized.
“If we don’t reduce these automatic pension increases, the entire fund is poised to go bankrupt,” Republican Josh Penry, minority leader of the Colorado state Senate, told the Denver Post. “Think United [Airlines]. Think GM. That didn’t work out well for the company or the retirees.”
Attorneys for the states say in court filings that limiting cost-of-living increases was justified, and actuarily necessary. “There can be no dispute that preserving the solvency of PERA [The Colorado Public Employees’ Retirement Association] is a legitimate governmental interest,” Colorado officials argue. Minnesota’s pension legislation “was reasonable and necessary to maintain and restore the financial stability of Minnesota’s public pension plans,” say the state’s pleadings.
Managing market swings
Although Colorado lawmakers and state pension officials blame much of the retirement fund’s current financial troubles on investment losses suffered during the 2007-09 recession — the median decline for funds nationally was 25 percent in 2008 — the truth is that Colorado lawmakers failed to make their annually required contributions to state pension funds in good times and bad. They also boosted retiree benefits without considering future costs.
Colorado’s pension fund was fully funded in 2000. Eight years later, before the recession hit, Colorado fell to 70-percent funded and was heading down further, according to a report released in February by the Pew Center on the States, which publishes Stateline. Most pension specialists recommend a funding level of 80 percent or higher.
Minnesota lawmakers also slid on their pension fund payments. Their pension system’s funding level dropped from 101 percent in 1999 to 81 percent in 2008.
“The Legislature was cutting off funds and starving the pension system,” says Stephen Pincus, a Pittsburgh attorney representing the retirees in all three states. “They shouldn’t now be able to cry there’s no money in the pension system. They had a large hand in creating the crisis.”
South Dakota offers a twist. The state Legislature has been one of the best in the nation at financing its public employee pension system over the years; it was 97-percent funded in 2000 and 2008, according to the Pew report. Lawmakers even increased benefits two years ago. The state retirement system investments did lose more than 20 percent in value in 2008, but gained as much in fiscal 2010.
Pincus says that makes South Dakota’s targeting of current employees and retirees suspect. “There’s no crisis in South Dakota,” he says. “They had one bad year. So they’re going to shore up their pension fund by cutting benefits to those who already receive them?”
Rob Wylie, executive director of the South Dakota retirement system, counters that when the funding level fell to 76 percent after the 2008 losses, it triggered for the first time a state law requiring the pension system to take immediate steps to return the funding level to 100 percent. Savings gained from reducing benefits for newly hired employees would have taken too many years for the system to catch up, Wylie says. So after consulting with retirees the pension board chose to ask lawmakers to trim the cost-of-living increase.
“We could have reversed the increase in the funding formula we approved in 2008,” says Wylie. “But the retiree groups said can you find another way to slow the growth in costs without decreasing the formula? So we did.”
Asked why states are taking the risky strategy of aiming at current retirees, Robert Klausner, a Florida attorney who specializes in public pension law, says many state officials believe they have less to lose in the courtroom by challenging pension protections than taking no action at all. “The belief is that if the employer [the state] prevails, it will have been worth the political risk,” Klausner says. “And if they lose, they will be no worse off than before.” Klausner adds that legislatures are taking the politically-difficult step and letting the courts be the “bad guy” if they overturn the law. Retired judges are among the plaintiffs in Colorado and South Dakota.
The first case to be heard is the one in Minnesota, where a September 15 hearing is scheduled on a motion for summary judgment that will be filed by the state. Colorado’s Supreme Court already has sided once with retirees, saying in a 1961 ruling, “Whether it be in the field of sports or in the halls of the legislature it is not consonant with American traditions of fairness and justice to change the ground rules in the middle of the game.”
Meredith Williams, executive director of the Colorado retirement system, says he is confident the state can prove that the system’s current and future financial stress will compel the court to allow the cost-of-living rollback. “PERA has been upfront about the challenges we face,” he says.

STRS FLASHBACK - 7 years ago - For STRS, the days of the "cushy front seats" are over!

From John Curry, August 8, 2010
"Childers, a retired educator who started with Garaway Local Schools in Tuscarawas County, said he believes board members purposely booked the more expensive coach seats. He said records indicate some seats reserved weeks in advance were more expensive than they should have been."
"He also said some tickets were bought just days before a flight when the event being attended was scheduled months in advance. That makes the seat more expensive."
Canton Repository, August 9, 2003
Travel agent: STRS board enjoyed frills
By PAUL E. KOSTYU Copley Columbus Bureau chief
COLUMBUS — Coach airline seats turned into first-class travel in a legal scheme used by members of the board of the State Teachers Retirement System, according to a Chillicothe travel agent.
After analyzing travel receipts turned in by board members from 2000 through 2002, Terry Childers, a travel agent for the past eight years, said it was clear to him that board members manipulated the system so they could fly in “cushy front seats.”
Deborah Scott, chairwoman of the STRS board and one of those targeted by Childers, said she had “no idea what this person is talking about.”
Laura Ecklar, a spokeswoman for STRS, said, “We have not purchased upgraded coach tickets. We do not do this. We do not allow it.”
STRS travel policy, however, allows frequent-flier coupons to be used to upgrade seats, she said. The policy applies to the board and staff.
The board spent $221,236 on out-of-state travel from 2000 to 2002, according pension fund reports. By law, board members must book coach class, but there are multiple fees for coach seats. More expensive seats in that fee structure gives a person a better shot at first-class seats if any are available.
With an expensive coach seat in hand, a traveler can upgrade to first class by either using a complimentary system offered by some airlines or by using frequent flier miles. Because frequent flier points cannot be assigned to a business, when STRS board members travel, they accumulate those miles on their individual accounts.
Scott said she always flies coach and has never been in a first-class seat on a board-related trip. She said she could only speak for herself and not the rest of the board.
Scott said she sometimes has to fly out of Cincinnati, where she lives and where Delta Airlines has a hub. Both she and Childers said Delta flights there are more expensive than those from Columbus or Dayton.
Connie Hahn, the owner of En Route Travel Services, a Columbus agency that books most of the travel for STRS, refused to talk about STRS travel. After checking with her attorney, she said the information was privileged.
“I don’t want anything to be misconstrued,” she said. “They’re going through an audit. I don’t want to talk about it.”
The Ohio Retirement Study Council has approved an audit of STRS, but it has yet to begin.
Hahn and Childers agreed that ticket pricing is based on airline capacity, advanced purchase, length of stay, time of travel, length of trip and availability of seats. Fees and coach class designations vary from airline to airline.
Childers, a retired educator who started with Garaway Local Schools in Tuscarawas County, said he believes board members purposely booked the more expensive coach seats. He said records indicate some seats reserved weeks in advance were more expensive than they should have been.
He also said some tickets were bought just days before a flight when the event being attended was scheduled months in advance. That makes the seat more expensive.
“It bothers me greatly that waste is going on,” he said. “There’s too much at stake here. These people blatantly abuse the public’s money. It’s my money and the public’s money and it’s got to stop.”
Chillicothe Superintendent Dennis Leone, who provided Childers with the travel documents that he obtained from STRS, said it was “a shameful practice to deliberately and consciously pay more than necessary for air fare.”
“This by itself represents ground for some board members to step down,” Leone said.
He said Childers’ findings were “absolute, undeniable fact” that coach tickets costing “four or five times more than the coach tickets the rest of the world buys, have frequently been purchased.”
Childers said he could save STRS money.
“The objective of our agency is to get the very lowest fair,” he said. “If the board is sincere about regaining trust, our agency is willing to do their ticketing.”
Larry KehresMount Union Collge
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