The Dispatch opines what Dennis has said many, many times

From John Curry, September 11, 2010

http://www.dispatch.com/live/content/editorials/stories/2010/09/11/public-gets-back-seat.html

Editorial: Public gets back seat

State pension funds have no excuse for lavish travel budgets

September 11, 2010
Columbus Dispatch

The Columbus Dispatch If Ohio's public pension funds weren't sucking wind like so many other investment programs, and if they weren't asking hard-pressed taxpayers to spend even more to keep them afloat, perhaps no one would notice or care that the five funds spent a total of more than $1 million on employees' travel in a year's time.

But that waste still would be egregious.

Three nights in a $400-per-night hotel in New York for a $1,125-per-person conference on investing, for two pension-fund board members who aren't even financial experts? In an age when videoconferencing and webinar technology can put top-flight training and consultation into any conference room, that's an extravagance.

Yet it was deemed a reasonable expense by the Ohio Police & Fire Pension Fund, which is asking taxpayers for a major increase in subsidies. Public-safety agencies - that is to say, taxpayers - already pay into the fund at the rate of 19.5 percent of salary for police and 24 percent for firefighters. Fund officials would like to see the public contribution grow to 25 percent for both groups over three years.

The State Teachers Retirement System, which wants taxpayers' contributions jacked up by 2020 to 16.5 percent from the current 14 percent, saw fit to send its managers all over the world for conferences: Japan, China, South Africa, England, Mexico, India and Malaysia, all in the year that ended July 1.

That's a year that followed one in which the pension funds lost between 23 percent and 31 percent of their value in the stock-market slide of 2008-09.

Investing and managing multibillion-dollar investment funds in a volatile environment certainly requires up-to-the-minute expertise, and those entrusted with public employees' dollars should receive frequent training updates. But professional development can be achieved more efficiently and much more cheaply by bringing experts in-house to speak, through distance-conference technology and in many other ways that don't involve sending employees to cushy confabs in desirable locales with expensive hotels, meals and travel. Sometimes these junkets have been coupled with private vacations.

Even in the private sector, such perks largely are a relic of a more-prosperous time, when success bred excess.

This extravagance never has been appropriate for the public sector. And in an era when public-pension funds have hemorrhaged value, retirees are facing significant increases in their health-insurance premiums and taxpayers are being asked to fork over bigger subsidies, this behavior is unjustified.

These same pensions have refused to disclose data on their funds for public analysis, even as they ask the public for more money.

Legislators should make clear that they expect the funds to be managed more transparently and prudently before they consider any increase in subsidies.

Commentary from Dennis Leone
September 11, 2010
"The STRS Board/Staff has shot itself in the foot, again, again, and again. They don’t want to listen, and oh how they pretend they know what is best. It is sickening. No wage freeze, no suspension of bonuses, no staff cuts, no reduction is staff benefits, no reductions in board member travel, -- all represent examples of the board and staff saying they knew what was best for the membership."
John –

Today’s Dispatch has a huge Dispatch editorial entitled “Public Takes a Back Seat.” It is a must-read article.

The proposed increase in the 14% employer contribution may be dead in the water now. The Dispatch suggests the very same thing I begged for over 6 years. The STRS Board/Staff has shot itself in the foot, again, again, and again. They don’t want to listen, and oh how they pretend they know what is best. It is sickening. No wage freeze, no suspension of bonuses, no staff cuts, no reduction is staff benefits, no reductions in board member travel, -- all represent examples of the board and staff saying they knew what was best for the membership.

Yes, many of these things did change, but only after much blood on the sidewalk, initial huge board/staff resistance, and fighting. I will never forget how – in my final board meeting -- Tim Myers made a motion, seconded by either Ramser or Meuser, to stop discussions completely on the bonus question for 2009. It failed, barely, by a 5-4 vote, with the active teachers on the board voting together as a block..….all attempting to stop any discussion of not providing bonuses that year due to huge losses in assets. Truly sad.

Dennis Leone

Frost-Brooks admits OEA lost major bucks..........

From John Curry, September 10, 2010

In the PSU blog, Pat Frost-Brooks admits that OEA has lost major bucks recently. Here is a quote from her letter as published in the PSU blog:

"Today, I am a trustee of a corporation whose assets were
$107 million in August of 2008 and are now around $78 million--until the
markets recover, OEA is in no position to accede to the PSU line--and all of
you know that based on your own treasurer's numbers. "

If you want to read her entire letter please click on the following link and scroll down to the third letter.

http://ohiopsu.squarespace.com/hall-of-shame/

The Dispatch's recent article re: globetrotting by pension system associates and.....STRS has been there, done that!

From John Curry, September 9, 2010

In May 2003, Dr. Leone presented a memo to the STRS board re. reforms that were sorely needed. One of the areas in which Dr. Leone mentioned was the excessive travel by STRS board members. Here is a listing of those monies spent back then and by the globe trotters who spent it.....maybe Dennis should come back for a visit this year?

John

STRS FLASHBACK - 7 YEARS AGO - May 16, 2003

"Travel-Related Expenses for STRS Board Members: According to data supplied by STRS staff, $177,009 is expected to be spent in 2003 on travel-related expenses for Board member/administrator development, training, professional seminars, and conferences, and for investment transactions, plus real estate transactions. In the three previous years, the total amounts spent were $186,116 (2000), $174,167 (2001), and $170,001 (2002). On May 31, 1995, the Cleveland Plain Dealer called into question the fact that Board members were turning in bills for trips to places like Hawaii and Palm Springs, for lodging at the nation's top hotels, for dining at expensive restaurants, and for beach bar bills. The article said that one Board member named Jack Chapman, who is a current Board member, spent $36,736 the previous year all by himself. According to the article, a planned trip by STRS Board members to China two years earlier was cancelled after the State Attorney General Office complained that such a trip would create an image of "junketeering." In recent years, while no STRS Board member has spend money like the Plain Dealer claims Jack Chapman did in 1994, Board members still spend a great deal of membership money on out-of-state travel expenses. The total travel-related expenses and the number of trips requiring airfare over the past 3 years are shown for each Board member below:

(Click image to enlarge.)

CONCLUSION: While there certainly are valid reasons for Board members and administrators to attend professional seminars and be properly trained, and while the STRS membership wants to be effectively represented at real estate/investment transactions, was it really necessary for Board members to spend so much money for so many out-of-state trips over the past 3 years? The STRS Board and administration say yes. The STRS membership says no. One would think that after the Plain Dealer wrote the article in 1995 about STRS Board member expenses for out-of-state trips, and after a 28% decline in assets ($16.3 billion) since August of 2000, maybe - just maybe - expensive trips to places like Hawaii would cease. Not so. Board members Eugene Norris, Deborah Scott, and Hazel Sidaway spent thousands of dollars to go to Honolulu in 2000. Board members Jack Chapman and Gloria Gaylord spent thousands of dollars to go to Kiawah Island off the coast of South Carolina in 2001. Chapman liked it so much that he went back in 2002. Board members Michael Billirakis and Joe Endry spent thousands of dollars to go to Anchorage, Alaska in 2002. Perhaps, in the minds of Board members, the dollar amounts spent and the out-of-state trips taken are not excessive or exorbitant. The STRS Board just simply doesn't understand that if the boards representing the 944 employers that are members of STRS took trips like these at a time when their organization was experiencing financial difficulties and/or declining assets, they'd be run out of town. The public wouldn't stand for it. The "public" that represents STRS is the membership - 178,557 active members, 105,300 retired members, 15,730 rehired retirees, and 944 employers."

STRS board to meet September 15 - 17, 2010

From STRS, September 8, 2010

PUBLIC MEETING NOTICE

The State Teachers Retirement Board and Committee meetings currently scheduled at the STRS Ohio offices, 275 East Broad Street, Columbus, Ohio 43215, are as follows:

Wednesday, September 15, 2010
11 a.m. Disability Review Panel (Executive Session)

Thursday, September 16, 2010
9 a.m. Retirement Board Meeting

Friday, September 17, 2010
9 a.m. Resumption of the Retirement Board Meeting

The Retirement Board meeting will come to order at 9 a.m. on Thursday, September 16, 2010, and begin with a report from the Member Benefits Dept. - Health Care, followed by the Executive Director's Report, public participation and Long-Term Fiduciary and Financial Contingency Planning. The Retirement Board meeting will resume at 9 a.m. on Friday, September 17, and begin with a report from the Investment Dept., followed by Enterprise Risk Management, routine matters, old business, new business or any other matters requiring attention.

Ohio's pensions travel expenses; STRS is mentioned

From John Curry, September 8, 2010

Pension officials note that vendors no longer can pay for meals and other perks at conferences, and there often is no better way to familiarize themselves with the companies in which they invest. A portfolio manager for the State Teachers Retirement System of Ohio justified a $2,400 trip to San Francisco, in part, because the fund owns real estate in the area.

(Note from John....STRS does staff California offices with STRS employees. Here is a link to that staffing:)

http://www.strs.state.oh.us/westcontacts.html

Laura Ecklar, spokeswoman for the teachers pension fund, noted that employees of the system manage 88percent of its real-estate holdings, a significantly higher percentage than other pensions that outsource such responsibilities.

The teachers pension system is the only one of the five to pay for significant foreign travel. In the year ending July 1, managers with the State Teachers Retirement System of Ohio visited Japan, China, South Africa, England, Mexico, India and Malaysia, sometimes tacking personal vacations onto the end of their official business. Several trips cost more than $10,000.

An international consulting analyst who visited Mexico - the cheapest foreign trip, costing less than $2,000 - said he was able to get a read on the country's economic situation just by looking around.

"I was able to see for myself the level of building activity and traffic on the street in Mexico City to get a gauge on economic activity," wrote the analyst, Larry Tedeschi.
http://www.dispatchpolitics.com/live/content/local_news/stories/2010/09/08/copy/pension-officials-traveled-in-style.html?sid=101
Pension officials traveled in style

Public systems' excursions exceeded $1 million in year

Columbus Dispatch, September 8, 2010
By James Nash

NEWYORKPALACE.COM

(Click images to enlarge)

Two board members of the Police & Fire Pension Fund attended a conference at the New York Palace Hotel in rooms costing more than $400 a night. When two board members of the Ohio Police & Fire Pension Fund jetted to New York in October for a conference on protecting investments, the pension fund made an investment of its own: more than $400 per night for each trustee to stay in a hotel that "blends old-world elegance and new-world opulence."

The board members, Columbus Police Officer Ed L. Montgomery and retired Cleveland firefighter William Deighton, stayed three nights each at the New York Palace, a five-star hotel that happened to be the venue of the conference. The conference itself wasn't cheap, either: $1,125 for each board member.

All told, Ohio's five public pension systems spent more than $1 million between June 2009 and June 2010 on conference-related travel, according to records obtained by The Dispatch under a public-records request. The expenses ranged from a few dollars to attend a workshop at a Columbus hotel to more than $10,000 to hobnob with executives in South Africa and London.

Even as the downturn in the economy sucked billions of dollars of value out of Ohio pension investments, board members and employees of the public pension systems continued to travel across the country - and sometimes out of it - to attend conferences on investing, information technology and management practices.

Pension officials defend the expenditures as necessary to stay on top of developments in the markets during a volatile time. And records do show officials scrimping in some instances. When two leaders of the Ohio Highway Patrol Retirement System traveled to Florida in March to speak to retirees at a snowbirds gathering, they stayed in a Clarion Inn for $85 a night. For every $41 steak billed to a retirement system - and there were few of those - there were a dozen hamburgers, salads and pizzas at airport and hotel cafes.

Still, some of the 1.1 million retired government workers in the five systems question the need for expensive travel and conferences that cost as much as $2,544 in attendance fees alone.

"That doesn't really surprise me, but it seems like the little people in a corporation - and I don't care what corporation you're talking about - are the ones that suffer," said Kathy Bowman, a retired charter-school liaison who lives in Van Wert. "The big wheels are the ones taking the extravagant vacations."

Bowman worked eight years for the Electronic Classroom of Tomorrow before taking a disability retirement last year. Her health-insurance rate through the School Employees Retirement System of Ohio will increase from $202 a month to $579 at the beginning of next year as part of the pension system's drive to remain solvent.

Tim Barbour, spokesman for the School Employees Retirement System of Ohio, noted that the pension system has cut back on travel costs by, for example, no longer sending officials to the International Foundation of Employee Benefit Plans annual conference in Hawaii. Board members are limited to three out-of-state conferences per year, he said.

Some retired police officers and firefighters question the need for Ohio Police & Fire Pension Fund trustees - who themselves are retirees rather than financial experts - to attend pricey out-of-state conferences. But Gary L. Monto, president of the retirees' association, said the trustees need to be educated about investments, although $400-per-night hotel rooms "do not make me happy."

Pension officials note that vendors no longer can pay for meals and other perks at conferences, and there often is no better way to familiarize themselves with the companies in which they invest. A portfolio manager for the State Teachers Retirement System of Ohio justified a $2,400 trip to San Francisco, in part, because the fund owns real estate in the area.

Laura Ecklar, spokeswoman for the teachers pension fund, noted that employees of the system manage 88percent of its real-estate holdings, a significantly higher percentage than other pensions that outsource such responsibilities.

The teachers pension system is the only one of the five to pay for significant foreign travel. In the year ending July 1, managers with the State Teachers Retirement System of Ohio visited Japan, China, South Africa, England, Mexico, India and Malaysia, sometimes tacking personal vacations onto the end of their official business. Several trips cost more than $10,000.

An international consulting analyst who visited Mexico - the cheapest foreign trip, costing less than $2,000 - said he was able to get a read on the country's economic situation just by looking around.

"I was able to see for myself the level of building activity and traffic on the street in Mexico City to get a gauge on economic activity," wrote the analyst, Larry Tedeschi.

jnash@dispatch.com

STRS Flashback - 1 year ago - Dennis Leone to the STRS board and Michael Nehf

From John Curry, September 6, 2010

From: Dennis Leone
Sent: Sunday, August 16, 2009 9:55 AM
To: 'Board'; 'Nehf, Mike'
Subject: Everything is NOT really "on the table"

Board – I write this in my last day as an elected STRS Board member. Much has been written over the past several months how “everything is on the table” pertaining to potential reductions to address future pension solvency concerns. Here is the truth: Everything is NOT on the table – at least as such pertains to the STRS staff and the STRS Board majority.

While the board annually takes action to require retirees to pay more for health insurance, while the total assets at STRS have dropped a staggering $27.4 billion since 10-31-07, and while the board soon will be making far-reaching legislative recommendations to reduce retirees’ COLA, to increase the contribution rate of active teachers, to increase the contribution rate of employers, to eliminate the ill-advised 35-year/88% rule, to calculate final average salaries on the top 5 years instead the top 3 years, and to raise the minimum age of retirement, here is what is NOT “on the table” for consideration:

1. The staff has refused to recommend --- and the board has refused to take action -- to require that STRS employees pay more for their health insurance which is provided by pension system funds.

2. The staff has refused to recommend – and the board has refused to require – that STRS employees receive a base wage reduction. Yes, a few months ago the board finally and reluctantly took action (with split votes) to implement a wage freeze, to require a 40-hour work week (changing the long-standing 37 ½-hour work week), to suspend bonuses for the second half of fiscal year 2009, to eliminate bonuses completely in future years when STRS experiences a stock market loss, to require a minimum asset threshold of $65 billion for investment staff members to be eligible to achieve their bonus potential, and to remove certain staff positions (i.e. real estate attorney) from the bonus plan completely . It deserves noting that ALL of these were initially rejected by both the STRS staff and the STRS board majority when they were first recommend many months earlier. The staff and the board felt they knew better, and the changes that finally occurred only after much ugliness and blood on the sidewalk. But don’t talk about anyone getting a possible wage reduction. After all, the staff and OEA-dominated board majority continue to believe that STRS won’t be able to attract the “best and the brightest” at STRS if we reduce wages or if we fail to give bonuses to investment staff. Never mind that the average BASE compensation for the STRS investment staff in fiscal year 2009 was $156,000. Bonuses come into play on top of that, even though the STRS Board provides staff with spectacular fringe benefits and a wonderful pension plan (through PERS) which are not the norm in the private sector.

3. The staff has refused to recommend – and the board has refused to implement – a true hiring freeze. Yes, the board has approved a “head count” freeze, but his is not the same as a hiring freeze. A “head count” freeze does not ensure savings. While I do not believe that the staff will be attempting to “beat the system,” it is a fact that two half-time employees can cost more than one full-time employee -- with the FTE “head count” remaining constant. The STRS executive director has pledged to reduce staff, but the board has rejected the notion that formal action is needed to require it. I made such a motion and it failed. Everything seems to be built on trust, even though the staff and board members personally and collectively violated this trust in past years by wasting pension system money in many, many different ways.

4. The staff has refused to recommend – and the board has refused to require – that STRS employees have an unpaid furlough of any kind. Bowling Green State University announced on August 14 that 500 employees there will be receiving an unpaid furlough during the 2009-10 academic year. Many state offices in Columbus are currently doing the same. Not at STRS however. In fact, there even are employees at STRS who still receive additional compensation yearly with “service awards” as well as annual cash reimbursements for unused sick leave.

5. The board flat-out rejected a motion I made a few months ago to place a moratorium on board member out-of-state travel. In other words, it is okay to reduce things for the membership, but not for the board members themselves. This will cause happiness for board member Tim Myers, who spent thousands and thousands of dollars on out-of-state travel “for training” during fiscal year 2009. Myers is the reincarnation of Jack Chapman on the STRS Board. Myers also publicly stated that the board “broke a promise” when bonus checks were suspended for the investment staff in January (Myers voted no), even though the STRS employees do not have individual contracts, and even though said employees were told very clearly a year in advance, in writing, that the board could suspend or modify the bonus plan at any time for any reason. At the June board meeting, Myers even made a motion (which failed 5-4) to stop me from discussing the bonus question for fiscal year 2009. This provides a snapshot for what STRS is facing in the future with the OEA-dominated board.

The Bonus Embarrassment: At the September Board meeting, the STRS will vote to approve bonus checks totaling $3.4 million for the first half of fiscal year 2009. This means simply that in the past two fiscal years, even though STRS stock market returns have been a dismal -27.1%, a total of $9.4 million will be handed out in bonus compensation. Can you believe it? The board majority didn’t listen in the fall of 2008 when members repeatedly expressed their outrage. No sir. The board majority felt it knew what was best for STRS and felt it knew the pulse of the STRS membership. They told me so, publicly, over and over again. In fact, as two members publicly stated, STRS needs to give bonus checks to staff even when we lose money to provide “an incentive for them to perform at their highest level.” The board could have stopped the bonus plan dead in its tracks one year ago, but did not. The vote to approve $3.4 million in bonuses in September for the first half of fiscal year 2009 is terrible mistake. But we will lose so much more through litigation, Tim Myers wrote recently, if the board does not give the bonuses. This is a cop-out in my eyes, given that a responsible STRS board and STRS staff should have stepped up to the plate to do the right thing a year ago – given what everyone else has gone through and what will be going though in the near future.

Without a doubt, the STRS Board’s recommended pension solvency plan for the Legislature will include a provision to raise the contribution rate of both active teachers and school boards. A proposal to raise the school boards’ contribution – given the reality of the state’s economy – makes no sense whatsoever, and every lawmaker I have spoken with knows this. So what will happen? How will the final proposed bill come up with the dollars needed to replace an increase in the school boards’ contribution rate (which will likely be stripped from or not included in the final proposed legislation)? You guessed it……..a harder hit on the retirees’ COLA and certainly not a harder hit on the contribution rate for active teachers. In other words, take away from those who have the least ability to earn more.

Dennis Leone
STRS Retiree Board Member
August 16, 2009

Another pol dodges CORE's question!

From John Curry, September 5, 2010
Won't take a stand, will he?
John
(Click image twice to enlarge.)
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