A little trip back in history to when they "trashed" the spousal subsidy...THEY DIDN'T WAIT FOR 5 YEARS, DID THEY?

From John Curry, January 15, 2011

In fact, the spousal subsidy disappeared on Jan. 1, 2004 without warning. Now...STRS wants to immediately cut retirees' COLA by 1 to 1.5% but not immediately phase in the increased contributions by active educators for at least several years and as much as 5 years down the road with their "scenarios???" GIVE ME A BREAK!

John

P.S. Why isn't ORTA addressing this inequity...they are supposed to represent retirees, aren't they?

The article below appeared in the Findlay Courier on 2-19-2004.

Benefit changes draw questions

By DENISE GRANT
STAFF WRITER

February 19, 2004

With a long list of questions in hand, about 100 retired educators from Findlay and Hancock County attended a luncheon Wednesday to hear firsthand how their pension fund is being managed.

The Hancock County Retired Teachers Association hosted the luncheon, featuring Gary Russell, STRS Director of Member Services, as the guest speaker.

Association members began mobilizing this fall when Ohio's retired teachers learned that the fund had paid more than $16 million in bonuses to employees since 2000. More than $200,000 was spent on trips for STRS board members and nearly $900,000 was spent on artwork for offices -- all while the pension fund was shrinking.

The controversy forced the resignation of then STRS director Herb Dyer.

Since taking over at STRS, interim executive director Damon Asbury has announced several changes in how the fund will be managed in the future. The changes include mandatory financial disclosure for senior STRS staff members, along with staff reductions, budget cuts, independent audits, among many others.

On Wednesday, much of the discussion focused on health care benefits.

Russell assured the group that the STRS pension fund is in good standing. Most of the concern and uncertainty centers upon health care benefits, not pension payments.

Russell said STRS increased members' co-pays on prescription medication and dropped spousal benefits to keep the benefit fund afloat. Without the changes, the rising cost of medical care and insurance would have bankrupted the fund by 2006.

Asked if the spousal benefit is likely to return, Russell said no.

Improving and increasing the medical benefits offered through pension fund will require a "dedicated funding stream," he said.

STRS is unwilling to divert more money to medical benefits. He said the pension fund's primary obligation is providing its membership with a pension. The medical benefits are actually an option that was first allowed by the General Assembly in the 1970s.

Russell said the additional money will have to come from one of three sources: employees, employers or the taxpayers.

Employees don't want to pay more. School boards don't want to pay more. And, Russell said, editorial boards from across the state have advised STRS that "there isn't much public empathy for a system that allows for retirement at age 50."

Still, Russell said officials at STRS know that retirement without good health benefits isn't much of a retirement. However, for now, there are no easy answers.

Russell also updated Wednesday's crowd on the status of two bills currently being debated by Ohio lawmakers aimed at overhauling the management of STRS, and the state's four other multibillon-dollar retirement funds.

STRS is opposed to two provisions contained in the bills.

In House Bill 227, the Legislature is attempting to mandate that 70 percent of invested trades and 50 percent of externally managed assets from the pension funds go to managers with a significant presence in Ohio.

Russell said STRS already uses Ohio brokers when the price is good. But mandating STRS to use Ohio brokers, even at a higher rate, could cost the pension fund $30 million a year in fees.

"Our first obligation is to our membership," said Russell.

STRS is also opposed to provisions of the House bill that would give the state treasurer sole authority to hire and fire the systems' executive directors.

Russell said the provision would create a "super board member," lessening the authority of other members of the board that are elected by STRS' membership.

The unofficial word, Russell said, is that both of these provisions most likely will be removed from the bill.
----------
Contact staff writer Denise Grant at: (419) 427-8412
denisegrant@thecourier.com

RH Jones to STRS Board and ORTA: The COLA should NOT be taken away from those who have already retired with it

From RH Jones, January 15, 2011
Subject: Violation of rightful law

To all:

By supporting any cut in our 3% fixed COLA is in effect advocating breaking the law. Quite astoundingly, the law has already been broken with the take-away of spousal and dependant children HC/Rx insurance coverage. The government, nor the OH STRS, nor anyone else, cannot “after the fact” just decide to arbitrarily take away defined benefits that have been promised and written into law. Simply put: it's written in stone!

Although it would damage a retirement system’s ability to provide guaranteed pensions to those already retired, in the very near future a new law can be passed and signed into law to lower the COLA and HC/Rx for the public employees who are hired after the signing of that change in law; but, again, there cannot be a take-away from those who already retired under the old law. To do so would be unconstitutional.

The laws of the land, guaranteed by our U. S. Constitution, should not be taken lightly. Remembering the Nazis world of Anne Frank, “... and then they came for me.” Collectively, we cannot, and should not, let anyone get away with this.

In all due respect,

RHJones, retired OH teacher

STRS sliding backwards once again?

From Dennis Leone, January 15, 2011

About 2000, without any warning whatsoever to retirees, the STRS Board suddenly eliminated the 13th check and dropped health insurance for spouses of retirees. Current retirees still receive a subsidy for health insurance, but the entire Health Care Stabilization Fund will die sometime between 2017 and 2019.

That will mean, for example, that retirees with a spouse will need to fork up the full cost for a family insurance plan......which currently is over $1,300 PER MONTH. By 2017, it likely will be over $2,000 per month. The sudden elimination of those two things for retirees and the plan to reduce retirees’ COLA immediately in 2011 make an OEA-desired 2015 phase-in for increased active contributions extremely insulting to retirees. In fact, it is an outrage.

The 88%/35-yr rule was adopted by the Board in 1999 and went into effect the following year, in 2000. Those retiring in 1999 and before – while all received a cash boost to make everyone feel better about the board’s 1999 action – are receiving 77% (not 88%) if they worked 35 years.

So, the bottom line is that if the 88%/35-yr rule is eliminated in 2011, there were 12 years of the “haves” and “have nots” – those retiring before 2000, and those retiring in 2000 and after. (The year 2000 is year 1, and 2011 is year 12.) Any way one tries to twist the data associated with this, it has been a 12-year, $1 billion hit on the STRS pension fund.

It should never, NEVER have happened. It happened at a time when over 300 non-investment STRS employees also were getting giant bonus checks every year, just for coming to work and doing their jobs. It happened at a time when the STRS Board also was insulting retirees by spending pension money on parties, booze, multiple trips to Honolulu, and expensive sculptures – while OEA consciously and deliberately looked the other way. There wasn't enough money for spousal health insurance and a 13th check, but there was obviously plenty of money for these things and for future fat, 88% pensions.

It’s a major STRS/OEA embarrassment when one really thinks about it. The current STRS Board is displaying many of the same characteristics that the STRS Board displayed in the early 2000s. Protecting current retirees is No. 2 in importance. Protecting the STRS staff, minimizing the impact on active teachers, and making OEA happy, collectively, are No. 1 in importance today.

Dennis Leone
STRS Board Member between 2005 and 2009

Linda Meinelt to STRS Board: Hold the line on COLA cuts

From Linda Meinelt, January 14, 2011

From: Linda Meinelt
Subject: COLA
To: contactus@strsoh.org
Date: Friday, January 14, 2011

To STRS Board Members: Governor Kasich has taken a hard line on funding for STRS and the other pension funds.

We, the stakeholders, need to take a hard line with STRS. It is past time for STRS to cut expenses (yes, more than you have!)

I urge Board members to find ways to make that huge building add some income to the STRS budget by renting out some of the space and the parking garage. Look again at staffing, bonuses, benefit packages. Leave no stone unturned in figuring ways to cut the expenses at STRS so that the stakeholders are not continuing to take the "hit."

Also, administrators need to respond to questions from STRS members the first time they are asked, not after multiple requests or not at all! Board members HOLD THE LINE and do not cut COLA below 2%. Retirees have suffered enough and have no way to recoup the losses of the COLA cut, the enormous increase in health care costs or the loss of the 13th check.

Let me reiterate, I DO NOT SUPPORT any further reductions from the 2% COLA.

Linda Meinelt
Retiree

Here are the STRS's possible scenarios that they *may* refer on to the Legislature!

From John Curry, January 14, 2011
Click image TWICE to enlarge.

STRS report on January 2011 Board meeting

From STRS, January 14, 2011

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 January report follows.

JANUARY BOARD NEWS

RETIREMENT BOARD REOPENS DISCUSSION ON PENSION PLAN CHANGES

In September 2009, the State Teachers Retirement Board approved a set of changes to its pension plan design to strengthen the financial condition of the pension fund. Economic and demographic factors, coupled with the effects of the "Great Recession," had caused a significant reduction in available funds to pay off accrued pension liabilities over time. As a result, the funding period (i.e., the number of years required to pay off the pension fund's unfunded actuarial accrued liabilities) was "infinite." Without action by the board, STRS Ohio would eventually be unable to pay benefits. Consequently, the board adopted a multifaceted plan affecting both active and retired teachers in 2009; then approved some modifications to the plan in October 2010. For the proposed changes to go into effect, however, legislation is required.

Feedback from the Statehouse has indicated that any final pension legislation for STRS Ohio will not include the request for an increase of 2.5% in employer contributions contained in the current board plan. Further, the plan must also result in a funding period for the pension fund that does not exceed 30 years; the current proposed plan brings the funding period down to 35.1 years - and to only 46.1 years without the additional employer contributions.

The board has been given an opportunity to develop a revised plan, though the timeline is relatively short. Consequently, the board began that discussion at its Jan. 13 board meeting, and has agreed to hold a special meeting on Friday, Jan. 21, beginning at 11 a.m., to continue the discussion.

The board has asked staff to look at several new scenarios that do not include an increase in employer contributions to see if they result in a 30-year funding period. The components contained in these scenarios include member contributions; age and service requirements for retirement eligibility; benefit formula; final average salary (FAS) period; and the cost-of-living adjustment (COLA).

At the next meeting, the board will have an opportunity to see if any of the scenario combinations bring the funding period to 30 years, as well as if additional scenarios should be considered.

The board has already scheduled its annual retreat at STRS Ohio for Jan. 26 and 27 and could continue the discussion at that meeting, with the goal of approving a new plan at that time.

2010 MEMBER SURVEY RESULTS PRESENTED

On a national level, public employees and public pensions are under attack. Closer to home, STRS Ohio's own members have faced uncertainty and lack of specific details regarding their retirement due to no legislative action as yet on pension plan changes, as well as the financial issues facing the STRS Ohio Health Care Program. Nevertheless, the membership surveys conducted in late 2010 show that most STRS Ohio members - active and retired - continue to have positive overall impressions of the system; most also still consider their pension an excellent or good value.

These were just a few of the findings from the annual membership surveys presented by Dr. Marty Saperstein of the Columbus-based research firm, Saperstein Associates, during the board's January 2011 meeting. The phone surveys were conducted in late November and December 2010, and involved 601 randomly selected participants (300 retirees and 301 active members). This survey marks the eighth year the surveys have been conducted.

The survey results also showed the following:

- Positive impressions about STRS Ohio extend to member services, the work of the Retirement Board and system communications. Understandably, though, there is a growing need for pension- and health care-related information.

- Compared with last year, fewer actives feel the pension system is financially sound.

- A majority of enrolled retirees continue to value their health care coverage. However, a substantial minority - perhaps as many as three out of 10 enrolled retirees - continue to consider their health care coverage a fair or poor value.

- While only a small percentage of retirees are participating in the health improvement programs offered by the STRS Ohio health care plans, those who are participating are satisfied with the programs.

- There is more interest in using Web-based services among actives (e.g., online service retirement applications).

- About half of the active members expect to teach longer than they originally thought. Of those, two out of five cite proposed pension plan changes as a reason.

- Nine out of 10 retiree households have at least one source of income in addition to STRS Ohio.

RETIREMENTS APPROVED

The Retirement Board approved 176 active members and 179 inactive members for retirement.

OTHER STRS OHIO NEWS

STRS OHIO RECEIVES STATE AUDITOR'S AWARD

STRS Ohio has received the "Making Your Tax Dollars Count" award from the Auditor of State's Office for the third consecutive year. STRS Ohio is receiving this award for the quality of its financial reporting and absence of audit issues for fiscal year 2009. Less than 5% of Ohio public entities receive this prestigious award.

FIRST REIMBURSEMENT RECEIVED FROM EARLY RETIREE REINSURANCE PROGRAM

STRS Ohio has received its first Early Retiree Reinsurance Program (ERRP) reimbursement for its self-insured plans from Health and Human Services (HHS) in the amount of $13.3 million. STRS Ohio's next submission will be in March 2011, as HHS allows only one reimbursement request per quarter per application. As required by the health care reform legislation, STRS Ohio will also begin notifying its early retirees of STRS Ohio's participation in this program. The reimbursed ERRP funds received from HHS will be placed into the Health Care Stabilization Fund, mirroring how retiree drug subsidy program monies are deposited.

Special STRS Board meeting scheduled for January 21, 2011

From STRS, January 14, 2011

PUBLIC MEETING NOTICE

The State Teachers Retirement Board will convene a special meeting at 11 a.m. on Friday, Jan. 21, 2011, for the purpose of discussing long-term fiduciary and financial contingency planning. This special meeting will be held at the STRS Ohio offices located at 275 East Broad Street, Columbus, Ohio.

This Missouri State Employees Retirement System's executive director says it so well!

From John Curry, January 13, 2011

“The problem with the state's pension fund is simple: No one's making any money off it except the retirees. The money just sits there, happily accruing interest and none of the state's huge financial corporations see a penny of it.”

Gary Findlay: Those pursuing the demise of DB plans should come clean on their conflicts

“It ain't what you don't know………

January 12, 2010 (PLANSPONSOR.com) - Mark Twain said, “It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”

This piece of wisdom was aptly updated in a December 23, 2010, New York Times editorial by Paul Krugman as follows:

“…why does it matter what some politicians and think tanks say? The answer is that there’s a well-developed right-wing media infrastructure in place to catapult the propaganda…to rapidly disseminate bogus analysis to a wide audience where it becomes part of what “everyone knows.”

I believe this goes a long way toward explaining what “everyone knows” about government employees in general and public employee retirement plans in particular that just ain’t so. Some of what “everyone knows” now, based on such propaganda and bogus analysis, follows:

• Government employees are overpaid relative to private sector employees.
• Government employees have retirement plans that are overly generous.
• Governments continually expand the size of their workforce. Government retirement plans are hiding the “true” cost of those plans.
• Government retirement plans are being far too optimistic about future investment return.
• Government employees should have nothing but defined contribution plans.

While I’m sure you can think of a number of other unsubstantiated criticisms, this list is sufficient for addressing the disinformation dilemma.

Regarding base compensation, comparing the pay of a research scientist at the Center for Disease Control with pay of a box store greeter would probably suggest a disparity. Is it valid? No, but validity does not seem to be instrumental in making their case. So, who are these overpaid underworked nameless, faceless public sector derelicts that have been dehumanized in the interest of creating targets for criticism? They are a workforce that is contracting and not expanding. They are teachers and first responders and corrections officers and mental health direct care workers. They are conservation agents and protectors of the environment. Some of them are even securities regulators. In other words, they are your friends and neighbors. They did not cause the credit crisis and market meltdown.. They did not produce the current level of unemployment. They did not promise themselves a certain level of benefit for a career of public service. Yet they seem to be the ones who are expected to bear the responsibility for all of the problems being faced by the nation today – at least there are some well financed “researchers” who would like very much for that to be part of what “everyone knows.”

The retirement issue (particularly the defined benefit/defined contribution debate) actually has a long history. In the late 1990s, there was a major push in a southern state to give state employees the option of moving from the existing defined benefit plan to a defined contribution plan, with the expectation that there would be a large number wanting to make the move, given the long running bull market at that time. Promoting the legislation to give employees this option were 70 plus lobbyists, described in the Wall Street Journal as being lined up Gucci to Gucci in the capitol building, who, not so coincidently, were there representing a number of large financial institutions. It just so happened that those financial institutions were expecting to play a role in managing the individual accounts in the defined contribution plan. A local newspaper picked up a sense of what was happening in the following excerpt from an editorial regarding the existing defined benefit plan.

“The problem with the state's pension fund is simple: No one's making any money off it except the retirees. The money just sits there, happily accruing interest and none of the state's huge financial corporations see a penny of it.”

There is no disputing the fact that large pools of defined benefit plan money can be managed much more cost effectively and efficiently than can individual self-directed accounts in defined contribution plans. That potential fee differential on hundreds of billions (trillions) of dollars has not gone unnoticed by those who would like a piece of the action.

Interestingly enough, a defined contribution plan does not have to be made up of individually managed accounts – that is, it can be managed in a single pool with participants owning proportionate shares of the pool. However, that does not run up the fees and it leaves the employer and the trustees with fiduciary responsibility for anything that goes wrong.

Some years ago the federal government ruled that private sector employers could effectively avoid the fiduciary responsibility bullet by simply making enough options available to plan participants. (As you might expect, there was no shortage of interest in that regulation.) Fees, of course, were not an issue for the employers since those were being charged to the individual participant accounts, in many cases without disclosure of the impact fees were having on account balances.

Of late, a number of so-called think tanks have been generating reports alleging that public retirement plans are being overly aggressive with their assumptions about future earnings on their portfolios. The claim is that if the plans lower their earnings assumptions it will reveal the “true liabilities” of these plans and substantially lower the extent to which the liabilities of public plans are funded. The reporters “catapulting this propaganda” apparently are quite willing to accept that the claims set forth in these research reports are credible and independent because, after all, the researchers say that they are. This is an issue that can actually be resolved quite easily. All the think tanks have to do to confirm their independence is to reveal the source of their funding and let the readers decide. After all, they expect elected policy makers to fully disclose the source of their funding. It seems only reasonable that since they seemingly also want to play a policy making role they should be equally forthcoming with information regarding who is directly or indirectly picking up the tab for their work.

Other than for those in the private sector who have direct financial motivations or whose greed in the 1990s cost them dearly in the last 10 years, are there others who would like to see public sector defined benefit plans just go away so the public sector would join the private sector in a race to the bottom? It turns out that there are.

(1) It seems that these pesky public sector institutional investors who manage defined benefit plan assets actually vote their proxies and think they should have some “say on pay” at the corporations in which they invest. Grover Norquist, head of Americans for Tax Reform, is on record as having said, "Just 115 people control $1 trillion in these funds. We want to take that power and destroy it." What better way to destroy it than to encourage a mass migration to defined contribution plans? As you might imagine, powerful lobbying groups, such as the U.S. Chamber of Commerce and the Business Roundtable were quick to endorse this concept because participants in self-directed accounts do not vote their proxies. However, the institutions that are doing the investing for those companies do vote proxies. The institutions that are investing defined contribution assets also have business relationships with the corporations in which these investment accounts are invested and I am sure they want to maintain those relationships. How likely is it that they are going to vote against management at these companies, particularly management making the decisions regarding which financial institutions they will use?

(2) Another beneficiary of the defined benefit to defined contribution movement is the federal government. The theory supporting defined contribution plans is that when employees move from one organization to another they will take their retirement accounts with them and continue to pursue the accumulation of money that will be available to support them when they retire. In reality, many of these accounts are cashed out when employees move from one organization to another. Those amounts are then taxable income in the year of the distribution and, in many cases, are also subject to a 10% premature distribution penalty. The fact is that these distributions are producing billions of dollars in federal revenue, all without the necessity of increasing tax rates. It is also a fact that when these former plan participants come up short in retirement, several years will have passed and it will be someone else’s problem (likely the problem of some state or local governmental unit).

This does not exhaust the list of those who stand to benefit in the short term from the demise of defined benefit plans in the public sector but I think it serves to suggest that there may well be less than altruistic motivations driving the proponents. When you hear or read that “they” say, give some thought to who “they” are and what it is “they” would like for “everyone to know” regardless of whether or not it can be supported by objective analysis. The environment has been ripened for exploiting the fear and anger that seems to be driving the masses today. It’s ironic that those who were largely responsible for that crisis that led to the fear and anger would be the beneficiaries of the elimination of public sector defined benefit retirement plans through increased fees.

I do have to give credit where credit is due. Whoever is paying for all of the current bashing of government employees and defined benefit plans is certainly getting their money’s worth. In the past two years, I’ve seen more of it than in my previous 35 years in the business combined. The approach is really simple – if you provide resources to others who will say something loud enough and with enough frequency, it does become part of what “everyone knows” despite the fact that it “just ain’t so.” The volume is impressive – it reminds me of the legal tactic of burying opponents in discovery. This week I found myself wasting time countering a “think tank” research report in which it was claimed, among other ridiculous things, that workers are better off in defined contribution plans because individuals will take more risk than will investment professionals managing pooled funds. I felt obligated to waste time on it simply out of fear that some people reading it might actually take it seriously.

In thinking all of this through, something did occur to me that I’ll mention only briefly here and reserve for future detailed commentary. In trying to identify their overall objective, I have to at least allow for the possibility that public sector defined benefit plans are simply a pawn in a much bigger chess game. It is beginning to display earmarks of being nothing more than a well-orchestrated initiative targeted at public sector union busting – signs of that are surfacing with some regularity but that’s a discussion for another day.

For the benefit of those who are annoyed by this article, I will, for their benefit, conclude the way I began – with a Twain quote:

“Few things are harder to put up with than the annoyance of a good example.”

- Gary Findlay, Executive Director, Missouri State Employees’ Retirement System (MOSERS).

Mr. Findlay is executive director of the Missouri State Employees' Retirement System (MOSERS), a position he has held since 1994. Prior to that, he spent 16 years as an administration and benefit consultant with Gabriel, Roeder, Smith & Company, a national actuarial and benefits consulting firm that specializes in serving the needs of public employee benefit plans. He was CEO of that firm from 1986 until he joined MOSERS.

http://plansponsor.com/OpinionsArticle.aspx?id=6442476606

Pension Funding Scenarios - presented at the January 13, 2011 STRS Board meeting [Click images TWICE to enlarge]

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Newt is out after your pension!

From John Curry, 1/11/11

http://www.pionline.com/article/20110110/PRINTSUB/301109976

"Former House Speaker and possible GOP presidential contender Newt Gingrich is pushing for federal legislation giving financially strapped states the right to file for bankruptcy and renege on pension and other benefit promises made to state employees. "

Regulation & Legislation

Latest News

Dennis Brack/Bloomberg News

Banning: Newt Gingrich's proposal would bar tax increases ‘as part of the solution.'

Gingrich seeks bill allowing state bankruptcy to avert bailouts

Move afoot to help states escape benefit obligations

By Doug Halonen
January 10, 2011

Former House Speaker and possible GOP presidential contender Newt Gingrich is pushing for federal legislation giving financially strapped states the right to file for bankruptcy and renege on pension and other benefit promises made to state employees.

Proponents of the measure — which include Americans for Tax Reform, a Washington lobby group that fights tax increases — said the legislation is desperately needed to clear the way for struggling states to slash costs before they go belly up, and should be regarded as a preemptive move that could preclude the need for massive federal bailouts.

“It's in the short-term and long-term interests of government workers and taxpayers to start those reforms now, rather than having to pick up the pieces after a crash landing,” ATR President Grover Nor-quist said in an interview.

“We are working with people inside and outside of Congress on this issue,” said Joe DeSantis, a spokes-man for Mr. Gingrich, whom Mr. DeSantis said is considering a bid to be the Republican presidential candidate in 2012.

Mr. Gingrich discussed the proposal in a Nov. 11 speech before the Institute for Policy Innovation, an anti-big-government group based in Lewisville, Texas. According to a transcript of the speech on Mr. Gingrich's website, www.newt.org, he said: “I ... hope the House Republicans are going to move a bill in the first month or so of their tenure to create a venue for state bankruptcy, so that states like California and New York and Illinois that think they're going to come to Washington for money can be told, you know, you need to sit down with all your government employee unions and look at their health plans and their pension plans and, frankly, if they don't want to change, our recommendation is you go into bankruptcy court and let the bankruptcy judge change it, and I would make the federal bankruptcy law prohibit tax increases as part of the solution, so no bankruptcy judge could impose a tax increase on the people of the states.”

Concerns about the funded status of public pension plans are increasing because the aggregate public pension plan funding level dropped to 80% for the fiscal year ended June 30, 2009, the most recent year for which data are available, from 85% a year earlier, according to the National Association of State Retirement Administrators, Baton Rouge, La.

States whose plans have the lowest funded status ratios, also as of June 30, 2009, were Illinois, with 51%, and Kansas, Oklahoma and New Hampshire, each with 59%, according to an analysis of state pension fund annual report data by investment bank Loop Capital Markets LLC, Chicago (Pensions & Investments, Dec. 13).

Vow to fight proposal

State and union officials vow to fight the bankruptcy initiative, which they fear would undermine state autonomy and be used to reduce promised benefits to government workers.

“I am unaware of any public pension plan that is requesting federal assistance,” said Keith Brainard, NASRA research director.

“Exaggerated reports on the financial condition of public pension plans are being used as a scare tactic to justify federal intervention,” Mr. Brainard added.

Said Mark McCullough, a spokesman for the Service Employees International Union, Washington: “This is another right-wing attack on behalf of their (the GOP's) anti-middle class, big-business donor base.

“It would amount to not just another attack on working families, but an attack on everyone from investors to retirees who would see the economy reel from the ripple effects of state bankruptcy as they pursue the goal of making American workers expect no better pay or benefits than workers in the developing world.”

So far, proponents of the legislation said they have not yet recruited a congressional sponsor for the proposed measure. “We're still shopping for the guy who is going to carry it,” Mr. Norquist said.

Nonetheless, union executives are concerned that the proposal — which has been promoted on conservative websites recently — is part of a well-orchestrated and hitherto underground campaign now surfacing as Republicans settle into leadership positions in the new Congress.

“This idea carries major negative financial implications for the states, their creditors and the companies that do business with them,” said Charles Loveless, director of legislation for the American Federation of State, County and Municipal Employees, Washington. “A state going into bankruptcy would send shock waves through the states and could very well undermine our fragile national economic recovery,” he said.

“It is incredible to me that proponents of this portray themselves as advocates of state rights when what they're really doing is driving states into the ground,” Mr. Loveless added. “It's clearly in an effort to renege on public employee collective bargaining contracts.”

Need to backstop benefits

The bankruptcy proposal also raised concerns in some corners because there's no agency to back up the pension benefits of state workers the way the Pension Benefit Guaranty Corp. backstops benefits for participants in corporate-sponsored pension plans, said Babette Ceccotti, a partner at Cohen, Weiss and Simon LLP, a New York law firm that specializes in labor and employee benefit issues.

Proponents of the state bankruptcy legislation “are proposing the cuts, but not a safety net for people's retirement security,” she said.

But Mr. Norquist said that, assuming the proposal becomes law, not every state would file for bankruptcy — a right that municipal governments already have under Chapter 9 of the U.S. Bankruptcy Code.

“If you don't have this (a state bankruptcy process), you have New York, Illinois and California running off the rails because there's no way to fix their problems ... They've got these contracts with government workers that you can't alter,” Mr. Norquist said.

He said restructuring benefit obligations doesn't necessarily mean cutting the amount of money a retiree gets; it could involve freezing a public defined benefit plan and enrolling new employees in a defined contribution plan.

Rep. Devin Nunes, R-Calif. — who introduced legislation late last year that would require state and local plans to disclose their finances to the U.S. Treasury — had no immediate comment on the bankruptcy proposal, said his spokesman, Andrew House. “He's aware of the proposal, but has yet to take a public position on the issue,” Mr. House said.

The Nunes bill, which also would bar federal bailouts of public plans and deny a federal tax exemption for bonds issued by governmental entities that don't comply with the new disclosure requirements, will be reintroduced on Jan. 19, Mr. House said.

Mr. House said finances of state and local governments will be a hot-button issue on Capitol Hill this year. “The whole area of how to deal with soaring debt at all levels of government and the consequences to the national economy will be the subject of hearings in multiple committees,” Mr. House said.

Rep. Paul Ryan, R-Wis., who co-sponsored Mr. Nunes' bill, and became chairman of the House Budget Committee earlier this month, was also mum on the bankruptcy proposal.

“Congressman Ryan certainly shares the concerns that state governments across the country are failing to live within their means, just as he has expressed continued concern for Washington's fiscal recklessness,” said a spokesman for the Wisconsin lawmaker. “But the congressman has yet to decide how to address the state issues.”

Contact Doug Halonen at dhalonen@pionline.com

Special STRS Board meeting January 26-27
Wednesday, January 26, 2011, 1:00 p.m.
Thursday, January 27, 2011, 9:00 a.m.
STRS building, 275 E. Broad St., Columbus, OH 43215

RH Jones: Letter to ORTA

From RH Jones, January 9, 2011

To ORTA officials, STRS officials and all:

For ORTA’s “Write Us a Letter” mentioned in the Winter Quarterly 2010, Vol. 63 No. 1, as a Life Member I am sending them the following letter:

Early on in my retirement, my OH STRS issued a very much needed and welcomed yearly inflation-fighting 13th check. Along with myself, I was also covered by HC/Rx for my wife, and this insurance coverage had very low medical co-pay. (All this was as promised to me before I made the decision to retire from a life-long career of teaching).

Consequently, I could volunteer for a public duty that required me to use my car on average of twice per week and at a total of 12-hours of my time per week. I traveled around Summit County often hauling a carload of people. This duty saved the government from having the expense to hire persons and a vehicle to do this job.

I continued this volunteering until such time as my STRS started, perhaps illegally, to renege on my promised HC/Rx. Of course, this is not all my STRS’s fault; the OH Legislature shares blame. In order to keep up with hyperinflated HC/Rx costs, their failure to properly back funding for the STRS with Ad Hoc increases and increases in employer contributions, there is not space in this letter to enumerate all their shortcomings. In order to insure future OH prosperity, maintaining a sound STRS is part of educating all of the next generation. If you think it is too expensive, try ignorance.

Unfortunately my ORTA is also part of the problem in this aspect: In this Quarterly Page 6, as part of their ORTA Legislative Guidelines For 2011 they say: “…and to maintain a COLA.” Fellow ORTA members, this could mean a percent as low as 1%. We currently receive a 3% non-compounded COLA. To leave out mention of maintaining the receipt of our present simply calculated 3% COLA, is evasive, and sends the STRS officials and the legislators the message that ORTA will willingly accept a COLA cut.

I strongly oppose this milquetoast approach to our Legislative Guidelines. My STRS retirement gross income is reported to me yesterday by our STRS to be almost $700 less, now in the year 2011, than last year! And there are those politicians who want to cut us even more, and are so uninformed as to think we are staying up with inflation? Au contraire, each year we lose ground. Further cuts will only add to the already negative aspects of teaching that seems to be growing. The Beacon reported on 01/06/2011 that two educators were shot in Omaha, Neb. The assistant principal died and the principal was wounded. Need I say more?

My ORTA also quotes outgoing Atty Gen Cordray as saying: “alternate voices -- not necessarily opposing voices”. This letter is not meant to be a “crybaby” approach but a notification to the ORTA officials and membership to an alternate, and I think better approach to keeping and improving on our retirement system. Ohio will be the better for it, educationally and economically.

Finally, I must say that it is certainly not economical for the Ohio treasury to have to pay for services that were once done for free to the government by retired teacher volunteers whose gross income has been lowered to the point that volunteering, for them, is now out of the question.

Robert H. Jones, an ORTA Life Member & SummitCRTA Legislative CMTE Member