Report on February 2011 STRS Board meeting

From STRS, February 18, 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 February report follows.

FEBRUARY BOARD NEWS

NEW MEMBER JOINS STATE TEACHERS RETIREMENT BOARD

John Childs took a seat at the board table during the Feb. 17, 2011, meeting of the State Teachers Retirement Board. He has been appointed as the representative of Dr. Deborah Delisle, Superintendent of Public Instruction. Childs is the executive director of the Office of Fiscal Services for the Ohio Department of Education (ODE). This office is responsible for the management of ODE’s $12.5 billion budget, monitoring and financial oversight of programs, and financial reporting. Before joining ODE in 2001, Childs served as deputy director of the Ohio Environmental Protection Agency. He is a graduate of The Ohio State University, where he received a bachelor’s degree in economics and a master’s in public administration. He is a current board member and past president of the Association of Educational Federal Finance Administrators.

PENSION LEGISLATION INTRODUCED, STRS OHIO STAFF PROVIDE TESTIMONY

Legislation to bring the five statewide retirement systems back to secure long-term financial stability was introduced in the Ohio House of Representatives on Feb. 1, 2011. Rep. Lynn Wachtmann introduced House Bill 69, which has been assigned to the House Health and Aging Committee that is chaired by Wachtmann. A Health and Aging Subcommittee on Retirement and Pensions, chaired by Rep. Kurt Schuring, has begun hearings on the bill.

On Feb. 16, 2011, Michael Nehf, executive director of STRS Ohio, and Terri Bierdeman, director of Governmental Relations for STRS Ohio, presented testimony in support of House Bill 69 during a subcommittee meeting. During his comments, Nehf reviewed the components contained in the plan approved by the Retirement Board at its Jan. 27, 2011, meeting, noting that most of the January’s plan components are not currently in House Bill 69, but should be included as amendments. The January 2011 plan maintains the current 14% employer contribution and brings the pension fund to a 30-year funding period by saving about $10.9 billion in accrued liabilities.

In his remarks, Nehf said “When the board began to proactively discuss future changes to strengthen the solvency of the pension fund in early 2009, it openly recognized and acknowledged that few would be happy with the needed changes. Current and future teachers will be contributing more and working longer for a lesser benefit in retirement; current retirees’ pensions will continue to grow, but at a slower rate due to a reduced cost-of-living adjustment. However, STRS Ohio members will continue to have the financial security provided by a reasonable and reliable pension.”

Schuring has issued a hearing schedule for H.B. 69 that includes opportunities for proponent/opponent/interested party testimony during both day and evening sessions. The members of the subcommittee are: Reps. Bruce Goodwin, Bob Hagan, Richard Hollington, Todd McKenney, Dan Ramos and Wachtmann. The hearing schedule is posted on the STRS Ohio Web site (https://www.strsoh.org/pdfs/hearing_schedule.pdf), along with STRS Ohio’s testimony (https://www.strsoh.org/pdfs/Nehftestimony2162011.pdf) and accompanying materials (https://www.strsoh.org/pdfs/STRSOH_Pension_Hearings_211.pdf) presented at the Feb. 16 hearing. It is Schuring’s plan to have the pension legislation with amendments to the full House floor for a vote in April.

A second placeholder bill addressing pension reform, Senate Bill 3, was also introduced on Feb. 1 by Sen. Keith Faber. At this time, the only language that it contains calls for changes to the Ohio Revised Code “… to modernize, update, and improve the actuarial soundness of the Public Employees Retirement System, Ohio Police & Fire Pension Fund, State Teachers Retirement System, School Employees Retirement System, and State Highway Patrol Retirement System.”

STRS Ohio will continue to use all its communication channels to keep STRS Ohio members and other system stakeholders informed of the progress of any pension legislation.

HEALTH CARE FUND STATUS IMPROVES, BUT LONG-TERM CHANGES STILL NEEDED

The move to a Medicare Part D Prescription Drug Plan via Express Scripts and a positive return on fund assets helped to lengthen the solvency period for the Health Care Stabilization Fund as of Jan. 1, 2011. The results of the annual actuarial valuation of the fund conducted by PricewaterhouseCoopers (PwC) show that the projected life of the STRS Ohio Health Care Program now extends to 2024 — an increase of three years from the previous valuation.

Costs for the health care program are paid out of the Health Care Stabilization Fund. Currently, monies for the fund come primarily from premiums charged to STRS Ohio retirees and their family members who are enrolled in the program, 1% of payroll from employer contributions, Medicare Part D subsidies and investment earnings on these funds. The balance in the fund as of Jan. 1, 2011, was $3.1 billion.

While the solvency of the health care program improved, both PwC staff and STRS Ohio staff noted that the health care fund is projected to become insolvent without significant changes to the program in the future. As discussed at previous board meetings, changes in coverage features, program eligibility and/or premium subsidies will be needed.

Looking to the future, staff noted that the uncertainty regarding federal health care reform, as well as STRS Ohio’s own pension legislation, makes long-term planning difficult at this time. Staff recommends there be a “bridge” to future strategic decisions through a single 2012 program change that would minimize disruption to program enrollees while helping to preserve the balance in the health care fund. This change could be an adjustment to the premium subsidy methodology by reducing the “years of service” multiplier to 2.1% from 2.5%, phased in over 2012 through 2015. The board will continue discussing this option at its March meeting, as well as other program options it asked staff to research.

RETIREMENTS APPROVED

The Retirement Board approved 194 active members and 161 inactive members for retirement.

MEDICAL MUTUAL LAUNCHES EDUCATIONAL CAMPAIGN FOR DIABETIC ENROLLEES

One of the most prevalent diseases among enrollees in the STRS Ohio Health Care Program is diabetes. To help these enrollees better manage their condition, Medical Mutual is starting an educational outreach campaign. Each quarter, diabetic enrollees in a Medical Mutual health plan will receive a mailing that contains information, nutrition tips, product coupons and recipes that encourage healthy eating and lifestyle habits. The first mailing will be sent in mid-February to about 3,330 enrollees.

The February Board News can also be viewed as a PDF by clicking the following link: https://www.strsoh.org/pdfs/Board_News/Feb_2011.pdf

So....why should WE care what happens in Wisconsin?

http://news.yahoo.com/s/yblog_thelookout/20110217/ts_yblog_thelookout/why-the-wisconsin-labor-bill-is-a-big-deal

Why the Wisconsin labor bill is a big deal

By Zachary Roth zachary Roth – Thu Feb 17, 3:12 pm ET

By now, you've probably heard about the kerfuffle in Wisconsin, where demonstrators have been clogging the state Capitol to denounce a bill, pushed by Gov. Scott Walker, that would strip most government workers of nearly all their collective bargaining rights. Schools have closed as teachers skip work to protest. Students have been sleeping in the Capitol rotunda for the last two nights. And there are unconfirmed reports that Senate Democrats may have skipped town to avoid a vote on the controversial measure tonight.

Wisconsin Congressman Paul Ryan summed up the unexpected fervor on MSNBC today: "Cairo has moved to Madison."

Here's a closer look at the what's going on in the Badger state--and what it might mean for the rest of the country:

What exactly would the bill do?

Walker's legislation would end collective bargaining rights--the process by which employees band together to negotiate with employers--for almost all of Wisconsin's state, county and local workers (police, firefighters and the state patrol would be excepted). This would mean, among other things, that unions wouldn't be able to seek pay increases above inflation, unless voters approve those hikes in a special referendum. Unions also would not be able to require members to pay dues, and would have to hold yearly votes to stay organized.

The bill also would make public workers pay half the cost of their pensions, and at least 12.6 percent of their health care coverage. On average, state employees' share of their pension and health care costs would go up by 8 percent.

In exchange for all this, Walker has promised not to lay off or furlough public employees. But he has said that if the bill doesn't pass, he'll order layoffs of up to 6,000 state workers.

How does the proposal affect the state's budget deficit?

Well, that's part of what's at issue. Wisconsin has a $3.6 billion budget shortfall, and the bill would save a projected $300 million over the next two years. "We're at a point of crisis," Walker has said.

But the bill's opponents argue that Walker's plan is less about restoring fiscal responsibility and more about weakening organized labor--a key political opponent for Walker, a Republican. President Obama yesterday said the measure "seems like more of an assault on unions."

And the Wisconsin State Journal, noting the state will run a budget surplus this year, declared: "Walker is manufacturing a fiscal 'crisis' in order to achieve political goals." The paper cited nonpartisan budget figures to make the case that Walker was creating a deficit in the latest budget with lavish spending items on special interests allied with his administration.

What are the chances Walker's bill will become law?

Pretty good. Republicans control the governor's office and both houses of Wisconsin's legislature. The measure passed the budget committee on a party-line vote late last night, and now heads to the Assembly and Senate, where Republican leaders have said they have the votes to pass the measure both chambers. Walker would then sign it into law.

But the Senate's 14 Democrats today threw the process into confusion by leaving Madison to avoid participating in the vote, according to an unnamed aide who spoke to the Wisconsin State Journal. Twenty senators are required for the chamber to do anything, and there are only 19 Republicans.

What are the implications for the rest of the country?

States across the nation are struggling with enormous short-term budget gaps. If Walker's effort passes and is judged a success, it could give a boost to state leaders--GOP Gov. Chris Christie of New Jersey is the most prominent example--who are also looking to rein in public employee benefits. A wave of states advancing Wisconsin-style bids to drastically downscale public unions and pensions could reinforce the notion, pushed by many Republicans, that overly generous state employee benefits are at the root of state budget problems. And that consensus, in turn, could embolden some states to mimic Walker's more direct challenge to collective-bargaining rights.

Meanwhile, if the bill fails or turns out to be broadly unpopular, that could serve as a strong political warning to states now pondering a similar course.

A Teabagger seen at the statehouse in Columbus.......

Click image to enlarge.

Nehf was also talking to the legislators yesterday.......

BILLS HEARD IN THE HOUSE HEALTH AND AGING RETIREMENT AND PENSIONS SUBCOMMITTEE
Rep. Schuring: 614-752-2438
Wed., Feb. 16, 2011

HB69 STATE RETIREMENT SYSTEMS (Wachtmann L) Regarding the state retirement systems.

Michael Nehf, executive director of the State Teachers Retirement System, testified that HB69 represents the first time in STRS history that benefit reductions are being sought, but he said the system understands that without changes, the system eventually won't be able to meet its obligations. He said benefit changes are needed because investment experts indicate increasing its 8 percent long-term rate of return was unrealistic, and that the system will not be able to invest its way out of solvency problems.

Nehf noted that the changes STRS seeks include the authority to increase employee contributions by 1 percent annually for three years beginning July 2012, with permissive authority to seek a fourth 1 percent increase. Per the wishes of Republican lawmakers, the plan does not seek employer contribution increases. Terri Bierdeman, STRS' government relations director, said the system largely made up for having to remove a previously proposed employer increase by delaying the start of cost-of-living adjustments until five years after retirement for those retiring after Aug. 1, 2012.

Nehf said the pension system still will need to make additional changes in the future to address solvency concerns related to its health care fund, which is projected to be solvent until at least 2024. While 1 percent of employer contributions go to health care now, it needs to direct 4.3 percent to health care in order to maintain the program long term.

In response to a question from Rep. Schuring, the committee chairman, Nehf said STRS doesn't anticipate making any major changes next year, but expects to present changes to the health care subsidy percentage to its board this week.

Bierdeman said other changes STRS is seeking include the following:

- A phased in transition to making full benefits contingent on being at least 60 years of age with 35 years of service, or 65 years of age with five years of service.

- A phased in transition to making reduced benefits contingent on being least 55 years old with 30 years of service, or 60 years of age with 5 years of service.

- A benefit formula of 2.2 percent of final average salary for all lengths of service starting Aug. 1, 2015, with an option for those who are eligible to retire as of July 1, 2015, to stick with the previous formula if it will offer them higher payments.

- Calculating final average salary from the five highest years of earnings.

- Changing age and service reduction factors.

- Increasing the service requirement for eligibility for disability benefit to 10 years of service, and reducing the time period members can apply for disability to one year after last date of service.

- Making service credit granted upon a member's returning to work from disability status match either return-to-work service up to five years, or the length of the disability, whichever is less.

- Increasing the service requirement for eligibility for survivor benefits to five years, and reducing the time period for survivor benefit eligibility to 12 months after last date of service.

- Changing service purchase credits to make them actuarially neutral.

- Repealing the program allowing employers to set up early retirement programs that include purchasing service credit for their STRS members.

- Numerous other technical changes to alternative benefit calculations, cost-of-living adjustments, Medicare, defined contribution plan and other issues.

Lisa Morris, executive director of the School Employees Retirement System, echoed some of Nehf's comments on the need to act to assure long-term solvency, and the knowledge that investment returns alone can't solve the problem. The bulk of the SERS solvency plan consists of adding two years to the age of service requirements for full and reduced pension benefits for all active members: requiring age 57 and 30 years of service or age 67 and 10 years of service for full benefits; and age 62 with 10 years of service or age 60 with 25 years of service for partial benefits. Along with some other change, the plan aims to allow $43 million more annually to be directed to unfunded liabilities.

While other systems have proposed changes to cost-of-living adjustments and final average salary calculations, Morris said SERS avoided those options because they yield less benefit while causing greater hardship for members. Final average salary changes would only reduce by about $70 the monthly payments average members get, she said, while salary spiking isn't a frequent problem in SERS. On cost-of-living adjustments, she noted SERS uses a simple 3 percent cost-of-living adjustment that is not compounded, and said reducing the adjustments would be especially hard for low-pension retirees, particularly those who retired long ago.

Morris said SERS funds health care differently than the other systems, varying the amount of employer contributions used for health care depending on investment returns, tweaking health plans and premiums to stay within budget on a pay-as-you-go basis.

Other changes sought to address early retirement, disability programs, service credit purchases and lump sum payments upon death.

View testimony here:

https://www.strsoh.org/pdfs/Nehftestimony2162011.pdf

For more, go to https://www.strsoh.org/

Thursday SB 5 Hearing... A CORE MEMBER ATTENDS AND HERE IS WHAT SHE HAS TO SAY.......

Nancy Hamant to John Curry, February 16, 2011
Subject: Fwd: Thursday SB 5 Hearing....

John,

Bill and I attended Tuesday's SB 5 hearing. There must have been 2000 attendees--mainly Ohio firefighters. Only about 50 people were permitted in the South Hearing room. All others had to listen in the atriums. Tuesday only permitted those in favor to speak. Thursday hearing was supposed to be for opponents, but one email that I read said that proponents were going to continue, then opponents. So opponents may never be heard.

Also, the crowd was under control by the Highway Patrol, which even had a police dog up on the balcony. Folks could not hold up signs and were warned about prolonged yelling and jeering.

I think to continue to sit in the Atriums when the press appears to be overly "friendly" to both Shannon Jones and Gov. Kasich is a waste of time. I think that contingents of AFLCIO folks need to cross the street to the Riffe Tower and politely present their individual cases to the Ohio legislators who are not attending the hearing.

Particularly important would be the sharing of how Ohio families are being kept afloat during this terrible economic downturn--only through public worker and union worker wages.

Stressing how passage of SB5 will only exacerbate Ohio's economic problems is most important. Ohio cannot pass a SB5 which will continue to destroy Ohio's middle class.

Nancy Hamant
-----

From John Curry, February 16, 2011
Subject: the CEA [Columbus] put this one out........

Senate Bill 5, introduced by Senator Shannon Jones (R-Springboro), proposed to end collective bargaining for sate and higher education employees and drastically curtail bargaining rights for K-12 educators. Ohio’s educators and working families are aggressively opposing this bill.

OEA and other labor unions from around the state are going to hold rallies at the State House on Tuesday and Thursday of this week. Consider attending one of these rallies. Unfortunately, CEA does not have enough Association Leave to give you the opportunity to attend. You would have to use a personal day. Remember, your financial future is at stake.

TUESDAY, FEB. 15 Testimony by proponents of HB 5 begins at 2:30 p.m.

...• Meet at OEA at 1:30 to march over to the state house.

...• Signs & Buttons will be available.

...• Wear an association shirt or your school shirt.

...• Bring a lawn chair – it is unlikely due to the number of people expected that we will actually make it into the hearing room.

...• The Tea Party is going to be there in force to support this bill – they are wearing red. Choose you attire accordingly. Do not wear red!

Thursday, FEB 17 Testimony by opponents of HB 5 begins at 10 a.m.

...• Meet at OEA at 9:00 a.m. to march over to the state house

...• Signs & Buttons will be available.

...• Wear an association shirt or your school shirt.

...• Bring a lawn chair and pack a lunch (it could be a long day)

...• The Tea Party has chartered 28 buses for this rally – they will be wearing red. Do not wear red!

CEA-R members please consider attending one of these rallies.

SECRET vote???????? Do we have a violation of Ohio's Sunshine Law?????????

From John Curry, February 16, 2011

"New elections could cut Hovis' term short. The Millersburg Republican was elected president in January by a vote of 10-9, narrowly defeating Debe Terhar, a Republican from Cincinnati elected to the board in November. The votes were secret, so it's not known to the public for whom Harris voted."

CORE's John Bos brings up a good question about a recent secret vote at the ODE...SECRET VOTE???????????? I thought our new Governor wanted transparency in government???????

John

http://www.dispatchpolitics.com/live/content/local_news/stories/2011/02/16/copy/kasich-may-increase-influence-on-school-board.html?adsec=politics&sid=101

State school-board vote Kasich may increase influence on school board

THE COLUMBUS DISPATCH
February 16, 2011

By Catherine Candisky

Gov. John Kasich already has made six appointments to the Ohio Board of Education since taking office last month, and the Republican governor may have another chance to expand his influence over the 19-member panel.

The board yesterday decided to scrap last month's internal election for board president and vice president and hold a new election in March.

Board President Robin C. Hovis announced the decision after a 90-minute executive session at the board's monthly meeting in Columbus.

Hovis said he and other board members felt it wise to hold new elections because of concern about the legality of votes cast since the start of 2011 by Martha Harris, a Democratic appointee of former Gov. Ted Strickland. Harris was replaced last week after she got caught up in a paperwork snafu and change in administration.

The board is made up of 11 elected members and eight appointed by the governor.

With another Kasich appointee now on the board, questions were raised about the validity of last month's board elections as well as speculation about the future of state Superintendent Deborah Delisle, who serves at the pleasure of the board.

Kasich has not said he wants Delisle, a Democrat, removed. But past governors, including Strickland, have pressured boards to fire the superintendent or make a favorable hire to gain greater control over education policy.

Hovis said the board's legal counsel did not direct members to hold new elections but that it was suggested because of questions about Harris' participation. The board also postponed all scheduled votes on its agenda yesterday until the March meeting.

New elections could cut Hovis' term short. The Millersburg Republican was elected president in January by a vote of 10-9, narrowly defeating Debe Terhar, a Republican from Cincinnati elected to the board in November. The votes were secret, so it's not known to the public for whom Harris voted.

Hovis, appointed to the board in 2004 by former Gov. Bob Taft and since elected to his current slot, said he plans to run for president again. "I've waited seven years," he said.

Thomas W. Gunlock, a Kasich appointee who briefly sought the president's post before he was elected vice president, said yesterday that he does not plan to challenge Hovis next month. It was unclear if any other Kasich appointee would run.

Political jockeying on the board began last month when Harris' tenure was thrown into limbo after Strickland left office and it was learned his staff never submitted paperwork requesting her confirmation by the Senate.

The Kasich administration says Harris' term expired, and the governor Thursday named Angela Thi Bennett, of East Cleveland, to complete the last two years of the term. In response, Harris, of Cleveland Heights, filed a lawsuit in U.S. District Court in Cleveland to keep the seat.

Yesterday, a judge transferred the case to U.S. District Court in Columbus.

I sometimes (in fact, quite often) disagree with Joe but...this time 'round he tends to make sense!

From John Curry, February 13, 2011

"Is it perfect? No. Does the mayor sometimes wish he could snap his fingers and make decisions for the entire work force? Sure. But these rules are in place for a reason. History shows what things were like before you had these rules, and there's a reason they're in place." "That history dates back to Toledo in 1979. And it includes Chicago now. Neither version is acceptable. Somewhere in the middle is a solution."

"But there are already signs of wariness in the GOP ranks. It's not among the many freshmen. They're gung-ho after coming off the campaign trail. But some of the veterans are well-aware of the respect and influence that teachers, police, firefighters and other public employees have in their communities." (OK, CORE members...get the drift? Write those letters...THEY DO MEAN SOMETHING! - John)

http://www.dispatch.com/live/content/editorials/stories/2011/02/13/unions-general-assembly-need-to-find-the-middle-ground.html?sid=101

Joe Hallett commentary: Unions, General Assembly need to find the middle ground

Sunday, February 13, 2011
The Columbus Dispatch

I remember vividly July 1, 1979, the night Toledo burned.

After a long impasse over pay, the police and firefighters' unions illegally went on strike. Mayhem ruled. The city was ablaze; a hotel was firebombed. A bus driver was robbed and killed. Residents brandished shotguns to protect themselves.

One of the striking officers was Mike Navarre, now the Toledo police chief. The strike, he told The Blade 30 years later, was an impetus for the 1983 collective-bargaining law for public-sector employees, including binding arbitration to resolve police and firefighter labor disputes.

Last month, I was in Chicago and picked up the Sun-Times. It reported that, if elected, mayoral hopeful Rahm Emanuel wanted to renegotiate a policy that allows police officers to take 365 sick days every two years. That's right, 365 sick days every two years.

Holy smoke, I thought, the mayor who allowed that to happen ought to be in the Cook County Jail for malfeasance.

Somewhere between the stalemate that caused Toledo police and firefighters to strike, and the incompetence that caused a Chicago mayor to subjugate his citizens to a self-serving police union, there must be a middle ground.

Don't look for it around the Ohio Statehouse. A battle for the ages is unfolding between powerful forces so dug in that, at this juncture, compromise seems impossible.

Gov. John Kasich and fellow Republicans who dominate the legislature are seizing an opportunity to rescue Ohio from what they view as the paralyzing grip of public-employee unions. The unions, which represent the teachers, police, firefighters and other public employees in your towns, know they're in a fight for their survival.

Make no mistake: Kasich and GOP lawmakers hold all the cards. If they stick together, they have the numbers to repeal the collective-bargaining law, including binding arbitration, as a bill presented to a Senate committee last week by Sen. Shannon Jones of Springboro effectively would do.

But there are already signs of wariness in the GOP ranks. It's not among the many freshmen. They're gung-ho after coming off the campaign trail. But some of the veterans are well-aware of the respect and influence that teachers, police, firefighters and other public employees have in their communities.

On Thursday, Jones conceded being under duress from the nasty phone calls and e-mails flooding her office, not to mention the more than 800 public unionists who jammed the Statehouse a day earlier when she testified on behalf of her bill.

Barely containing her emotion, Jones said it was not her intent to kill public-employee unions, but she said their power had to be curbed to give state and local elected officials more control over dwindling resources, particularly with the state facing an $8 billion deficit.

Perhaps Jones' bill would be unnecessary if more governors, mayors and school boards were not prone to cave in to demands for automatic pay increases, generous pension deals, unreasonable job protections and straitjacketing workplace rules that most of the citizens they represent do not enjoy and for which they must pay.

But before blowing up a collective-bargaining law that has significantly diminished public-employee strikes, Kasich and the Republicans have an obligation to go beyond anecdotes and actually quantify how much the law is costing cash-strapped governments.

Kasich, for instance, told an audience Thursday that the state's Democratic big-city mayors are secretly cheering his effort to kill binding arbitration.

Not Columbus Mayor Michael B. Coleman: "We're pretty pleased with how the process has worked for us," said spokesman Dan Williamson.

"Is it perfect? No. Does the mayor sometimes wish he could snap his fingers and make decisions for the entire work force? Sure. But these rules are in place for a reason. History shows what things were like before you had these rules, and there's a reason they're in place."

That history dates back to Toledo in 1979. And it includes Chicago now. Neither version is acceptable. Somewhere in the middle is a solution.

Joe Hallett is senior editor at The Dispatch.

jhallett@dispatch.com

Pickups....pickups on the pickups and.....how long will this inequity continue?

From John Curry, February 13, 2011

Finally....attention is being focused on an area of school funding that has been on my mind for years. Why, when most classroom teachers in Ohio have to pay "their fair share" of their retirement payments into STRS have the administrators been getting away with not paying "their fair share." I'll bet you that 90% of the electorate have no idea that this inequity has existed right under their very noses in their local schools.

This inequity will soon be history, won't it? I almost never agree with Lynn Wachtmann but, on this issue, I am in total agreement. This is one way to save taxpayer monies and will affect only those most able to afford the change.

John

Rep. Lynn Wachtmann, R-Napoleon, another member of the Ohio Retirement Study Council, is advocating for major cuts to public employee pension benefits. As for pickups? He thinks they should be outlawed.

"It's long overdue that we looked at it," he said. "These issues could be solved by taxpayers refusing to vote for levies."

http://www.zanesvilletimesrecorder.com/article/20100927/NEWS01/9260301/0/OBITUARIES/Schools-perk-pads-pensions?odyssey=nav%7Chead

Schools' perk pads pensions
Sep. 27, 2010
Click images to enlarge.

Written by JESSICA ALAIMO AND BRIAN GADD

ZANESVILLE -- Many public school administrators pay nothing toward their own pensions. But the perk doesn't stop there.

A lucrative deal allows 84 percent of Ohio superintendents to retire with a higher pension than they otherwise would have earned -- all at additional taxpayer expense, according to an analysis of public records by CentralOhio.com and the Times Recorder.

About half of Ohio districts also give this benefit to other certified administrators, although it's far less common for other school employees -- only 29 of Ohio's 613 school districts statewide give the perk to teachers or classified staff.

More than 70 administrators in Coshocton, Morgan, Muskingum and Perry counties have their pension contributions paid for and an extra 10 percent added in.

While 13 of 18 local districts only provide the benefit to superintendents, treasurers or both, the other five -- Zanesville, Tri-Valley, West Muskingum, Franklin Local and Morgan Local -- extend the additional benefit to curriculum directors and principals as well.

In Muskingum County, this practice, officially called "pickup-on-the-pickup," cost districts $41,567 per year.

School districts pay the employee share of the individual's retirement contribution, or 10 percent of their salary, and then consider it extra salary for pension purposes at a total cost of 26.4 percent of the employee's salary. The mandatory portion is 14 percent.

While practiced widely at many schools, this method has received virtually no attention on the state level. Many close to the public pension system process are unfamiliar with the practice, and apparently it has never been the focus of statewide legislation.

It only is offered in the pension funds for school employees. Ohio's other three retirement funds decline to participate.

HOW IT WORKS

Pickup-on-the-pickup does not put extra money in the workers' pocket immediately. But for a school superintendent retiring on a $100,000 base salary it means an extra $169,620 in retirement over 20 years because the pension is based on a reported salary of $110,000.

The extra cost to the employer amounts to 2.4 percent of the employee's annual salary, in addition to making their 10 percent employee contribution.

Some officials say the extra benefit helps districts hold on to top talent and is a way for administrators' take-home pay to keep pace with teachers who receive regular step increases.

Dale Dickson, who has been superintendent of the Perry-Hocking Educational Services Center in New Lexington for 13 years, said if pension pickup and pickup-on-the-pickup were taken away, many administrators who receive the benefit would be asking for a raise to make up for the amount they would then be required to pay into their pensions.

Andy Jewell, a researcher for the Ohio Education Association, said most local bargaining units for teachers have not pursued a pickup-on-the-pickup. When they do propose it, it's just another item on the table in the collective bargaining process. The union has no official policy on the pickup-on-the-pickup, he said.

HOW DID IT BEGIN?

The Ohio Supreme Court ruled in 1980 that once earned, sick time could not be taken away from public employees. In doing so, the ruling expanded what could be considered salary.

"It should be obvious that sick leave credits, just as other fringe benefits, are forms of compensation," the court's opinion stated.

Language officially made the ruling part of state law in 1986, opening the door for overtime, sick and vacation time, certain fees and commissions and disability leave to be considered salary for pension purposes.

Each of Ohio's five pension funds is governed by a different section of the Ohio Revised Code. They all have similar definitions of earnable salary. None mention pension pickups, but all give the pension funds the final authority on what can and cannot be counted toward one's final average salary.

The pension systems representing teachers and school employees then allowed pension pickups to be considered salary.

The systems representing state and municipal employees, and police and fire employees declined.

Mary Beth Foley, legal counsel for the Ohio Police and Fire Pension Fund, said that once an employee share is picked up, it becomes part of the employer share. The employer share does not count toward the worker's salary, she said.

When asked why the Public Employees Retirement System didn't allow it, spokeswoman Julie Graham-Price simply said: "It's a school system practice."

Pickup-on-the-pickup was permissible in the State Teachers Retirement System starting in 1982. That year, former executive director James Sublett asked former Attorney General William Brown for a legal opinion on the practice. Although he had ruled to the contrary in 1979, he reversed that opinion citing the 1980 Supreme Court case.

"The rationale was that this was compensation," said Tom Ash, director of governmental development for the Buckeye Association of School Administrators, on why the pension funds allow the practice.

One of the first districts to allow a pickup, and one of the few that give a full pickup to teachers, is Osnaburg Local Schools in East Canton. The pickup came out of a change in the health insurance program in the 1980s, said Larry Morgan, currently the superintendent of the Stark County Educational Service Center. Teachers got the pickup-on-the-pickup as a trade-off for having to pay more for health care, Morgan said.

ADMINISTRATORS

Ash said there are a number of reasons why districts give administrators this benefit. Primarily, everyone else does, so in order to attract the best candidates they need to offer competitive benefits.

If a district were to roll this back, they'd likely have to increase salary to either attract viable candidates or appease current administrators, Ash said.

Northern Local Treasurer Elizabeth Arnold said district records show the school board first approved the extra pickup-on-the-pickup for the superintendent and treasurer positions in 1988.

She said the board "has never even entertained" the possibility of expanding the extra pickup to more administrators, in an effort to contain costs. Arnold and new Superintendent Thomas Perkins receive the pickup-on-the-pickup.

While former superintendent Jack Porter was always concerned with the district's financial stability, providing the extra pickup-on-the-pickup was a way the district could help "entice or retain" administrators, she said.

"We don't have cars and annuities like administrators in big city districts," Arnold said. "And we aren't necessarily on a time clock. It's a 24-7 job. That's just a part of what we do. And this (pickup-on-the-pickup) is part of the board's acknowledgment of that."

Zanesville City Schools paid out $2.5 million in total pension contributions in 2009, both mandated by the state and those they have agreed through contracts to contribute. That is down from almost $3.1 million in 2007.

The pickups have decreased over the past three years, from $115,354 in 2007 to $80,625 in 2009, while other school districts' costs have either remained steady or increased. For example, Tri-Valley's total pickups have risen from $116,130 in 2007 to $126,243 last year.

Zanesville City Schools Treasurer Cindy Nye said the decrease can be attributed to the fact that pickup-on-the-pickup is not offered to new administrators. Currently, eight Zanesville school administrators receive the pickup-on-the-pickup. Two others who did, former Roosevelt Middle School Principal Dick Lear and Director of Curriculum Kathy McCray, retired before the start of this school year.

Nye said the Zanesville district has had the policy in place since at least 1990, the earliest she can find that paperwork was sent to the state on the issue.

"I believe the thought behind the pickup-on-the-pickup was due to the fact that the superintendent and treasurer do not get salary steps as teachers do until they are at the top step," Nye said.

In Franklin Local, Superintendent David Branch along with nine other administrators get the pickup-on-the-pickup, which will cost the district an additional $8,212 in the next year.

That number is down about $200 over last year, Treasurer Chris Miller said, after the school board approved 10 percent salary reductions for both herself and Branch in August through the retire-rehire process.

Miller said pickup-on-the-pickup for the superintendent position was approved by the Franklin Local Schools Board of Education in 1986, with the assistant superintendent and principals added in 1988. The treasurer position was added into the mix in 1997.

"Although we were not here at the time, we believe the pay difference between teachers and principals was not great and this was a way to give additional benefits without increasing salaries," Miller said.

The additional benefit for administrators also guards the district against the possibility of losing a valuable and experienced member of the staff, she said.

"Not all districts pay the retirement for principals. We have had other districts contact our administrators and we do not wish to lose these administrators," Miller said. "When the pickup is figured into their salary, they have decided to stay."

Tri-Valley Local Schools provide the pickup-on-the-pickup to 15 administrators, including Superintendent Mark Neal.

Based on current salaries, Tri-Valley will voluntarily pay $147,377 for the 15 administrators' pensions, according to a Central Ohio.com analysis of information provided by the district. With the mandatory employer share factored in, the total pension tab for these individuals is $313,771.

On Neal's $108,000 salary, the district pays $28,512 to the pension fund on his behalf -- but $13,392 of that is voluntary.

Treasurer Ryan Smith said Tri-Valley's school board had approved the pickup-on-the-pickup plan in June 1988 on a 5-0 vote.

In Perry County, Crooksville Exempted Village Schools Superintendent Kyle Newton is the only administrator in that district to be offered the pickup-on-the-pickup, Treasurer Michael Hankinson said.

Newton, who was hired earlier this year, receives a $90,000 salary, with his employee contribution of $9,000 picked up and an additional $900 for the pickup-on-the-pickup, Hankinson said.

Superintendents Dr. Larry Rentschler (New Lexington) and Dale Dickson (Perry-Hocking ESC) also receive the pickup-on-the-pickup benefit, as does Southern Local Treasurer Jeff Kaaz.

All of these districts have offered the benefit since at least 2003, although the plan for Kaaz was just approved in 2008, according to documents.

The contract for Kaaz also froze his salary at $61,696 for the first three years of his five-year contract and eliminated salary steps.

Echoing Miller and others, Dickson said the added benefit is one incentive school districts offer in an effort to hold on to experienced administrators.

"I only know of one superintendent who did not have that (pickup-on-the-pickup) offered," Dickson said. "This is my 13th year as superintendent, and it has always been covered here."

Dickson said in the great scheme of things, the extra amount picked up by school districts is a small amount when compared to the salaries and other compensation that is offered.

For instance, both Franklin Local and Morgan Local schools pay out between $8,000 to $9,000 annually for the pickup-on-the-pickup, or one-hundredth of the administrative salaries.

And districts have to balance the cost to taxpayers versus the cost to the kids if experienced administrators are not in the classrooms, he said.

NO ATTENTION FROM STATE

It is highly unlikely that pickups will be addressed in any Ohio pension legislation soon. In fact, employee pickups have never been the focus of statewide legislation.

While local employers are required to notify the pension funds of pickup plans, the involvement ends there.

"STRS Ohio's only focus is on making sure both member and employer contributions are correct and received on schedule," Laura Ecklar, spokeswoman for STRS, said in an e-mail.

Tim Barbour, spokesman for Ohio's School Employees Retirement System, agreed.

"We only need employers to provide notice as to whether there is a pickup so that we can account for the contributions," Barbour said in an e-mail.

State Rep. Dan Dodd, D-Hebron, is a member of the Ohio Retirement Study Council, which oversees the pension funds. He said lawmakers view the pickup-on-the-pickup as a local issue.

"We expect local districts to do things that are in their own best interest financially," he said.

Rep. Lynn Wachtmann, R-Napoleon, another member of the Ohio Retirement Study Council, is advocating for major cuts to public employee pension benefits. As for pickups? He thinks they should be outlawed.

Wachtmann said the Legislature has never addressed it because most lawmakers see it as a local control issue.

"It's long overdue that we looked at it," he said. "These issues could be solved by taxpayers refusing to vote for levies."