Thursday, November 15, 2012

Dennis Leone Reform Initiatives as an STRS Board Member
 Between 2005 and 2009
1.  Bonus plan for fiscal year 2010: Motion made by Leone adopted, after being first rejected, to restrict bonuses unless total STRS assets are at least $65 billion. For every $1 billion STRS total assets fall short of $65 billion at the end of FY 2010, bonuses for investment staff were reduced by 3%.
2.  Motion made by Leone adopted, after being first rejected, to prohibit investment staff bonuses beyond FY 2010 in years in which total STRS returns are negative.
3.  Motion made by Leone adopted to require the STRS staff to provide the Board a summary of all proposed contracts for services for any proposed contract in excess of $100,000 – prior to Board action on said contracts.
4.  Several motions made by Leone that were adopted resulted in the following changes to the Board's travel and expenditure policies:
A. No reimbursements for meals unless itemized receipts are provided.   
B. Airplane tickets must be purchased 30 days in advance, and Board members who choose not to do this will pay the difference in cost between the two tickets. Board members -- not STRS -- will personally pay for any additional fees charged by the airline if ticket reservations are changed for personal reasons.
C. The previously adopted $6,000 maximum for individual Board members to spend on out-of-state trips per year did not include the conference fee for registration or tuition. Now it does.
D. Meal reimbursements are now limited to $10.00 for breakfast, $15.00 for lunch, and $25.00 for dinner.
E. No overnight lodging will be provided by STRS on the day that Board meetings end or the day after conferences conclude.
F.  Board members will not be reimbursed for expenses while attending in-state meetings unless they are a formally invited speaker or an official participant at the meeting or unless the Board votes to approve attendance in advance.
G. STRS funds will not be used ever again to purchase credit cards, fax machines, fax lines, or laptop computers for Board members. Also Board members cannot expect STRS to pay for their personal long distance phone calls when they are attending meetings.
On March 11, 2008, Leone published his objections to the stock market assumptions and payroll growth assumptions being used by the STRS Board and STRS Staff to project future income at STRS.  Leone was the only board member who objected to the assumptions being used.  Both assumptions were subsequently lowered (which Leone requested) and were ultimately included in the STRS Board’s pension solvency plan that was adopted by the Ohio Legislature in 2012.
No longer on the STRS Board, Leone testified at the Statehouse in 2011 and 2012 to express his concerns over one provision of the pension solvency law that passed.  The provision will give a future STRS Board the authority to make major pension system changes without legislative approval.  Interpreted literally and legally, this will permit a future STRS Board to put more money in the pockets of active teachers (by lowering their annual contribution rate) and pay for it by reducing the COLA retirees receive from 2% to 1%.
On May 16, 2003, two years before his election to the STRS Board, Leone prepared and released a 13-page report that was critical of STRS spending practices and called for numerous reform measures.  Leone was cited by the Cleveland Plain Dealer, the Columbus Dispatch, the Akron Beacon Journal, and the Canton Repository for causing managerial and fiscal reform at STRS in many areas. In recognition of these efforts, he received the 2004 First Amendment Award by the Central Ohio Chapter of the Society of Professional Journalists, the 2005 Ohio Ethics Award by the Ohio Government Finance Officers Association, and the 2007 Exemplary Leadership Award by the Ohio Coalition or Rural and Appalachian Schools.  The reform measures that Leone is credited for triggering after his 2003 report was released included:
1   Fifty two (52) credit cards and 39 gas cards held by STRS staff and Board members were turned in.
2.  Nine cars, vans, and SUVs purchased by STRS were considered excessive and sold.
3.  A policy permitting staff, and their family members, to use STRS cars for personal use was canceled.
4.  STRS staff was reduced by 100 employees and the administrative budget was significantly cut.
5.   New policies were adopted to prohibit the use of pension money for things like alcohol, parties, movie rentals, concerts, baseball games, Kings Island trips as well as lodging, airfare, and gifts for out-of-town STRS visitors.
6.   The cost to run the STRS child care center was reduced from $500,000 per year to $100,000 per year and became cost neutral.
7.  Cafeteria prices were increased causing food services in the STRS building to be cost neutral.   Meals for STRS staff had been subsidized by the pension system at the rate of $85,000 - $90,000 per year.
8.  Fees for staff to use the STRS fitness center were increased.
9.  Bonus checks for non-investment staff (affecting over 300 employees) were completely eliminated.
10.  Following the exposure of Dr. Leone’s research, 105 Ohio legislators signed a petition that called for STRS Executive Director Herb Dyer to resign (which he did to avoid being terminated).
12.  Senate Bill 133, signed into law just one year after Leone’s 2003 report calling for reform was released, put in place a number of oversight regulations:  It required ethics training and annual travel restrictions for all STRS Board members. It added another retiree to the STRS Board, three investment specialists, and removed – against their wishes – State Auditor Betty Montgomery and State Attorney General Jim Petro.  It stipulated that the “big spender” STRS Board members from 2000, 2001 and 2002 – those who spent in excess of $10,000 per year of pension money on trips around the country -- may never again run for the STRS Board nor serve again as an appointee to the STRS Board. It contained a disciplinary procedure that authorizes the State Attorney General in the future (in the event that STRS Board members improperly spend pension money in the future) to pursue civil charges, to seek restitution, and to cause the removal of STRS Board members.
16.  The following summarize other expenditures since 1995 that were included in Leone’s 2003 report about spending practices at STRS:
·  $94.2 million on the new STRS headquarters.
·  $869,235 on artwork, sculptures, and polished, decorative stones for the new STRS bldg.
·  $818,000 on a child care services center for the children of STRS employees.
·  $426,000 on new a fitness center in the STRS bldg.
·  $428,056 for 16 new cars, vans, and SUVs.
·   $18,810 spent on a “Discovery Park” gala event which included the purchase of Instamatic cameras for attendees.
·  $15,100 spent on the new STRS building dedication which included alcohol and gifts for attendees, as well as air fare and lodging for out-of-town STRS visitors.
·  $4,100 spent on a private retirement party for one STRS Board member.
·  $5,594 spent on poinsettias to decorate STRS during the holiday season in 2002.
·  $1,000 spent on dinner and alcohol for 12 STRS Board members/staff members on two occasions.
·  $7,116 spent to purchase baseball tickets, concert tickets, movie rentals, and Kings Island tickets for STRS employees in the summer of 2003 for “team building”.
·  $530,284 spent by the STRS Board on trips and meetings around the country in 2000, 2001, and 2002.
·  Multiple trips, per year were taken by STRS Board members and staff to places like Honolulu, Palm Springs, Kiawah Island, and Anchorage. A planned trip to China in 1995 was canceled after it was suggested that it would have the appearance of junketeering.
·  Frequent occurrences of at least 6 STRS Board members going to the same meeting, sometimes twice a year, costing STRS over $9,000 each year.
·  $36,736 was spent by one STRS Board member in a single year for trips all over the country. He was criticized in a Columbus Dispatch editorial for his spending habits.
·  $1,017 was spent for an airplane ticket for a STRS Board member that would have cost $258 if it had been purchased 30 days in advance of the conference.
·  $1 million was paid per year to full-time STRS employees for 18 days of unused staff vacation days and unused sick leave.
·  Administrative expenses at STRS increased 17.4% per year between 1996 and 2002.
·  STRS employees increased from 414 to 725 between 1996 and 2002.
·  A total of 1,035 employee bonus checks were issued to STRS staff in 2000, 2001 and 2002.
·  $24.4 million spent on bonus checks for employees between 1998 and 2003.
·  $3.2 million was paid by STRS to PERS because of bonuses alone since 1998 to satisfy that pension system’s 13.31% annual employee contribution requirement. (STRS employees are members of PERS).
·  34 STRS employees in 2002 received bonus checks in excess of $40,000 (with 18 of those getting bonuses in excess of $70,000).
·  One STRS employee received bonus checks of $110,000 and $68,000 in 2001 on top of his base salary of $164,000.
·  Over 150 STRS employees had base salaries over $100,000 in 2002, with 32 of those making over $155,000 -- topping the salaries of both the governor and the chief justice of the State Supreme Court.
·  A total of $39,251 was paid to the Perry Local School District by STRS in 2002 and 2003 for substitute teacher costs for one STRS Board member (when he attended STRS meetings) even though he did not have a position in the school district. NEA paid Perry Local the dollar amount associated with the salary and the benefits for him, enabling him to be listed as an employee.
·  Excess STRS furniture was sold to STRS employees in 2000 and 2001 for $27,703, and instead of this amount going back into the pension fund, it was given to charities.
·  The regular work week for STRS employees was 37-1/2 hours.  (This was changed to 40 hours during Leone’s term on the STRS Board.)
·  If an STRS employee adopted a child, the STRS Board awarded a $5,000 cash gift to said employee.  (This practice was stopped during Leone’s term on the STRS Board.)
·  Between 1999 and 2004, the STRS Board paid out $2.1 million in educational stipends for STRS employees to take college courses. This amount was double what the other four public pension systems in Ohio paid out, COMBINED, over the same time period. STRS paid up to $7,000 per year (per employee) for undergraduate or graduate work. ember 12, 2012
Larry KehresMount Union Collge
Division III
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