Report on November 2012 STRS board meeting

From STRS, Nov. 16, 2012

November Board News

Retirement Board Resumes Health Care Strategic Planning Discussions
At its November 2012 meeting, the Retirement Board reviewed the three primary goals of the health care strategic plan:

• Establish Medicare as the health care program's cornerstone, to help the largest number of retirees for the longest period of time;

• Achieve 30 years of solvency for the health care program by 2016;

• Extend forecasted solvency to 65 or more years by 2025.

The Retirement Board discussed ways to extend the solvency of the Health Care Stabilization Fund, as health plans around the nation wait to see just how the Affordable Care Act (ACA) will shape the industry. One key issue surrounding the ACA is if and how the health care exchanges will develop in Ohio. These exchanges are expected to provide guaranteed issue coverage for pre-Medicare individuals. In most health care plans, pre-Medicare individuals are now subject to preexisting condition restrictions and underwriting requirements.

The Retirement Board's challenge is to balance plan solvency and a plan that offers meaningful benefits while continuing to attract and retain healthy members to the plan.

Retirements Approved 
The Retirement Board approved 387 active members and 116 inactive members for service retirement benefits.

Other STRS Ohio News

Brooks Reappointed to Retirement Board; Rafeld to Represent The Superintendent of Public Instruction
Craig C. Brooks was reappointed to the Retirement Board as the joint appointee of the Ohio Senate President and Speaker of the Ohio House. His term extends through Nov. 4, 2016. Mr. Brooks was first appointed to the board by the Treasurer of State in 2007.

The Interim Superintendent of Public Instruction, Michael Sawyers, recently designated Jason Rafeld to represent him on the Retirement Board. Mr. Rafeld replaces John Childs, who served as an ex officio member of the board since January 2011.

STRS Ohio Completes CEM Pension Administration Survey; Service Levels Increase, Costs Decrease
STRS Ohio staff completed and returned the annual CEM Pension Administration Benchmarking survey, with results expected to be published next spring. CEM Benchmarking is a leading global research company that measures the performance of public pension plans and uses comparative analysis among peer groups to rank the service level of the plans. STRS Ohio consistently scores in the top quartile for performance. Based on this year's reported data, STRS Ohio's service level scores increased in nine of 15 categories. STRS Ohio's cost per active member and annuitant dropped again this year. STRS Ohio's cost per member measurement has been trending lower for several years, while peer group system's costs have increased.

CEM Benchmarking also performs cost effectiveness analysis for the investment programs of more than 300 pension funds around the world. This year's study showed that STRS Ohio's total investment costs were the lowest in its peer group. The study also confirmed the value of STRS Ohio's internal investment strategy, noting that STRS Ohio saved about $91 million by using internal managers for about 80% of the system's assets. The savings is based on the peer group's median external management costs.

Satisfaction Survey Responses Ranked Outstanding For First Quarter
During the first quarter of the 2012–13 fiscal year, more than 1,800 members who met with a counselor completed a satisfaction survey, with 96% responding that the service met or exceeded their expectations. Of those members who met with a counselor, 55% provided a perfect 10 score for overall service. Staff continues to be rated the highest in the areas of professionalism, courtesy and knowledge, with more than 70% of members providing a perfect 10 rating.

In addition, about 700 members who attended a Member Education program completed satisfaction surveys for the quarter, with 98% stating that the program exceeded their expectations and 45% rating the program a perfect 10. More than 73% of respondents rated the Member Education staff a perfect 10 regarding professionalism, courtesy and knowledge.

Call Center staff was evaluated by 4,000 callers with 97% providing a positive satisfaction rating and 84% stating that they were extremely pleased.

Retirement Board Election Process Begins This Month
On Nov. 9, notices were sent to all STRS Ohio reporting employers and other interested parties about the upcoming Retirement Board election for one contributing member seat and two retired member seats. In addition, election information was in the October newsletters and is posted on the STRS Ohio website. Individuals interested in running for a seat on the State Teachers Retirement Board can request petitions from STRS Ohio. The deadline for returning petitions is Feb. 22, 2013.

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

DENNIS LEONE: CANDIDATE FOR STRS BOARD

Dennis Leone, a former STRS Ohio board member, has announced his candidacy for a retired seat on the STRS board in the upcoming election, to be held March 1 - May 7, 2013.

Dr. Leone, a strong advocate for retired educators, served as an STRS Retiree Board Member between 2005 and 2009. In addition, he testified at the Statehouse in 2011 and 2012 on needed changes in the proposed pension solvency law. Before retiring, he served as a superintendent of schools in Ohio for 23 years, including the Chillicothe City School District, the Oxford-Talawanda School District, and the Liberty Center Local School District. He is currently teaching graduate level School Law courses at Ashland University and frequently testifies on legislation affecting public education.

See the article below for information on his reform initiatives while a member of the STRS board; additional articles follow. Anyone willing to sign or circulate petitions to help get Dr. Leone’s name on the STRS Retiree Board Member ballot may contact Kathie Bracy at kbb47@aol.com.

From Dennis Leone's résumé.......

DR. DENNIS A. LEONE

Home Address:
45 Timberlane Drive 
Chillicothe, Ohio 45601 
Cell: 740-649-2173 
Home: 740-779-1398 
dennisleone@roadrunner.com

Educational Training
1981 University of Arkansas Fayetteville, Ark. - Doctorate in Educational Admin.
1976 American University Washington, D.C. - Master's Degree in Public Relations
1972 Bowling Green State Univ. Bowling Green, OH - Bachelor's Degree in Education
1968 Lawrence High School, Lawrence, Kansas - High School Diploma

Full-Time Ohio Administrative Experience and Full-Time Ohio College Teaching Experience    
2010 - Present: Assistant Professor, Ashland University
2009 - 2010: Junior High School Principal, Lancaster City School District
2005 - 2008: Asst to Dean & Child Dev Center Dir. Ohio University-Chillicothe Branch
1997 - 2004: Superintendent of Schools, Chillicothe City Schools
1984 - 1997: Superintendent of Schools, Oxford-Talawanda City Schools
1981 - 1984: Superintendent of Schools, Liberty Center Local Schools
1980 - 1981: Assistant Superintendent, Preble-Shawnee Local Schools

Other Public Education Experience
1974 - 1980: Alexandria City School District, Alexandria, Virginia

Adjunct College Teaching Experience
2005 - 2010: Ashland University, Graduate Educational Admin Courses
2005 - 2010: University of Dayton, Graduate Educational Admin Courses
1985 and 1990: Miami (OH) University, Undergraduate Ed Admin Courses

Awards and Recognition [and Presenters]
2011 Authored revisions to H.B. 116: Ohio House Education Committee Chairman
2008 Authored $143,000 Grant for OUC: Ohio Appalachian Regional Commission
2007 Exemplary Leadership Award: Ohio Coalition of Rural and Appalachian Schools
2005 Ohio Ethics Award: Governmental Finance Officers Assn. (GFOA) 
2005 Elected to Board of Directors: State Teachers Retirement System (STRS) of Ohio
2004 First Amendment Award: Central Ohio Society of Professional Journalists
2002 Formal Yearbook Dedication: Chillicothe High School Senior Class of 2002
2002 Labor/Mgmt Relations Award: Ohio Association of Public School Employees
2002 Outstanding Ed Service Award: Ohio General Assembly/Senate President
2000 Award of Excellence: Ross County (OH) Labor/Management Council
1999 Distinguished Service Award: Buckeye Association of School Administrators
1999 Won State Open Records Lawsuit: Ohio Supreme Court (7-0 vote)
1995 Exemplary Leadership Award: Buckeye Association of School Administrators
1993 Authored Tax Exempt Legislation Authorized additional state funds annually to school; passed in Ohio General Assembly districts with excessive tax exempt real estate

Click here for more on Dennis Leone.....

Dennis Leone's 2005 campaign flyer