Thursday, March 21, 2013

STRS asset value as of 2/28/13

From Mario Iacone, March 21, 2013
CURRENT ASSET VALUE as of 2/28/2013
.....67.3  Billion
.....UP 1.1  Billion ( 2%)
.....Current Fiscal Year
ASSET VALUE as of  1/31/2012
.....67.3  Billion
.....approx 66.2 Billion
.....approx 80 Billion
LOW ASSET VALUE...early 2009
..... approx 47 Billion  

approx 13 Billion BELOW 2007 HIGH and
approx 20  Billion ABOVE 2009 LOW

It will be considered for OPERS...when will it be considered for STRS...a retirement system whose healthcare situation is in worse shape than OPERS!

From RH Jones, March 21, 2013
To my fellow retired teachers: 
Concerning the PERI message below, this is not STRS news but could be some day. 
One wonders about the meaning of "an OPERS insurance 'connector' company." How will OPERS decide on who gets the "connector" insurance contract? Could PERS members after 2016 be forced to go to doctors they do not want treating them? This seems to be very foggy to me. I hope the PERI leaders and their members look into this carefully. 

From: <>
Date: Wed, Mar 20, 2013
Subject: Health Care Update fro PERI
Dear PERI Members 
At the OPERS Board Meeting on Wednesday March 20, 2013, their board took action to delay implementation of the Health Care "connector" transition until January 1, 2016. 
[The connector transition is the point where OPERS will no longer provide health care, but rather put dollars into a Health Retiree Account, so retirees can purchase their own insurance through an OPERS insurance connector company.] 
This means that our retirees and spouses will have the same insurance coverage for 2013, 2014, and 2015. 
The allowances will start being reduced in 2016 at the same rates as before. 
Medicare Part B reimbursement will remain on the original schedule, 100% of the $96.40 in 2014, 66% in 2015, 0% in 2017 and 0% thereafter. 
OPERS will be making this information available to all members on their website, and in a Comprehensive Guide update as quickly as possible.
William I. Winegarner, Administrator

Public Employee Retirees, Inc.
659-F Park Meadow Rd.
Westerville, Ohio 43081
614-891-6868 * 800-247-7374

RH Jones: The Beacon editors support our public schools once again!

From RH Jones, March 21, 2013
To all:
Please click on to the "attach" above [see article below] and you will be able to read how the Akron Beacon Journal, once again, supports our public school system. I highly recommend that you active teachers use the Beacon in your classrooms -- as a retired career teacher, I always did.
This newspaper, over its many years, has always supported traditional public school education in Ohio. In mutual support, we need to purchase their newspaper and spend our teaching salaries, and our STRS pensions, in the businesses that agree that public school education equals prosperity for our citizenry.
RHJones, retired teacher
Order of transparency
White Hat Management and its public money
Akron Beacon Journal, March 20, 2013  
It is almost three years now since the governing boards of 10 charter schools in Akron and Cleveland filed suit in the Franklin County Court of Common Pleas trying to get White Hat Management to show them how it used operating funds for the schools. They notched another victory last week that should get them closer to the goal.  
The boards had contracts that required them to turn over 96 percent of their state funding to White Hat to operate the schools. The boards, which are accountable to the state, argued reasonably that they have a responsibility to oversee the use of public funds flowing through the schools to the for-profit education management company owned by Akron businessman David Brennan.  
White Hat refused to provide the requested records. It said the records were proprietary and confidential and that the law only required it to provide summary information. It argued also that public funds cease to be public once they pass through a private company to pay for services.  
The trial court disagreed. In decisions in 2011 and in 2012, it sided with the schools and ordered White Hat to open its books, concluding that charter schools are public entities and the funds that a management company receives remain public funds. White Hat appealed the order. Last week, the 10th District Court of Appeals in Columbus in turn rejected the company’s claim of confidential and proprietary records. It affirmed the lower court’s order to release detailed financial information to the boards. With an option to appeal to the Ohio Supreme Court, White Hat could evade essential transparency for a long while yet

Tuesday, March 19, 2013

STRS Bonuses and what the President of CORE said to the STRS board 4 years ago at a "public speaks" board session......and it didn't sink into their brains then, did it?

From John Curry, March 18, 2013
Public Speaks Message April 23, 2009,
By David Parshall, 41 year STRS member
STRS Board Members and Director Nehf:
(The following words represent my views and are not necessarily those of CORE.) It has been many months since I have spoken to the board in this public manner. During this time I have attended all of the board meetings and other public meetings of the board. I listened to the speeches of the four OEA/OFT board members during the March 20, board meeting These speeches were just more evidence that they lack the ability and wisdom to set on this board no matter how well meaning they may be. I along with thousands of your stakeholders find ourselves on the edge of a cliff looking down into a very deep canyon, and feel that we can no longer remain silent in hopes that some day these board members will come to finally realize some common truths. I wonder even today if these board members fully understand just how close this board came to a total meltdown after the 5 to 5 vote. All stakeholders owe Mr. Nehf a huge amount of gratitude for stepping up and saving the day. I have personally thanked Mr. Nehf for his actions, and do so again.
Now let us back up a little and see what we can agree upon.
1. I fully understand that our investment people here at STRS are fine dedicated professionals, who through their personal actions since August of 2008 did not cause STRS to lose over 31 billion dollars. 2. That having in-house fund managers actually saves us money. 3. Because of the skill of our staff, STRS actually lost .3% less than most other pension funds. 4. That we are in unique economic times far different than the historic 10 to 15 year recession cycles that have plagued our history since colonial times. The most similar historical economic event was the great depression. Changes in Wall Street were made afterwards that have kept us sound for fifty years.
So how did we get ourselves in this mess?
Well, the greatest single factor is that over a period of 3 or more decades, greed was systematically allowed to trump principle. These words are not just mine they are the words of Dr. Elizabeth Warren chair of the Congressional Oversight Panel of the TARP.
Now, the big question-- how does this board fit into the current national and state situation?
Like it or not you have become a part of this corrupt financial system. This industry has been allowed to set their own standards for far too long, and have sent out consultants to tell the public that these are the standards and that we have to follow. Willing Congressman from both sides of the isle were bribed to do away with regulation and break down the Chinese Wall that stood between main street banks and Wall Street since the 1930’s. Alan Greenspan has publicly apologized for playing a major roll in this mess, by not realizing the depth of human greed. Keep in mind this is the industry that coined the phrase, “This stock is a pig, get on the phones and put lipstick on it”. The compensation for our fund mangers is outrageous. Do you really think that anyone here at STRS is more valuable than the president of the United States?
You as board members have failed to realize that at last transparency is coming to the financial world. The discussions should not be about the 25th. percentile, rather to pay bonuses when the fund grows back to 53 or 65 billion, or what floating benchmark should we use, but rather why are we paying any bonuses at all considering the base salary and perks that STRS offers? We at least need to totally restructure our PBI program and be a leader for reform. If I hear one more time, that we have to pay these salaries to keep the best and brightest, I will just scream. This has always bordered on extortion. Why would any of our investment staffs want to leave a secure position today to go out into the mess that has become Wall Street, especially with more than 20 years in OPERS and a secure retirement in sight? CalPers is hiring wall street fund managers at bargain prices. Whatever happened to “you do your job to keep your job”.
The bottom line is as long as we have union controlled STRS board elections, especially for active seats, we will not get the truly qualified members on the board that we need. This must be overhauled so that the election process is totally open and allows for all candidates to have complete access to both actives and retirees. Change is coming with or without you. It is time to stand back and see the forest. These are serious times and we need qualified people making serious decisions for us. I thank you.

Monday, March 18, 2013

Report on March 2013 STRS board meeting

From STRS, March 18, 2013 
March Board News  
Actuarial Firm Selected
With the upcoming conclusion of its current contract with PricewaterhouseCoopers, STRS Ohio issued a request for proposal (RFP) for actuarial consulting services in November 2012. Proposals were received from seven firms. Staff reviewed the proposals based on criteria outlined in the RFP and selected four firms to make presentations to the Ad Hoc Actuarial Search Committee of the State Teachers Retirement Board. At the March meeting, the ad hoc committee recommended that the board authorize the executive director to negotiate a contract with the recommended firm. In making its recommendation, the committee noted that the firm offers expertise in a number of areas, including pension liability analysis, health care plan design and a broad understanding of national trends in the public and private sectors. The board concurred with the committee’s recommendation and approved a motion authorizing the executive director to negotiate, and subsequent to review by the board of a contract summary, execute a contract for the period April 1, 2013, through March 31, 2018.  
Board Adopts New STRS Ohio Mission and Vision
At its March meeting, the Retirement Board approved revisions to the organization’s mission, vision, guiding principles and strategic goals. The new statements are as follows:  
The mission of STRS Ohio is to partner with our members in helping to build retirement security
The vision of STRS Ohio is to be a leading retirement system by providing comprehensive retirement benefits and quality service to our members through exceptional financial performance, ethical business practices and responsible resource management.  
Guiding principles:
1. Make decisions that produce the greatest sustainable benefits for our members.  
2. Attract, develop and retain highly competent and motivated associates who have authority commensurate with their responsibilities.
3. Continually improve through research, development, evaluation and risk management.
4. Build an organizational culture that inspires a high level of professionalism and performance.
The board also approved revisions to the organization's strategic goals:
1. Implement STRS Ohio pension legislation into business rules and systems.
2. Develop options for the Health Care Fund that supports the STRS Ohio Health Care Program.
3. Ensure a high level of quality service to STRS Ohio members.
4. Attract, develop and retain a high quality STRS Ohio workforce.
5. Refine the STRS Ohio Defined Contribution and Combined Plans to maintain a quality retirement selection for members.
6. Improve overall investment performance within acceptable risk parameters as set forth in the STRS Ohio Statement of Investment Objectives and Policy.
Retirement Board Election Materials to Mail in April
The deadline to turn in nominating petitions for the 2013 Retirement Board election was Feb. 22. Only one individual qualified for a contributing member seat on the Retirement Board and that is incumbent Carol Correthers. Ohio Revised Code stipulates that the board is not required to hold an election for a position on the board if only one candidate has been nominated. At the March meeting, the board passed a resolution to elect Carol Correthers to the seat with a four-year term that begins on Sept. 1, 2013, and runs through Aug. 31, 2017.  
Four candidates qualified for the two retired teacher seats on the board: Dennis Leone, James McGreevy, Nadine McIlwain and Bob Stein. Election materials will be mailed by an outside vendor, VR Election Services, beginning on or about April 1. Voting will conclude on Monday, May 6. Retired members can vote via phone, Internet or by mail. The election tabulation is done by VR Election Services, and the president of the company will be at STRS Ohio on Saturday, May 11, to present and certify the results of the election.  
Retirements Approved
The Retirement Board approved 136 active members and 72 inactive members for service retirement benefits.

Beacon Journal supports public education

From RH Jones, March 18, 2013 
Akron Beacon Journal, March 16, 2013 
Charter diversion (editorial) 

Ohio’s charter school program has made remarkable strides as an alternative to the traditional public school system. But from the beginning, the mechanism for funding the rapidly expanding system was — and remains — contentious. Public school administrators, particularly in large urban districts where the majority of charter schools are located, regularly point out that the practice of transferring funds from the resident districts of charter school students diverts essential resources, leaving the traditional schools to scramble continually to make up the gaps. 

The rest of the article may be read here.

Sunday, March 17, 2013

Thank you Jim Stoll, Paul Kostyu and the Cincinnati Enquirer for shedding some SUNSHINE on the bonus situation at STRS

IN-DEPTH: Fund manager bonuses questioned 
Rewarded even when state teacher fund falters
Over 38 million dollars in bonuses "given, not deserved" handed out to STRS investment staff since 2005. All for a performance that the Executive Director Mike Nehf says "the system will not be able to pay benefits in the future if changes are not made!"  We'll I've got news for you Mr. Nehf; you and the STRS Board should be the ones making the changes!  ELIMINATE THIS RIDICULOUS AND OUTRAGEOUS BONUS STRUCTURE!  If you read this and agree with me please email Mr. Nehf and the STRS Board.  and
~ Jim Stoll, March 17, 2013 
Cincinnati Enquirer, Mar 17, 2013
By Paul Kostyu
(Please click all images to enlarge)
COLUMBUS — Fund managers at Ohio’s state teacher pension system took in nearly $4 million in bonuses last year – with many of the bonuses alone more than the governor’s salary.
Pension officials say that’s the cost of attracting the best fund managers, and experts say it’s not unusual. A fund spokesman said the educators whose salaries pay the staff are saving up to $100 million a year by not hiring outside firms to manage the funds.
But critics worry that the State Teachers Retirement System – the second largest public pension system in Ohio and 19th largest in the nation – is handing out big bonuses even when they’re not deserved. Ultimately, that money comes out of the retirement fund for the state’s nearly half million current and retired educators.
By contrast, the Ohio Public Employees Retirement System, the largest in the state and 11th largest in the country with a portfolio that’s $15 billion more than that of STRS, has half the investment staff and handed out smaller bonuses. Six-figure bonuses, however, were not unusual among OPERS top paid employees last year.
The STRS bonuses are being awarded by a pension fund that found itself the subject of a 2003 investigation for handing out bonuses to its investment and non-investment staff. Millions of dollars went to employees even when the system’s portfolio did poorly.
Questions about the bonuses come as critics across the country suggest pension systems should not be awarding high bonuses. In Ohio, teacher positions are being eliminated and school districts across the country have had to tighten their belts against state budget cuts and failed levies.

Informed of the recent STRS bonuses, state Rep. Kirk Schuring, R-Canton, told The Enquirer there are “legitimate questions” to be raised about the fund’s bonus structure, especially when the portfolio lost money.
Earning even more than the governor
Since 2005, the STRS paid out $38.6 million in bonuses to its roughly 80-member investment staff. OPERS paid $10.7 million, which does not include 2012.
That irks some who rely on the system, among them James A. Stoll, the athletic director of Sycamore Community Schools and a contributor to the pension. Stoll, who ran unsuccessfully for the STRS governing board in 2009, has been studying the bonus issue for more than three years.
“This really bothers me,” he said.
The money to pay those bonuses comes from investments and out of the pockets of the system’s 470,000 active, inactive and retired teachers – including 53,000 in Southwest Ohio – and ultimately taxpayers who indirectly contribute to STRS through taxes that pay educators’ salaries.
In Ohio, public school districts provide 14 percent of an educator’s salary for retirement purposes. Employees contribute 10 percent. Beginning July 1, the employee contribution climbs to 11 percent and adds another 1 percent each year through 2016 to eventually match the employer contribution.
The Enquirer found those who manage the STRS portfolio of $65.4 billion received bonuses in fiscal 2012 as high as 77.6 percent of their salaries. In other years, employees earned as much as 125 percent of their salaries.
Assistant Director of Investment Mary Ellen Grant, for example, received $512,842 in salary and bonus in 2011 as the top earner in the department. She oversees real estate.
Gov. John Kasich’s salary that year was $139,417, according to the state treasurer’s office.
OPERS’ top salary for 2011 went to Chief Investment Officer John C. Lane at $587,073.
One of the three other Ohio public pension systems, the School Employees Retirement System, also awards bonuses to its investment staff using a formula similar to that of the teachers’ pension.
“It sounds like a lot of money relative to what the typical Ohioan sees,” said William Even, a professor of economics at Miami University in Oxford. “At the same time, if they were to manage that kind of money for a mutual fund, they would probably be looking at similar kinds of salaries.”
In other states, a bonus backlash
The bonuses at STRS aren’t the only ones to raise eyebrows in state capitals.
In 2010, for example, investment staff in Georgia’s teacher retirement system got pay boosts of more than 35 percent, according to The Atlanta Journal-Constitution.
Last year, the California Public Employees’ Retirement System, the nation’s largest pension, froze executive pay and cut bonuses, but didn’t eliminate them, when investment returns dropped.
Other bonus skirmishes have occurred in Pennsylvania, Colorado, North Carolina, South Carolina, Massachusetts and Texas.
Stoll speaks out 
[Click here to see what Sycamore’s Jim Stoll has to say (video)]
The other Ohio pensions
Ohio Public Employees Retirement System: The largest pension system in the state and the 11th largest public retirement system in the country. Assets $80.3 billion Bonuses: Based on a formula over three years. New employees may not be eligible.
According to Executive Director Karen Carraher, OPERS “has always been within the 30-year funding guideline” set by law. She said its investments earned 14.52 percent in 2012 and posted an annual investment return of 8.57 percent over the past 30 years.
Ohio Police and Fire Pension Fund: Assets: $12.9 billion all externally managed. Bonuses: None
School Employees Retirement System: Assets $11.2 billion all externally managed, but 10 investment staff manage the managers. Bonuses: Based on a three-year formula.
The pension system came under fire from legislators in late February for approving the travel of three board members to a convention in Hawaii, according to Gongwer news service.
Referring to the 2003 investigation of STRS, state Rep. Lynn Wachtmann, R-Napoleon, said, “I am not going to go through this crap again with another board that’s spending their members’ money. Do they have any clue that some of us are very, very unhappy about it?”
Highway Patrol Retirement System: The smallest of Ohio’s public pensions systems does not have in-house investment staff, but does have a chief investment officer. Assets: $720 million.
Winning and losing at STRS
The STRS investment staff rarely does day-trading primarily because of the high risk. But on May 18, 2012 it used $114 million to buy Facebook stock (2,175,000 shares) at $38 per share on the day the company went public. STRS broke even on a strategy that required trading Facebook nearly minute-by minute. On paper, however, the investment has been a money loser because STRS continues to hold stock in the company and that stock declined in value significantly since May. Here’s what happened:
11:30 a.m. 1.5 million shares sold at $42 per share.
11:32 a.m. 300,000 shares sold at $40.50.
11:36 a.m. 50,000 shares sold at $40.
11:43 a.m. 50,000 shares sold at $41.
1:50 p.m. 150,000 shares sold at $39.59.
3:35 p.m. 125,000 shares sold at $38.87.
The stock reached a high of $45 that day, but STRS did not sell any shares at that price. Had it sold all of the shares at 11:30 a.m. instead of waiting, it would have nearly doubled its profit.
Still, the pension system hung onto and purchased more shares. It continues to hold shares in Facebook, waiting for its stock price to climb from its current $27.72 per share.
STRS spokesman Nick Treneff said the pension fund broke even so far though there’s a “paper loss” of $5.6 million because stocks are still be held. Paul Justice, director of fund research at Morningstar, said it was “not typical” for a pension fund that is interested in long-term results to trade stock so quickly. “It seems odd to me,” he told The Enquirer. “It’s out of the norm.”
Bonuses at STRS
Here is the amount of STRS investment staff bonuses for the past eight fiscal years and the top earning employee in the investment department. (Click image)
STRS Board members
There are 11 members of the governing board of the State Teachers Retirement System of Ohio. Of the seven elected members, two of the seven represent retirees and the others represent active members. The board includes three members appointed by the governor, Legislature and state treasurer. The state’s superintendent of public instruction serves as a non-voting member. The positions are unpaid except for expenses. They can be contacted via the STRS website,
Michael J. Nehf, the system’s executive director, is the only employee with a contract. All others are at-will employees. (Click image)

Where money comes from; where it goes
For fiscal year 2012, the State Teachers Retirement System of Ohio lost $2.5 billion. Here’s where the money comes from and where it goes.
Contributions (in thousands)
Health care premiums…$246,264
Deductions (in thousands)
Benefit payments…$5,725,859
Health care coverage…$627,890
Refunds to members…$183,768
Administrative expenses…$61,328
Not the first time
• This isn’t the first time bonuses for employees at the State Teachers Retirement System of Ohio have come under scrutiny. 
• An investigation by the Canton Repository in 2003 found STRS spent $16.7 million on bonuses, artwork and travel over three years.
• It also found the bonus for the system’s then-executive director, Herb Dyer, was linked to the bonuses of employees. The higher their bonus, the more he got.
• Dyer famously said the money sent to STRS by educators and their employers belonged to the system to do with what it wanted. In the freewheeling days of 2000 to 2003, STRS board members spent millions on art, parties, travel and bonuses. Dyer and the head of the investment department, Steve Mitchell, had hard-to-break contracts that almost guaranteed their jobs no matter what.
• As a result of the investigation, Dyer was forced out, though at a six-figure price because his contract was bought out to avoid a lawsuit. He and six pension board members were convicted of violating state ethics laws. Bonuses were dropped for non-investment and some investment staff.
• The Legislature passed a pension reform package that added more financial experts to all five state pension boards, among other items.

Question: How much did STRS pay out in bonuses last year (2012)? Highlight the white space below to see the answer.
According to Bloomberg, $8.1 MILLION, to 88 workers.
Posted 3/6/13
Larry KehresMount Union Collge
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