Will Tim Myers attend the June 9 meeting in Lima at Apollo Career Center?

From Dennis Leone, May 24, 2009

Folks……it is this simple: Tim Myers knows that certain people in attendance on the 9th (Leone and Stoll in particular) will hold his feet to the fire and ask him to explain his public actions and public statements – such as:

1. Why, Tim, did you tell the Elida teachers in writing that their pensions were secure?

2. Why, Tim, did you put in a NW-OEA newsletter that reducing bonuses aversely impacts the BASE SALARIES of investment staff?

3. Why, Tim, didn’t you want stop the FY 2009 bonuses in September after the backlash of paying $6 million in FY 2008 bonuses (which you voted for, Tim) and after STRS lost $12 billion in assets in the preceding 10 months?

4. Why, Tim, did you vote no on the original motions to: (A) Suspend the bonuses; and (B) Establish a $65 billion threshold for assets in order to trigger maximum bonus potential in the future?

5. Why, Tim, after you voted no in January to suspend the bonuses, did you say publicly (and were quoted in the Columbus Dispatch) that the STRS Board was “breaking a promise” by suspending the bonuses? Why did you say this, Tim, when all investment staff received a letters in July of 2008 that the said the bonus plan could be modified or terminated by the board at any time for any reason?

6. Why, Tim, did you allow Leone’s motion on May 15, 2009 (to NOT pay the 7/12ths bonuses for FY 2009) die without a second?

7. Why, Tim, did you recently write to a supt and say that the board might lose 10 times the cost of the 7/12ths bonuses in litigation if the bonuses were NOT paid? Wouldn’t possible litigation be a non-issue, Tim, had you and your fellow board members stopped the bonuses last fall, when you could have?

There is much more………..it’s really not hard to see why Tim Myers might avoid a meeting where he could be asked these questions.

Dennis Leone

Rich DeColibus to STRS Board: STRS would be far better off eliminating the PBI program, not just tinkering with it

From Rich DeColibus, May 16, 2009
Subject: PBIs

".....being in the middle of the lemming pack is not much of an excuse for going off the cliff"

".....had STRS invested in 5% return T-bills for the last eight years, it would have been far better off today, by tens of billions of dollars"

".....any suggestion to permanently eliminate the COLA lessens everyone's buying value year after year after year, virtually guaranteeing an impoverished living standard as time goes on"

"Professionals are supposed to do their best for their client. Without bonuses as incentives. That is the definition of a professional. My presumption is our investment counselors will act professionally, and if they do not, that is why we have a management. Frankly, again, if the whole department would have been dismissed eight years ago, we'd be tens of billions of dollars richer."

Gentle(wo)men:

I believe the argument over whether PBIs should be extended when STRS loses total assets is like being unable to see the lake because of glare off the water. The fundamental question is whether there should be PBIs AT ALL, not just when our total asset value is down. My conclusion is STRS would be far better off, in every way that is important, by scrapping the whole program, not just tinkering with it. Bear with my logic.

The Board in the past was sold PBIs as a standard way of doing this kind of business, a replication of Wall Street employment practices, and a practice without which STRS would be left without competent investment counselors. My understanding is virtually no one currently on the Board was actually there when this practice started; most of you simply inherited it. Various experts have either validated the practice or judged it excessive and unwarranted (you can, in short, get any opinion you want if you shop around for it). More to the point, what may have been true in the past is no longer true. There has been a sea-change in accepted thinking about what constitutes appropriate compensation; granted many on Wall Street are doing their best to "Bring back the good old days," but there is now a tidal wave of anger and condemnation against huge salaries and grotesque bonuses as rewards for, at best, mediocre performance. Think of the AIG bonuses, if you need a solid example.

The number one responsibility of the STRS Board is preservation of capital. It is NOT a given percent of return (like an average of 8% per year). If you inspect the record, it is crystal clear all those years of wonderful returns were completely washed away by one catastrophic year (the most recent one). Not only is there no guarantee this will not happen again, in the mostly free market of America, it's virtually a certainty this will happen again. It is not a good thing for the situation to have deteriorated to such a degree that the Ohio General Assembly is now interested.

Your responsibility was to avoid this catastrophic loss, not maintain 8% returns year-after-year only to see it all lost by a failure to anticipate a bad year. Yes, few others were clever enough to see what was coming, but being in the middle of the lemming pack is not much of an excuse for going off the cliff. The fact of the matter is brutally obvious: had STRS invested in 5% return T-bills for the last eight years, it would have been far better off today, by tens of billions of dollars. Your current PBI program simply encourages investment counselors to invest in riskier vehicles than are appropriate, because the rewards for them personally are great (the bonuses) and the risks are all taken by us who have a vested interest in STRS (which is none of the investment counselors).

Professionals are supposed to do their best for their client. Without bonuses as incentives. That is the definition of a professional. My presumption is our investment counselors will act professionally, and if they do not, that is why we have a management. Frankly, again, if the whole department would have been dismissed eight years ago, we'd be tens of billions of dollars richer. That is a fact. If you insist on hanging on to the department, then at least expect them to be professionals, just like the teachers and administrators who put a lifetime of their savings into the pot. That does not seem like such an unreasonable request.

The suggestion to eliminate the COLA is a horrible one. It penalizes every individual who has already retired, and the younger they are, the more it penalizes them. In years where the cost of living is stagnant (such as this year), not a problem, but any suggestion to permanently eliminate the COLA lessens everyone's buying value year after year after year, virtually guaranteeing an impoverished living standard as time goes on. This is not what STRS is supposed to stand for. Please discard this really bad idea forever. Losing the 13th check is one thing, but a COLA is absolutely essential to maintaining a normal but modest life style into the retirement years, especially as unreimbursed health care costs mount, which they tend to do as the years go by. The federal government's COLA calculation doesn't even include the price of gasoline or food, two of the most volatile price indexes in existence. Does anyone think, running up a trillion and a half dollars of federal government debt, isn't going to skyrocket the inflation rate in the near future?

We need to look to the future, not rest on the outdated and clearly failed business practices of the past.

Rich DeColibus

[Rich is a retired teacher and former president of the Cleveland Teachers Union.]

Columbus Dispatch on 5/15/09 bonus vote

Board eliminates bonuses in bad years
THE COLUMBUS DISPATCH, May 16, 2009
By James Nash
Dozens of investment officers for the state teachers' pension will lose their merit bonuses completely if the fund dips into the red.
The board of the State Teachers Retirement System voted yesterday to eliminate merit bonuses for investment officers in years when the pension fund posts an overall negative return.
For months, activist retired teachers have pushed for such a change, saying it's disrespectful to pay bonuses that sometimes top $100,000 when the fund is losing money. The pension board voted in January to slash bonuses during down years, but not eliminate them.
Under that formula, the pension system would have paid $3.4 million in bonuses to its 89 investment officers this year.
Yesterday, however, the board voted unanimously to eliminate bonuses in down years and to reduce them if the pension fund gains value but falls short of $65 billion. The fund currently has about $51 billion, down from its October 2007 peak of $80 billion.
"I think it was extremely important for the board to take this step, especially in light of changes that will adversely affect not only retirees but active members as well," said Dennis Leone, a pension board member who pushed to cut the bonuses.
On Monday, state Rep. Matt Huffman, R-Lima, introduced a bill to ban the merit bonuses during years when the pension system posts an overall loss.
jnash@dispatch.com
Investment officers won't get the payouts if the fund sees an annual loss.

Lima News: The Huffman bill and a subsequent STRS bonus vote

STRS board decision mirrors Huffman's bill

Lima News, May 15, 2009
Beth L. Jokinen

COLUMBUS - The State Teacher Retirement System (STRS) board voted Friday to eventually do the same thing a local state representative hopes to put into law.

The board voted that starting in fiscal year 2011, no performance-based incentives will be paid out to investment staff if the retirement fund sees a negative overall return, said board member Dennis Leone, of Chillicothe.

Ohio Rep. Matt Huffman, R-Lima, introduced legislation earlier this week that would ban the STRS bonuses when the fund is not making money.

"Rep Huffman's bill had an impact on those votes occurring," Leone said. "I appreciate him stepping up to plate with the proposal."

All eight STRS board members approved the decision. The board also voted to eliminate bonuses in fiscal year 2010, which begins in July, if there is a negative return.

Also, for the investment staff to qualify for bonus potential, the fund's total asset has to climb to at least $65 billion. It is currently $51 billion. If there is an increase, but it doesn't reach the $65 billion, a formula will determine the bonus amounts.

The staff could still see bonuses from the first half of fiscal year 2009, which ends June 30. The board suspended its existing bonus program for the second half of fiscal year 2009, meaning the payments are based on just the first half of the fiscal year.

Preliminary reports show bonuses likely paid for fiscal year 2009 to about 90 employees total nearly $3.4 million. They range from $162,488 and $480. Leone made a motion to not pay the bonuses, but it died for a lack of a second. The board still needs to approve the bonuses by its September meeting.

http://www.limaohio.com/news/board-37401-bonuses-fiscal.html

STRS Board actions on bonus-related motions proposed by Dennis Leone May 15, 2009

1. Bonus plan for Fiscal Year 2010: motion made by Dennis Leone, seconded by Craig Brooks; passed 8-0.

• Voting yes: Leone, Brooks, Burch, Meuser, Myers, Ramser, Puckett, Cervantes.

• Absent: Hayden & Chapman.

• Plan prohibits bonuses if overall return is negative.

• Plan restricts bonuses unless total STRS assets return to $65 billion (we now stand at $51 billion).

• For every $1 billion our total assets fall short of $65 billion at the end of FY 2010, bonuses will be reduced by 3%. Example: If we have $54 billion at the end of FY 2010, this is $11 billion under $65 billion. 11 x 3% = 33% reduction in bonus potential.

2. Motion by Dennis Leone, seconded by Craig Brooks: to prohibit bonuses beyond FY 2010 in years in which total returns are negative. Motion passed 8-0.

3. Motion by Dennis Leone: to remove Investment Chief Steve Mitchell from PBI (Performance-Based Incentive) Plan; motion died due to lack of a second. Dr. Leone cited conflict of interests concerns since Mitchell evaluates other bonus recipients.

4. Motion by Dennis Leone: to deny FY 2009 bonuses; motion died, due to lack of a second. This means between now and September the Board will have to vote on the actual payments for the 7/12 FY 2009 bonuses.
May 15, 2009

STRS Board votes this afternoon on 2010 PBI program

From STRS, May 15, 2009
Subject: [News] Board Takes Action on PBI Program

During its May 2009 meeting, the State Teachers Retirement Board adopted a Performance-Based Incentive (PBI) Program for 2010 for eligible Investment associates that includes a provision for no incentives being awarded if the STRS Ohio total investment fund has a negative absolute return for the fiscal year (July 1, 2009-June 30, 2010).

The vote followed months of discussion and consideration regarding incentive compensation. Other key components of the newly adopted incentive program include provisions adopted by the board at previous meetings:

- If the STRS Ohio total fund earns a positive absolute return but the total market value of investment assets is less than $65 billion by the end of the fiscal year (June 30, 2010), then incentive awards will be reduced by 3% for every $1 billion (and fraction thereof) of the shortfall from $65 billion. For example, if assets on June 30, 2010, are $55 billion, earned PBIs will be reduced by 30%. As of April 30, 2009, total fund assets were approximately $51 billion.

- The new PBI program will enhance earned PBIs when the absolute and relative performances are high.

The board also adopted a motion that said in future years, when the total investment fund returns are negative, no Investment staff will receive PBIs. This is effective with fiscal year 2011 going forward.

Additional information about the May Retirement Board meeting will be published in Board News on Monday.

Lima News editorial re: STRS...."If you're not making money for your client, you don't deserve a bonus."

From John Curry, May 14, 2009
Editorial: No gain, no bonus is common sense
"Rewarding someone to lose money, though, is just obscene."
"If you're not making money for your client, you don't deserve a bonus."

The Lima News, May 13, 2009

Wall Street wasn't the only place where investment executives earned bonuses to lose money. It's been happening in Columbus with the State Teachers Retirement System, too.

The private sector is perfectly fit to make the changes needed on Wall Street, but a state system requires intervention of the kind state Rep. Matt Huffman, R-Lima, proposes. Huffman this week introduced a bill that would ban performance-based incentives if the teachers retirement fund isn't making money.

Preliminary reports show half-year bonuses for about 90 employees of the State Teachers Retirement System will total almost $3.4 million. That's a handsome reward when a fund has lost more than $33 billion over the last 16 months. And it's a reward that 460,000 public educators and millions of taxpayers alike would have to contribute to.

"All of these employees who are to receive these bonuses are already compensated for the work they perform, with some earning a six-figure salary," Huffman said. "When many Ohio citizens are losing their retirement investments in this economy, how can STRS of Ohio justify giving these bonuses?"

That's a good question.

A newsletter tried to justify the bonuses by saying the fund could have lost more than it did. That's a bold statement: You get to pay us even more money because we've only lost so much of yours.

Some people won't like that the average salary among those handling investments at the State Teachers Retirement System is $156,000, but some careers paying far better than others is part of life. Rewarding someone to lose money, though, is just obscene. Other states have eliminated bonuses. Ohio should at least go as far as Huffman wants: no bonuses in a year with negative returns.

The State Teachers Retirement System board is scheduled to vote on the bonuses in September. Other state lawmakers should join Huffman in seeing that such a vote isn't needed. If you're not making money for your client, you don't deserve a bonus.

http://www.limaohio.com/articles/bonuses-37333-state-retirement.html

Subject: Knock, knock...STRS...you might want to see this! Notice that it is sponsored by representatives from BOTH parties?

From John Curry, May 12, 2009

"The bill, sponsored by representatives from both parties and supported by local retired teachers, specifically says that in any year with a net negative return, no bonuses will be paid out."

Huffman bill aims to ban teacher's retirement system bonuses

Representative Matt Huffman

Lima News, May 12, 2009
Beth L. Jokinen

COLUMBUS - Ohio Rep. Matt Huffman, R-Lima, introduced legislation this week that would ban performance-based incentive for the State Teacher Retirement System (STRS).

The STRS board suspended bonuses for the first half of this fiscal year, which ends June 30. The board is considering giving the bonuses back to about 50 employees, Huffman said. The bonuses total nearly $3.4 million.

The bill, sponsored by representatives from both parties and supported by local retired teachers, specifically says that in any year with a net negative return, no bonuses will be paid out.

"My big issue is I don't think there should be bonuses paid when what is paid out to the teacher could be potentially damaged or less," Huffman said.

The bill still needs to be assigned to a House committee for further discussion. Huffman hopes to have the bill in place before the STRS board makes a decision in September.
http://www.limaohio.com/news/bonuses-37288-huffman-bill.html

Read more about this story in Wednesday's The Lima News.

Dennis Leone responds to the rhetoric

From Dennis Leone, May 4, 2009
Subject: Thank You

Jerry – Thank you for writing what you did to Meuser. I am sick-to-death of the Meuser/Myers/Ramser/Cervantes/Chapman/Nehf/Mitchell rhetoric of the bonuses being justified because the investment staff is providing “value added” (which means that our returns for the first 9 months of FY 2009 were -32.1% in comparison to Wall Street average market loss of -32.2%).

The union block on the STRS Board simply do not want to hear that base salaries averaging $156,000 for the investment staff (and spectacular fringe benefits) certainly pays for the so-called “value added.” No, they say it justifies giant bonuses on top of that.

I am also tired of hearing the age-old argument that the bonuses also are justified because we’d be spending more money using external money managers instead of our own internal money managers. Everyone could make an argument that it would cost him/her more money if they did things in a different way.

I guess I should have told my school board that I deserved a bonus check because I never recommended that my district hire a 2nd assistant supt, and therefore I was “saving” my district money by never recommending such. Maybe my wife and I are “saving” money by not buying a Florida condo that we can’t afford anyway.

Dennis Leone

The bonus situation explained.....

From Dennis Leone, May 1, 2009

Most of the confusion surrounds the fact that the board votes each spring to adopt a new bonus plan for the upcoming fiscal year (which begins each July 1), but then 6 months later the board votes to approve the cash bonus payments for the PREVIOUS fiscal year (which is 12 months after the work is done).

This means: The board voted 8-1 to adopt the fiscal year 2009 bonus plan in March of 2008, then voted 8-1 in September of 2008 to approve the actual $6 million bonus payments for the previous fiscal year (fiscal year 2008, which ended 6-30-08). This is when the firestorm really started.

But instead of stopping the bonus plan for fiscal year 2009 at this time (September, 2008), everything went forward (with only me complaining). A Columbus Dispatch article in December of 2008 said I was the ONLY board member who was pushing to have the bonuses suspended.

Then in January of 2009, the board voted 6-3-1 to approve my motion to suspend the fiscal year 2009 bonus plan effective 2-1-09. This meant two things:
...(1) No one would get bonuses for their work in the final 5 months of FY 2009; and
...(2) The board would at some point have to vote yes or no on the cash bonus payments for the first 7 months of FY 2009 (which will be $3.3 million).

The board has itself in a real pickle now. If the board votes no, the door will be open for staff to sue and argue that they have already done the work for the first 7/12 of the fiscal year.

If the board votes yes on the 7/12 cash payments, board members will look stupid because they chose NOT to stop the bonus plan last September when they could have.

STRS Board policy permits the board to modify or terminate the bonus plan at any time, and all investment staff members received a letter early last summer that explains this. The comments by board members Tim Myers and Mary Ann Cervantes that appeared in the Columbus Dispatch after the board voted 6-3-1 to suspend the bonuses effective 2-1-09 were dead wrong. Both voted no on the suspension and were quoted as saying that board was “breaking a promise” by suspending the bonuses. No promise was broken. It was dishonest to make such a statement, and they both know it.

Between the years of 1995 and 2004, approximately 350 non-investment staff members at STRS (in addition to approximately 100 investment staff members) also got big bonus checks every year. This was a major component of my 2003 report. The board finally voted to end bonuses permanently for non-investment staff in 2004. Another elimination I pushed for, which was adopted in 2005, was the STRS practice of basing bonuses paid to investment staff, in part, on SUBJECTIVE factors. It’s gone now. How stupid was that past practice? Very Wall Street.

~~~~~~~~~~~~

"The PBI program may be interpreted, amended, rescinded and/or terminated at anytime by the Board."
~ STRS Board Policy Manual, page 33

Superintendents getting a heads-up re: Bonuses

From Jim Stoll, April 29, 2009
Subject: RE: STRS - State Teacher Retirement System - Outrageous Bonuses 2009

Jerry,

Thanks to you and other Superintendents for getting involved. You are absolutely correct in that taxpayers foot 14% of this bill and that 8 - 10 % of every School Districts budget goes to STRS and they are going to pay the (ATTACHED) 7/12 Bonuses despite losing 33 billion in the past 18 months. Additionally, they continue to send out email responses which you've already received trying to defend this nonsense, which they themselves, by suspending then changing the PBI plan have recognized as extremely flawed. You are the fifth Superintendent that has contacted me today so you are not alone. Many thanks for taking action. I would agree that we need to move our efforts to legislators to stop these bonuses as the Exec. Dir. and Board are not responsive to the members overwhelming desires to Eliminate these bonuses. I have met with my legislators here in Southwest Ohio and they are most interested in the issue of these bonuses. Will let you know of developments.

Jim Stoll
Director of Athletics
Sycamore Schools
7400 Cornell Rd.
Cincinnati, Ohio 45242
cell 513-615-4690

From Jerry Harmon, April 29, 2009
Subject: RE: STRS - State Teacher Retirement System - Outrageous Bonuses 2009

To All;

Below is the action I took with my staff – I sent it to all of them because I haven’t seen an announcement by STRS eliminating raises and bonuses for this year. My understanding is that it is within the power of the STRS Board to do this. This is my first action that did not just involve those directly involved with this baloney.

As I stated earlier, I am not going to sit by while we go down the toilet. If I don’t hear something by the 1st of May, I will send letters to major newspapers expressing my outrage and encourage them to investigate and report in depth. I didn’t believe it would go this far, but I am too old to abide stonewalling about anything like this. With aggressive action now, we all can avoid the dreaded questions in the aftermath that go something like this: Why didn’t someone speak up? How could you, as a Board, do this? What do you say to taxpayers who will foot the bill by way of larger employee and employer contributions? All of this as the reporters totally display the waste and abuse even in past years.

I am also sending this to my state Senator and State Representative.

I saw a good quip the other day & it fits somewhat in this situation:

“THE PROBLEM WITH SOCIALISM IS THAT EVENTUALLY YOU RUN OUT OF OTHER PEOPLE’S MONEY.

Respectfully,
Jerry W. Harmon, Superintendent
Jackson Center Local Schools

From: John Lazares, April 28, 2009
Subject: FW: STRS - State Teacher Retirement System - Outrageous Bonuses 2009

Superintendents:

Please forward to your staff.

Thank you.

John Lazares, Superintendent
Warren County ESC

From Jim Stoll:

Dear Superintendents:

It may have been brought to your attention, and I am sorry to report, there are some serious problems with STRS, our State Teachers Retirement System.

Did you know that STRS paid 11 Investment associates total compensation exceeding $400,000 last year? The highest topped out at $529,000.

Did you know that two investment associates got RAISES from 2008-2009 of $39,500. (yes, that was their RAISE. (See links below for all 83 investment associate raises.)

Did you know that this September, in spite of losing $33 Billion in the past 18 months and exploring “CUTTING” member benefits, they are paying “7/12 BONUSES” to 83 STRS Investment Associates, – one bonus for losing 33 Billion is in excess of $160,000 !

See Below for entire details….Many thanks to Superintendents John Scheu, Jerry Harmon and Rod Russell for getting on board and leading the fight to hold STRS accountable for this waste of member contributions and taxpayer dollars. In most school districts 8 – 10% of your entire BUDGET goes to STRS. IS THIS THE WAY YOU FEEL THOSE DOLLARS SHOULD BE SPENT – for outrageous salaries and bonuses?

Please email STRS Exec. Dir. Mike Nehf nehfm@strsoh.org and the Board board@strsoh.org and advocate for them to eliminate the 7/12 Bonuses for this year. Feel free to cc (copy) me at jastoll@yahoo.com.

Please feel free to call or email if I can be of further assistance. Upon request, I'd be happy to send the entire spreadsheet of salary, bonus and compensation totals separately, so you can share with your staff minus what may be construed as a political message below..

Respectfully,
Jim Stoll
Director of Athletics
Sycamore Schools
7400 Cornell Rd.
Cincinnati, Ohio 45242
Cell 513-615-4690
jastoll@yahoo.com

Jim Stoll's speech to STRS -- and a challenge to OEA -- April 23, 2009

STRS Board -- Jim Stoll, Member of STRS who has paid into the system for 23 years now.

I'd like to share an analogy or example with you….. Sycamore Schools, where I'm the athletic director, has a Catholic high school within our district called Moeller. Several years ago, my football coaches came to me and said "Jim, Moeller's recruiting all of our good football players"; they complained and said I should turn them into the OHSAA for recruiting violations.

I asked our coaches one question: Name for me the best five eighth grade football players that we have at Sycamore Jr. High….. They couldn't -- coaches couldn't give me the names of our best five players…..they weren't doing their job. Moeller wasn't violating rules, they were OUTWORKING US.

My question/challenge to ANY board member, and to the Executive Director is the same which I had for my coaches….. Name me one "INDEPENDENT" professor (expert) that any one of you took the Bonus plan to and asked them for an evaluation??? Mike, did you go down the street and walk into the Business School at Ohio State to ask someone to evaluate it? Tim, did you go up to Bowling Green or Toledo and ask for an independent evaluation or critique of it????..... If any of you, INDEPENDENTLY, took it to someone outside the confines of these walls, please be SPECIFIC and give us the person you took it to…

I did; I consulted with a professor at the prestigious Farmer School of Business at Miami University…

He/We are all flabbergasted and amazed that you would, ON THE FLY, BY THE SEAT OF YOUR PANTS, make changes, revisions, motions, and votes and approve things in a plan that make no sense to experts in the field. MY ADVICE is ELIMINATE the PROGRAM, TAKE a year to get independent compensation experts from 13 universities throughout OHIO and build some consensus for the program. That is what a leader would do, and a prudent board, but this group seems to be neither, so I'd suspect you'll continue down the same ill-fated path.

I hope you realize that the field you're playing on has changed. Last week I sent an email to only 25,000 STRS members, one-fourth of our list. Based on the feedback you and I've received -- there is little or NO support for your continuation of this ridiculous Bonus plan or your defense of the Bonus plan. Superintendents and school boards are now getting on board.

As a successful coach, having won an OHIO STATE BASKETBALL TITLE in 1985, I understand a few things about MOTIVATION. There are two kinds of motivation. Intrinsic and extrinsic.

Intrinsic is the kind every teacher in OHIO is motivated by -- doing a good job, inspiring kids to achieve. It's the best kind of motivation; it encourages integrity and provides achievement that makes a person's heart and soul feel great about accomplishment! It lasts forever.

Extrinsic is the kind you are motivating through these bonuses. Extrinsic motivation is corrupt and greedy; it is fraught with problems and rarely lasts. Extrinsic motivation is giving material things for doing a person's JOB!

You want to MOTIVATE your investment associates -- fire a couple! Jack Welch, CEO who led GE to its greatest heights, states in his book, Jack -- Straight from the GUT, that to keep a business on the cutting edge at the top of its game and to attract the best and brightest talent that he would fire the bottom 5-10 percent of his management team every year! In your case, Human Resources would make a list of their 90 investment associates and rate them from 1-90. Whoever was listed 85-90 is non-renewed, let go, and you hire in five more of the best and brightest to compete and keep everyone motivated. School districts do it all the time by non-renewing the contracts of sub-par teachers. Want to intrinsically motivate your staff and not cost the members a penny…..adopt Jack Welch's strategy.

If the emails you've received haven't convinced you and the Executive Director that YOU are out of touch with your constituency, then you ought to rethink your roles and positions.

Lastly, as a basketball coach of an inner city school in the 1980s and at the college level, I've been spit on, had racial epithets thrown my way and other things occur to me, so in a political campaign, to receive criticism is somewhat amusing to me…..

I would like to say one thing to the OEA and those board members who were endorsed by that group. I'm the one running for a seat on the board -- my name is James A. Stoll.

Any criticisms should be directed at me, not a current sitting board member. For OEA to write a memo to their members and/or district leaders calling Dennis Leone a "Dissident STRS Board member" is APPALLING… I'd only heard the word "dissident" used referring to someone in China, Russia, North Korea or Cuba.

I've got news for Mr. Mahoney and Mr. Leibensperger at OEA -- if you want to take someone on, you better come after me because DR. LEONE is way out of your league! Dr. Leone has done more to protect the Active and Retired Teachers from abuses and mismanagement of STRS than everyone at OEA and STRS combined. He's not a part of this race, but I certainly thank them for putting me anywhere in his category -- based on my email response -- it has garnered me more votes than you know.

Thank you for your time.

Jim Stoll

Donna Seaman to Mike Nehf and STRS Board re: Credibility, respect and trust

From Donna Seaman, April 22, 2009
Subject: Board mtg.

Board members and Mr. Nehf:
This month's board meeting continues to bring you challenges. Your recent STRS glowingly written newsletter reports that "89% of STRS retirees say you have earned their trust and confidence." In this "random sampling" of STRS recipients, my opinion has never been sought. But I do not trust or have confidence in you, my STRS board! Many of us have lost credibility, respect and trust because of your recent and past decisions! Your survey also showed an interesting statistic: much fewer of respondents believe you are managing operating expenses prudently (66%)!
You continue to ignore my concerns and frustrations, and those of many other writers. You do not respond, or direct Mr. Nehf to respond, to our suggestions. While Mr. Nehf claims he supports transparency and open communication with retirees, I see virtually no follow through on issues of highest importance to retirees.

You continue to allow OEA to be your puppeteers and to pull many of the strings for your decisions! You continue to permit OEA to criticize and put down board member Dr. Leone and candidate Jim Stoll, who strive to advocate for retirees.

As you meet again this week, and in the coming months, these issues must be resolved:

• Performance benefit incentives/bonuses must be totally eliminated. Not suspended with the likelihood of paying investment staff for 7/12 for FY 2009, but eliminated! PBI's should be reinstated only if and when the 13th check for retirees is reinstated. Your newsletter states "Total operating expenses are expected to be about $6 million lower than the budgeted amount of $98.8 million for this year," yet you are still discussing pbi payments of $3.3 million (or more) for this year. This is insane! Look at what is happening in neighboring states, such as Missouri, and the stand that governor has taken against public pension bonuses. He should have a phone conversation with Gov. Strickland about this! Benefits and fringes provided to STRS employees should never be better than those provided to your constituents, retirees.
  
• Health care coverage for retirees should be comparable with the coverage you provide for STRS employees, no better, no less!
• STRS staff must be cut to reflect the loss in portfolio assets value! Even one of your board members' school districts has had to lay off teachers and dramatically reduce staff because of decreasing revenue. Why is STRS staff exempt from reductions and cuts that are being made in virtually every segment of our economy? I applaud your decision to increase the work week to 40 hours and to place a wage freeze through 2010. That is a good start, but more cost-cutting measures must be taken.

These issues must be discussed and resolved now, not put on hold until Dr. Leone's board term ends, or until new, inexperienced board members are installed this fall.

You must begin to listen to us! Your credibility, trust and respect depends on it! I look forward to being there and hearing your discussions this week.

Donna Seaman, 2002 retiree
(These opinions are my own, and do not reflect those of any organization.)

Supt. John Scheu: These bonuses need to be eliminated -- not just suspended

From John Scheu, April 13, 2009

To All: As a contributing member to STRS, I am appalled by the actions of the STRS Board on your decision to pay 7/12 bonuses for 2009 to investment associates employed by STRS. Despite the vote to suspend the bonus plan in February, it is my understanding these bonuses will still be paid in September of 2009. Then when I read that $39,500 raises were given to two investment associates in 2009, I became even more upset. With our Pension Assets losing $33 billion - how can you even think about awarding such salary and bonus increases? These bonuses need to be eliminated -- not just suspended. And as a member of STRS -- I am one who wonders why STRS seems to be constantly in financial straits, and am concerned about STRS providing health care benefits for retirees in the future.

John Scheu
Superintendent
Hardin-Houston Local Schools (Shelby County)
5300 Houston Rd.
Houston, OH 45333
937-295-3010 ext. 224

Rich DeColibus to Mark Meuser: The horse may be gone from the barn, but let's make sure the barn doesn't burn down, too

From Rich DeColibus, April 20, 2009
[Sent to the STRS Board after it was refused by Mark Meuser's mailbox]

Dear Mr. Meuser,

First of all, thank you for the courtesy of a reply. I appreciate your taking the time to respond. I would like to address some of your points and do so with the understanding we're dancing in the gray area of opinion, not the arena of certainty.

Nobody believes it's our Investment Counselors' responsibility that the market tanked big time. We'll attribute that to the Wall Street wizards and banks and rating agencies who collectively created monsters they didn't know how to tame. What is more at issue is simply this: our Investment Counselors did better than the market average, but how much better? Yes, the 0.35 basis points mean something. What is true is STRS trumpets this number as if it majestically huge, while detractors pooh-pooh it as so insignificant it is meaningless. Given our asset amount, it does amount to $215 million, a number large by itself but, when push comes to shove, is about one-third of a percent of our assets. It is, in short, large in isolation and tiny in comparison. To be brutally honest, STRS has fared very poorly in investment competence compared to other Ohio retirement systems, something which certainly undermines the contention having our Investment Counselors "in house" has substantially improved our investment strategy. In the end, the assertions made must be backed up by the facts. To not change direction when the facts no longer sustain a given point of view is intellectually dishonest. "Faith" this is the correct investment strategy belongs to religion and ideology, not finance.

If the truth be known, when the market goes up, STRS's assets will go up in value, and when the market goes down, we will lose assets. The question is can we do better than average no matter how we manage the assets. I have no problem with managing our assets in house as we do, although it would certainly eliminate a lot of controversy if we just used index funds. It would be utterly foolish to use outside investment firms, no argument about that. While you accept the $215 million better-than-the-average as proof positive our Investment Counselors more than earned their salaries and bonuses, I'm not there yet.

The reason is simple: a one-third of a percent better than market index is well within the range of random luck. The market routinely goes up and down several percentage points per day; over the course of a year, a one-third percentage point above market index for a whole year is so trivial compared to a year's worth of gains and losses, it's hard for me to believe it really means anything beyond randomness. Do not take my word for it, check with probability theory. Indeed, with your math background, no further explanation is necessary.

I do take issue with the size of the Investment Counselors' salaries. The explanation is 25% of industry standard, but that way of thinking has been forever shredded after September 2008. Wall Street mentality now resembles the Polish cavalry charging the German panzers in 1939, and STRS looks extraordinarily foolish beating that drum over and over. However, I also am not in favor of reducing them much because it breeds too much resentment. Better to adjust salary amounts with new hires. Your Investment Counselors aren't going to leave except under extreme conditions because they have too much invested in their pensions in OPERS. By the way, you need to move them over to STRS's system; it's nuts having them investing for one pension system and contributing to another; whatever aggravation is necessary to move them is worth it.

With your permission (which I take for granted), may I quote you?

"My view is that the real bottom line is not how much money we spend on incentives. The real bottom line is the monetary value that our investors add to the system. No one relishes paying high salaries, but outperforming the benchmark by directly investing in the stock market requires specialized expertise. That expertise can be expensive."

Here we will disagree. There is no question the size of the bonuses is absolutely trivial compared to STRS's overall asset value, but that's not the point. I firmly believe there should be no bonuses; again, it's a Wall Street thing. They expect them only because they've been convinced they deserve them. The whole plan logic is flawed for the simple reason you do not reward people to take risks with other people's money so they can get higher bonuses. You virtually ensure risk-taking entirely out of proportion to STRS's single-most important responsibility, namely preservation of capital. Not only that, but it creates a huge hostility between the retired membership and the Board; my best guess is the retired membership is against any bonuses by a 5:1 ratio, at least when STRS is losing money. You don't have to take my word for it, poll the members. I understand the conflict between what you know the membership wants and what you believe to be in the best long-term interests of everyone, but keep in mind the old union saying, "None of us is as smart as all of us."

From a retiree standpoint, here's what bothers me the most: the attitude our Investment Counselors are an untouchable sacred elite. They may be collectively very good, or not, but from where I sit the evidence either way is pretty scarce, and if you compare how well STRS's investments have done compared to the other Ohio retirement systems, it's pretty clear the contention our ICs are special is not sustained by the facts. I understand the Board feels it is under siege because of the losses and the bonuses, but the solution is for management to actually manage, not automatically take the side of the Investment Counselors and the Board to automatically back management. Let me posit a few questions; they're not questions you need to answer, they are explanations why the retired membership is so unhappy.

1. We lost $32 billion. Was that entire amount simply bad luck because the market went down? The current Board stance is, "Yep, every cent of that loss was simply bad luck." That is, I think you understand, not an attitude which inspires much confidence in management, the ICs, or the Board.

2. How many Investment Counselors who were eligible for a performance bonus didn't get one? We have what, 83 ICs? Losing $32 billion and then awarding performance bonuses to virtually everyone who is eligible for one is shouting to the heavens, "Our standards are the world's biggest joke."

3. I assume our ICs are evaluated. How many of our ICs got excellent evaluations and how many got poor evaluations? Except, how can you give a poor evaluation to an IC if you also awarded him a performance bonus. Answer: You can't. The system is so flawed and twisted, the way the PBI program is structured makes real evaluations close to impossible.

4. The market went down, we lost $32 billion, but that was because we were way too heavily into stocks instead of bonds and other less risky investments. Hindsight is real good like that. Why were we heavily into stocks? Because they have the highest return (when they go up), thus ensuring better bonuses. Again, you are encouraging risk taking with other people's (like mine) money. Had the ICs socked away some proportion in T-Bills or whatever, our losses would have been less. The more they socked away, the less would have been our losses. They socked away virtually nothing. That is a fact. Yet, they all (or almost all) still received performance bonuses for superior performance. Not many individuals will agree that was "superior performance." Or, is it the Board's fault when they did asset allocation?

We lost much more than we should have. Can't do anything about it now, tomorrow's another day. But, the horse may be gone from the barn, let's at least make sure the barn doesn't burn down also.

Rich DeColibus

Rich DeColibus is a retired member of STRS and past president (for 16 years) of the Cleveland Teachers Union.

Active teacher Toby Thompson to Mike Nehf and Board: No bonuses!

From Toby Thompson, April 19, 2009
Subject: STRS Investment Associates

Hello,

Before I speak to a specific point regarding STRS....

How did you feel when you found out your US tax dollars that were given to AIG to keep their company afloat were used to pay huge bonuses to the same AIG employees that had created the financial crisis at AIG? I bet you didn't think it was right, but maybe you weren't surprised by the arrogance the AIG executives displayed in spending our tax dollars that way. And, what was the overall response of the media and the nation to those bonus payments? They, too, were quite vocal about how wrong it was to pay the bonuses. How did the president feel about it? Was anything done to "compensate" for that action? Yes -- the federal government is taxing those bonuses an enormously large tax. Why? To fix the wrong, and to put other companies using federal bail-out funds on notice not to do the same.

Well..... if you, the executive leaders of STRS, pay the STRS Investment Associates bonuses, you are going to be as disliked as the AIG executives in the eyes of the STRS members, public (who help fund STRS through their local taxes that support their schools), and the media. Employees should not get a bonus for a bad outcome -- it's that simple.

One last analogy in case you did not get my point above. Are you going to pay your personal financial advisor a bonus this year when your personal portfolio of stocks and investments lost worth? NO! Absolutely not. You might even think of finding a new financial advisor, but certainly not pay him/her a bonus!

What's my point? Do not even consider paying STRS Investment Associates bonuses this year. Not 7/12. Not 1/12. Do not pay any bonuses! The outcome is not worthy of a bonus -- it's that simple. Car salesmen are not getting bonuses now because they are not selling cars. STRS Investment Associates should not be receiving bonuses this year because there is a large loss in the STRS portfolio. Say NO to STRS employee bonuses.

I believe the STRS Investment Associates (and ALL STRS staff) should never get bonuses. Teachers do not get bonuses. STRS employees should not get bonuses either. Their salary should be payment in full.

Sincerely,

Toby A. Thompson
National Board Certified Teacher
Public School Teacher & Member of STRS

Active teacher Bill Stewart to Mark Meuser: Your responsibility goes well beyond the dollars and cents of contributors' personal life savings

From Bill Stewart, April 17, 2009
Subject: Re: No Bonuses
Mr. Meuser,

Thank you for taking the time to personally respond to my concerns and give me your version of what you believe to be the facts.

Since you have identified yourself as a math teacher of 37 years, you will understand this as I reduce it to my LOWEST COMMON DENOMINATOR:

When you are responsible for the personal life savings of others, that responsibility is not restricted only to the dollars and cents, but entails ensuring people like me that they understand and appreciate the sacrifices made by the contributors. For me personally as someone who has been in public service my entire professional life, I have never received a BONUS for anything that I have done regardless of the results. I ask you, why should someone else EXPECT or even ACCEPT a bonus when everyone but them is watching their future earnings going down the drain?

Please know that I have complete faith in Jim Stoll and hope that he is elected to your Board, with full knowledge that he completely understands my LOWEST COMMON DENOMINATOR. I wholeheartedly encourage you to join me in my support of Jim and work with him to protect our life savings so that we may enjoy a peace of mind our retirement after our years of public service have ended.

Bill Stewart
Business Dept. Chair
Fairfield Sr. High School

From Mark Meuser, April 16, 2009
Subject: RE: No Bonuses

Dear Mr. Stewart,

Thank you for your recent e-mail. I have received a number of e-mails expressing concern over STRS investment bonuses, and I want to take this opportunity to clarify a few points for those who took the time to write.

I am a math teacher with 37 years experience in the classroom. Like you, I have never received a bonus nor do I make the kind of regular salary that many of our investors do. Even so, I have been a proponent of Performance-Based Incentives. This program has, over the years, been instrumental in adding value to the system.

I would like to comment on some common misunderstandings that I have seen expressed in e-mails.

Misunderstanding # 1: The STRS staff lost our members billions of dollars. The investment staff cannot realistically affect the performance of the fund by any more than about one half of one percent of our assets. Though this is a tiny fraction of the assets, it can amount to tens of millions of dollars. Active trading by our investors did not cause the system to lose the billions that it did. Those losses were the result of the extreme bear market and the subsequent economic downturn, which affected all segments of the economy. That downturn was not controlled by any investor.

Misunderstanding # 2: STRS Investors are being rewarded for poor performance. In fiscal 2008, our investors beat the total fund benchmark (the performance of an index fund) by $215 million. What this means is that if we had put our money in an index fund instead having our own employees invest it, we would have been $215 million poorer. In pursuit of that $215 million, we paid about $6 million in incentives. The whole concept of incentives is a no-lose deal for the board. If our investors beat the benchmark by a predetermined amount, they earn an incentive. If they don’t beat the benchmark, they don’t get the incentive. Thus, the excess earnings above benchmark pay for the incentives.

Misunderstanding # 3: The retirement board has recently increased the investors’ salaries. This is not true. It is true that one year ago the board voted to bring total investment salaries (base salaries plus maximum potential incentive) up to the bottom 25th percentile of private investment firms. That was an effort to make investment salaries more competitive and was part of the overall operating budget for fiscal year 2009. In the wake of the economic downturn, however, the board did a number of things. It suspended investor incentive payments from January through June of 2009, and it put restrictions on future incentives. It also froze salaries for all STRS employees for the remainder of this fiscal year and for fiscal 2010. These measures are more than any other Ohio retirement system has done thus far. If we reduce our investors’ total salaries (including incentives) by too much, we run the long-term risk of losing the best talent (both current and prospective) to systems or brokerage firms that have not instituted such cuts.

We have three choices in managing our assets. We can manage them internally, which is what we do now for 80% of our assets.. We could put the majority of our assets into index funds, or we could hire external managers. For the last six years, our investors have substantially outperformed index funds, and external managers would charge much more for their services than what we pay our own investors with no guarantee of any better performance. Consequently, I believe that we should continue to invest using our own staff. This will remain a viable option, though, only if our staff continues to outperform the benchmark. My view is that the real bottom line is not how much money we spend on incentives. The real bottom line is the monetary value that our investors add to the system. No one relishes paying high salaries, but outperforming the benchmark by directly investing in the stock market requires specialized expertise. That expertise can be expensive. The market will eventually recover. When it does, and even in these difficult times before that happens, I do not want to trust our assets to below-average investors. How many of us would go to a hospital for an operation and insist on using the cheapest, least experienced doctor? I realize that my views may not be popular with some STRS members. However, it is my fiduciary duty to the system and its members to act and vote in such a way as to most positively impact the system’s assets. That is why I am not in favor of further cuts to the salaries or incentives of the STRS investment staff. Thank you again for your e-mail. I appreciate your input. I want to assure you that I am acutely aware of the economic crisis and of the board’s responsibility to do what is in the best interests of all of our members.

Sincerely,
Mark H. Meuser
STRS Board Member

From: Bill Stewart, March 19, 2009
Subject: No Bonuses

Mr. Nehf,

I am contacting you today as a result of the following comments:

“STRS staff believes it’s important for the Board to implement financial contingencies immediately, given the current state of the economy in terms of POTENTIAL REPERCUSSIONS OF FUNDING FUTURE BENEFITS.”
~ Mr. Bob Slater, Exec. Dep. Dir/Finance STRS (Feb.19,2009)

“WOW, what you've said is HISTORIC, STRS assets are INSUFFICIENT TO MEET our Pension obligations in the Future”
~ Dr. Dennis Leone – STRS BOARD MEMBER (Feb. 19,2009)

As a member of the STRS for nearly 31 years, I find it extremely troubling that the STRS is willing to pay out huge bonuses and willingly mortgage my savings, with reckless abandon and ill-advised consideration, that I have entrusted to the board. The Ohio State Teacher's Retirement System is not AIG or General Motors. STRS will not receive "bailout funds" from the our Democratic controlled Congress, nor be directed by our Democrat President to do so, despite the PAC money that has been invested by the STRS to back these candidates.

As a result, I urge you in the strongest of terms to oppose these bonuses and to more vigilantly protect my savings and those of my fellow contributing members of the Ohio State Teachers Retirement System.

Sincerely,
William J. Stewart
Business Dept. Chair
Fairfield City Schools
Fairfield, OH 45014

STRS Ohio 2009 PBI Preliminary Analysis
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PBIs (bonuses, Performance-Based Incentives) for STRS investment staff

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Base salary increases for STRS investment staff 2008-2009

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