THE STRS BONUS ISSUE

From Mario Iacone, May 16, 2009

So much is heard these days about STRS bonuses. Many say they are not deserved. Some say they are because benchmarks were met. I researched the issue with a fair and open mind. The following is what I discovered and concluded.

FACT ONE: Bonuses were paid for PAPER GAINS that were not sustained. Not only were the gains not sustained, but all of the gains and more were lost. Even worse, the losses are such that teachers and retirees are facing substantial cuts.

FACT TWO: The STRS Bonus Structure provides reward for gains in the investment value of the fund. It even provides reward when losses are suffered, but STRS established benchmarks are met. However, The STRS Bonus Structure does not provide penalty for losses in the investment value of the fund. If one gains, they receive a bonus. If one loses, they receive a pay cut. A pay cut is not unreasonable nor would it cause undue financial hardship for salaries of $200,000 or better.

What a Sweetheart Deal, you never lose. Pension Fund Gains, get Bonus. Pension Fund Loses, get Bonus. Although the latter will be changed in the future thanks to Dennis Leone, it’s still a great deal, Pension Fund Loses, no Bonus, just great salary.

FACT THREE: The more I researched this issue, the more I read about BENCHMARKS. I will admit that I truly do not understand benchmarks that well. This much I do know, benchmarks are used to grant the bonuses.

Then I found a simple benchmark that was not met by STRS investment managers. The rate of return on no effort, no risk Treasury Bonds.

Examine the ORSC Performance Review Chart below. It will indicate a ten year 3.30% return on STRS investments.

Then, examine the Treasury Bond Rate Chart also shown below and notice that it would have been a “no brainer” to achieve at least a 5% return over that same ten year period.

OPINION ONE: I believe I can anticipate one response to my comments. That’s not how things are done in the FINANCIAL WORLD. Before that comment is made please consider that STRS is not a Wall Street Investment Firm. STRS is a Pension Fund for Teachers. The members are not trying to get rich but just have a decent income for their old age.

OPINION TWO: Furthermore, I believe I can anticipate a second response to my comments. If STRS would not invest as it does and use things like Treasury Bonds, STRS would not make enough to meet its obligations. Well, STRS has not made enough. But, STRS has lost enough that major changes in the pension plan for both teachers and retirees are being considered. Changes that appear to be more substantial than would have been necessary not making enough with steady, conservative, low risk investments.

IMPORTANT FACT/ESTIMATE: The following chart shows at least what 2009 STRS assets would be if the 1998 asset value would have been invested in low and no risk investments averaging Five Percent.

No doubt, it will be pointed out that stock market investments will do much better and probably average 10% over the long term, and that is probably accurate, although such is not true for the period of 1998 to 2009 and might turn out to be true for the period of 1998 to 2025.

However, there is a serious flaw in such Long Term projections. Large Short Term losses cause serious financial hardship for both the active and retired members of STRS.

Click images to enlarge.

Below is a chart showing guaranteed Treasury Bond Rates from 1998 to 2008.

[Live link for this chart: www.federalreserve.gov/releases/h15/data.htm]

Below is a chart showing a 3.30 return earned by STRS for the last ten years.

STRS Investment Return vs Treasury Bill Return

From Mario Iacone, May 12, 2009

IMPORTANT FACT/ESTIMATE: TABLE ONE shows at least what 2009 STRS assets would be if the 1998 asset value would have been invested in low and no risk investments averaging Five Percent.

TABLE TWO lists Treasury Bill rates since 1998 showing that at least a 5% Return would have been easily attainable over the period of time shown in TABLE ONE.

Click image to enlarge.

No doubt, it will be pointed out that stock market investments will do much better and probably average 10% over the long term, and that return might be attainable, although such is not true for the period of 1998 to 2009.

However, there is a serious flaw in such Long Term

projections. Large Short Term losses cause serious financial hardship for both the active and retired members of STRS.

The current situation best illustrates that point. Due to large short term losses, STRS members are confronted with:

• Increases in Contributions.
• Higher Retirement Age.
• Worse Final Average Salary.
• Reduction/Elimination of COLA.
• Worse yet, we are paying high salaries and b onuses to get that.

Will it matter to those that suffer those cuts, if in 2024, STRS can show an average return of 10% on their investments?

STRS should note that it is NOT a Wall Street Bank or Wall Street Investment Firm, but a RETIREMENT SYSTEM.

STRS must implement an investment strategy that offsets huge short term losses to avoid a repeat of the same problem a short time into the future.

Live link from Table 2: www.federalreserve.gov/releases/h15/data.htm

Mario Iacone: Comments on the STRS 'Best Days' chart (April Board News)

From Mario Iacone, May 11, 2009
Subject: April Chart

Please reference the STRS website, April Board News (posted April 27, 2009;

http://www.strsoh.org/boardnews/bn_current.html) and the “Best Days” chart shown in that report. The chart is also shown below.

That chart was provided by Russell Investments and was used to refute the argument against more “conservative” investments.

The information on the chart could be very misleading, although I do not believe such was intentional and have been informed by STRS that such was not the case.

If misinterpreted, the chart could give the appearance of providing "rigged data" to make its point by ending in 2007 before there was any serious downturn in the markets. While true that the relative positions of the bars would still be the same if the chart provided data ending in 2008, the first bar might show something like $7900 instead of $15,559.

Click image to enlarge.

Various Issues could arise from the data on this chart. They are:

Why does it show results ending in 2007? The most serious downturn in the stock market occurred during 2008, specifically from September on.

This chart with data only through the end of 2007 is very misleading on the issue of best days, because it leaves out the worst days of 2008 and 2009.

What would the results be if it ended in 2008?

What would the results be if it ended March, 2009?

If the money were invested in more “conservative” assets, what would the results be for the Missed Worst Days?

Also, the chart itself states that the results are based on INDEXES.

INDEXES CAN BE VERY MISLEADING! If an investor does not own an equal amount of every stock in the index, the results of an index are meaningless and the actual performance for a given investor could be very different than the performance of the index.

Practically speaking, Investment Managers have a very direct interest in STRS avoiding more “conservative” investments. They would LOSE TENS OF MILLIONS IN FEES.

I am not totally certain, but believe the best days approach originated with brokers trying to get clients to retain and commit funds in a down market by promoting that the market could run away from them. Promoting the message, more risky to be out of market than in it.

Such message to be totally accurate, should add, if a significant number of worst days are ahead, losses will increase. Also, such a broker is not doing due diligence if the same argument is not presented showing the results if the worst days were missed over that same period of time.

For example, if that message had been used with clients at the beginning of 2008 and if clients had followed the premise, they would have suffered significant losses due to the number of worst days that were ahead.

COLA Calculator

From Mario Iacone, May 9, 2009

Below is a sample annual COLA (Cost of Living Adjustment) calculation based on an original $30,000 retirement benefit. This was put together by Mario Iacone, a Mahoning County retiree (Youngstown area). If you would like a copy of the original spreadsheet so you can calculate your own COLA amounts, e-mail him (ike1@zoominternet.net) and he will send it to you.

Click images to enlarge.

NUMBERS, NUMBERS...........

Current value of STRS assets (as of March 31, 2009):
......$47.65 billion
As of mid May, 2009: $51 billion
Peak value (October 2007):
......$80.1 billion

Lowest value since October 2007:
.....$46.3 billion (February 28, 2009)

Current (4/09) projection on when the healthcare fund
will run out of money (it's been funded from
the principal since 2008):
......2018 (if we're lucky)
Number of associates employed by STRS (4/09):
......605
Peak number of employees at STRS (2003, before Dennis Leone made a hard pitch for cuts in his INVESTIGATIVE REPORT of May 16, 2003):
......734

Number of job openings at STRS on 4/30/09:
......1 .....(Click here for updated listing(s)

How much STRS spends to support our health insurance plans (based on 2008 figures)
......Per year: $544,448,203
......Per day: . $1,487,563

Approximate number of stakeholders/members in STRS (4/09):
......175,000 active members (teachers, administrators, college professors & college administrators)
......125,000 retirees

......100,000 inactive teachers (neither retired or active in STRS; they have money in the pension fund from previous service over the past 80 years, which has not been drawn out)
......Total: 400,000

Some March 31, 2009 numbers at STRS:
......http://www.strsoh.org/pdfs/expenses.pdf

May 2009

Jim Stoll, candidate for active seat on the STRS Board

-----------------------------------------------------------------
James A. Stoll has been Director of Athletics at Sycamore High School for the past 12 years. Prior to that Mr. Stoll was an assistant college basketball coach at the University of Wyoming and Miami University where he also served as adjunct professor of Sports Marketing.

In addition to being a Teacher/Coach/Administrator for 22 years, Jim also Co-Founded a successful summer business called ProCamps where he puts on youth sports camps for NBA/NFL players in their communities throughout the United States. Among Jim’s clients are five NBA superstars who played for Coach Mike Krzyzewski’s Olympic Gold Medal Team, Chris Paul, Dwayne Wade, Dwight Howard, Tayshaun Prince and Carmelo Anthony.

Mr. Stoll feels his business acumen will greatly assist in helping to protect the assets of our pension fund. First and foremost the role of a State Teachers Retirement Board Member is to be a “Fiduciary” of the pension fund that active and retired teachers have paid into throughout their careers.

"As you know, our pension fund has lost 33 billion dollars from June 2007 – February 2009, I want to put mechanisms in place to be sure losses like this will never occur in the future."

Other key issues include elimination of bonuses for investment staff, Health Care for retirees and protection of our assets so pension benefits will be ensured when active teachers are ready to retire.
3.16.09

OEA pay...is the cart before the horse?

From John Curry, March 27, 2009

Mr. Mahoney,

As a "spokesperson" for the Ohio Educaton Association, maybe you can "speak" to the thousands of OEA affiliated educators in this state and tell them why the median salary of an OEA administrative secretary is almost $3,000 more than the average salary of an Ohio teacher who is now required to hold a Masters Degree to teach in Ohio's schools. I will be awaiting your answer.

The link to this salary information is: http://dispatch.com/live/content/local_news/stories/2008/11/29/unionyes.ART_ART_11-29-08_A1_5PC2RH8.html?sid=101

John Curry
A former 30 year OEA dues-paying member now, a retired educator

Click image to enlarge.

OEA salaries.....Latest Dept. of Labor posting 11/2008

From John Curry, March 13, 2009

Below is a summary of the top OEA salaries as reported to the U.S. Dept. of Labor from their website. This posting was presented to the U.S. Dept. of Labor in November of 2008 and covers a time period from 9/1/2007- 8/31/2008. Just as public school educators' salaries are public domain, the salaries of the OEA associates are also public domain. I have listed all salaries at or above $50,000, there are some less than 50K but this may or may not be due to a part time position or a person who was hired during this time period or resigned during this time period or....could just be a salary lower than 50K.

John Curry

a member of CORE (Concerned Ohio Retired Educators)

If you wish to access the full report please follow this procedure:

1. Go to this page (this link opens in a new window): http://erds.dol-esa.gov/query/getOrgQry.do

2. Enter this employer number: 512-490 in the box listed as "File Number."

3. Click the "Submit" button.

Now, here's the summary. Please note the term "LRC" listed as a job description - this stands for Labor Relations Consultant....the OEA people that you probably see when they visit your school. These names/salaries can be found listed on schedules 11 & 12 of the U.S. Dept. of Labor document should you decide to click on the link above and do your own search.

I have left out the dollar signs. The first group listed are officers of the OEA and are on a separate schedule from the rest of the associates. Salaries in excess of 100K are in boldface print. These figures are from column (D) Gross Salary Disbursements (before any deductions).

Frost Brooks, Patricia---President---172,574

Leibensperger, William---Vice-President---151,451

Timlin, James---Secertary-Treasurer---151,382

Allen, Gary---Former President---97,502

Allison, Mark---CIS Consultant---118,901

Arrigi, Geraldine---Admin. Secretary II---58,821

Austin,Jolynn---Staff Consultant I---59,215

Avouris, John---LRC---91,314

Babcock, Susan---AED Strategic/Workforce---136,209

Heitzman, Lynn---LRC---54,663

Gee, Karen---LRC---54,574

Barbu, Alex---CIS Technician---55,732

Bartlo, Lynn---Admin Secretary II---58,887

Bayou, Ann---LRC---118,668

Bell, Marla---LRC---118,690

Bibler, Timothy---LRC---118,634

Biddle, Susan---LRC---118,536

Bird, Rodney---LRC---121,805

Blanden, Lee---LRC---107,062

Boerger, Katherine---LRC---72,695

Botz, Gail---Communications Tech.---61,654

Bozovich, George---LRC---124,050

Brooks, Lisa---Ex. Assistant-Counsel---66,286

Busby, Robin---LRC---118,369

Carlisle, Gary---LRC---118,917

Chandler, Elizabeth---LRC---119,904

Chanfrau, Graciela---Dir. Human Resources---85,826

Chavez, Peggy---LRC---124,235

Chute, Danielle---Staff Accountant II---60,790

Clark, Melissa---Lobbyist---86,002

Clar, Airica---LRC---86,213

Cline, Cathy---Admin. Secy. II---60,615

Clum, Darren---CIS Consultant---118,692

Cohagen, Joseph---Dir. Accounting---116,872

Colbeck, Tad---LRC---72,586

Coyler, Shelley---Admin. Secy. II---61,189

Cooper, Jeanette---Dir. Region 4---113,458

Cooper, Shawn---LRC---109,938

Constantino, Mark---LRC---106,966

Crawford, Douglas---LRC---118,621

Crumrine, Margaret---Admin. Secy. II---58,691

Dalton, Donald---LRC---118,580

Davis, Demetrice---Education Reform Cons.---101,237

Davis, Elaine---Admin. Secy. II---60,084

Davis, Robert---Lobbyist---106,625

Davis, Vicky---LRC---118,525

Dotson. Matthew---Lobbyist---114,386

Doubledee, Arlene---Admin. Asst.---55,048

Eichelberger, Donna---Admin. Secy. II---58,123

Elias, Dawn---Ex. Asst. Human Resources---77,814

Elling, Betty---LRC---96,394

Facchiano, Joyce---Admin. Secy. II---60,363

Fekete, Fritz---Dir. I/S & Research---140,258

Field, Ann---LRC---120,498

Fiely, Linda---Dir. Legal Services---111,075

Flanagan, Kevin---Dir. Region 3---137,692

Flora, Randall---Dir. EI&I---123,764

Fulton, Karen---Dir. EI&I---54,220

Gallagher, Kathleen---Admin. Asst.---68,625

Garlits, Lenna---Admin. Secy II---58,968

Gascon, Gregg---Research Cons.---121,534

Grafton, John---LRC---106,981

Graham, Stuart---CIS Consultant---121,518

Harris, Russell---Ed. Research Cons.---118,658

Hart, Jonathan---CIS Consultant---105,003

Helvey, Edward---LRC---101,457

Holub, Donald---Research Consultant---105,482

Hornacek, Anthony---CIS Consultant---86,782

Howell, Lynette---LRC---118,857

Hutchins, Talmadge---LRC---118,715

Jackson, Schalet---LRC---76,904

Jewell, Paul---Research Consultant---118,658

Johanson, Barbara---Admin. Secy. II---59,112

Johnson, Charles---LRC---118,633

Johnson, Rachelle---Counsel---111,171

Jones, Esther---Admin. Secy.II---59,040

Jones, Jan---LRC---118,658

Joseph, Bonnie---Political Consultant---139,822

Jowhar, Thomas---LRC---118,671

Kaliszak, Teresa---Membership Accounting---70,011

Kappes, John---Tech. Operator---74,868

Kaszar, Suzanne---Communications Cons---118,064

Keller, Rosemarie---Manager Legal Services---90,995

Kelm, Linda---Admin. Secy. II---63,488

Kestner, Jeffrey---LRC---131,935

Kidwell, Sally---Staff Accountant II---69,957

Kirdwood, Amber---LRC---96,485

Kovach, Gary---LRC---93,826

Kubiske, Annette---LRC---118,595

Lane, Kimberly---LRC---120,191

Leidy, Chloann---LRC---112,771

Lester, Donna---Admin. Secy. II---59,252

Linder, Mark---LRC---110,354

Lindsey, Linda---LRC---119,438

Lobert-Edmo, Lavonne---:RC---109,355

Mahoney, Mike---Dir. Communication---117,098

Marchese, Victor---LRC---112,885

Marcum, Connie---Admin. Secy. II---58,986

Martin, Beverly---Admin. Asst.---53,208

Martin, James---AED Business Services---148,249

Matkowski, Robert---LRC---121,120

Matusick, Michael---LRC---53,672

May, Linda---LRC---118,658

Maynard, Debbie---LRC---81,809

Mceachern, Michael---LRC---102,680

McMurray, Bonnie---LRC---120,157

Messer, Darlene---LRC---101,614

Messer, Donald---LRC---119,224

Miller, Diane---LRC---118,631

Miller, Tim---LRC---118,642

Miller, Vickie---LRC---101,900

Mills, Linda---Accountant Asst.---52,902

Mueller, Daniel---LRC---72,548

Munoz-Nedrow, Cristina---LRC---97,929

Murdock, Patricia-Director Region 1---126,006

Musilli, Henry---LRC---118,617

Navin, Lori---Admin. Secy. II---59,121

Nelson, Alfred---LRC---111,526

Nelson, Judy---Admin. Secy. II---64,674

Newhall, Julie---Editor---119,324

Nolasco, Jeffrey---LRC---106,810

Norris, Parry---Director Region 2---123,068

Obrien, Sharon---Admin. Secy. II---59,206

Oconnell-Burt, Kathleen---LRC---101,735

Odonell, Tina---Ex. Assistant---81,582

Otten, William---LRC---118,540

Patrick, Maureen---Prod. Consultant---159,087

Pearson, William---LRC---127,356

Peltola, Dennis---LRC---121,881

Peterson, Cynthia---Education Reform Cons.---125,441

Phillips, Crystalle---Admin. Secy. II---59,558

Picker, Barbara---Admin. Secy. II---58,681

Pipe, Herman---LRC---101,517

Prater, Michelle---Communications Cons.---107,679

Puterbaugh, Debra---Admin. Secy. II---58,393

Quesada, Dinica---Education Reform Cons.---88,836

Radel, Sam---LRC---81,994

Rapp, Ron---Director Governmental Svc.---73,384

Ray, Patricia---LRC---72,305

Reardon, Dennis---Executive Director---176,317

Reed, Phyllis---Admin. Secy. II---59,420

Reimund, Marci---LRC---118,681

Renaud, Thomas---LRC---118,670

Rivera, Daniel---AED Member Services---133,466

Roberts, Debra---Admin. Asst.---59,254

Rosa, Miriam---Admin. Secy. II---59,703

Rumsey, Lora---LRC---91,369

Saad, Sheila---LRC---127,606

Shoulders, Venita---LRC---135,677

Simonini, Laura---Admin. Asst.---66,634

Slaughter Rebecca---Mgr. Governance Relations---96,687

Smith, Peggy---Admin. Secy. II---58,717

Smolik, Carrie---LRC---118,665

Soto, Charlene---Reprograhics Tech.---53,847

Squires, Jerry---LRC---119,424

Starcher, Connie---Admin. Secy. II---60,424

Stephenson, Edward---LRC---118,653

Stewart, Joyce---Admin. Secy. II---54,648

Suchy, Mary---Dir. of Membership---135,321

Terman, Melodie---LRC---107,278

Thomas, Anne---LRC---68,629

Thompson, Angela---Admin. Secy. II---59,895

Tieman, Diane---LRC---123,962

Trapp, Helen---LRC---101,428

Tufaro, Dolores---LRC---80,960

Turner, Patricia---Research Cons.---118,750

Urban, Eric---LRC---98,610

Villamagna, Rebecca---LRC---118,624

Volz-Costell, Jerrilyn---Mgr. Admin. Svcs.---82,567

Walters, Saundra---Admin. Secy. II---58,815

Watson, Diana---LRC---77,486

Webster, Michelle---Staff Accountant II---79,438

Weldon, Cecelia---LRC---120,466

White, Cathy---LRC---117,624

Whitney, Theresa---LRC---76,220

Williams, Don---LRC---118,742

Williams, Kent---LRC---52,729

Wilson, Jada---Admin. Asst.---59,352

Wing, Debra---LRC---103,862

Winters, Deborah---Data Entry Tech.---50,505

Wittemire, Leroy---Ex. Asst. Business Svc.---83,431

Yevincy, Amy---LRC---61,118

Yoder, James---Director Region 5---166,254

Young, Alice---Admin. Secy. II---59,655

Young, Norman---LRC---127,705
[Gov. Ted Strickland: $144,831]

Tom Curtis, Mike Nehf re: Employee numbers

Tom Curtis to Michael Nehf, February 19, 2009
Subject: 021909 Curtis To Nehf, Employee Counts

Hello Mr. Nehf,

Would you kindly provide me with the current number of STRS employees at this date? Please break that down into full and part-time, if that applies.

Further, would you kindly have a listing prepared of the number of employees, month by month, from July 1990 to March 2009. That will cover a span of four executive directors. I will ask that you provide me with this listing in a reasonable amount of time, as it should not take much time to produce.

I am requesting this information, because I find it troubling that the STRS continues to employ the highest number of employees, of the five public pension systems in Ohio, yet does not have the largest amount of holdings or members. Further, the STRS does not provide the best benefits for their stakeholders. Actually, in my opinion from documentation that I have obtained about the other four, the STRS provides fewer benefits to their retirees, with the exception of the State Highway Patrol. Please correct me if I am wrong.

These are very trying times, which you are well aware of. All of us are having to cutback on our expenditures. In my opinion, so should the very people that are employed to handle our retirement funds. I have not witnessed, or know of any reduction in force in the history of the STRS.

The STRS does not produce a product and therefore does not require a specific workforce to provide the most crucial benefits the stakeholder needs. Reducing programs and the work force at the STRS should be highly considered and completed no latter then the end of this fiscal year.

We have more employees, but receive fewer benefits then do the OPERS stakeholder. I realize some of the other pension funds show little comparison to the STRS, but we most closely are compared to the OPERS.

I for one am getting very tired of loosing ground every year financially, while the STRS employees continue to gain in compensation at a rate far above what the retire receives and/or the rate of inflation has been. This is absolutely wrong!

Just one example: The pay increases given this fiscal year, along with all of the added ways of receiving more bonuses, shows little consideration of the very people that you are employed to represent. Please explain how you justify such? Please do not tell me we paid a consulting firm to justify the increases for the employees, as that simply verifies your greed and shows how little concern you have for your stakeholders.

Others and I had discussed these issues with Damon Asbury and the executive staff as far back as when we held monthly CORE/STRS meetings in 2003-2005. I chaired many of those meetings. I stopped doing so in 2005, when my level of frustration grew far beyond my ability to be civil to those people that provided us with so many lame answers. I lost all respect for those people, because they were not being held accountable for their decisions and actions. Unfortunately, little has changed since that time.

After reading about your background and experience prior to coming to the STRS, I was very encouraged by your selection as our new executive director. I will show you the respect and courtesy you well deserve, but as my father used to tell me, respect in earned and not simply given. I will continue to question many policies and practices at the STRS and I am hopeful that you will respond to such in an appropriate manner.

Please keep in mind, that business as usual is no longer the norm. Our new president, who I highly admire and voted for, is offering a new direction for this country. One of renewed accountability, though I realize that is a very tuff avenue to travel down, considering the mindset of today's society.

With all due respect Mr. Nehf, despite all of the various surveys the STRS wastes our money to have produced, the stakeholders of the STRS are not getting value for their dollar.

The STRS literature sent to the stakeholders is and has been skewed to the positive for as many years as I can remember, which makes for a truly uninformed stakeholder. A stakeholder lulled into thinking everything is just peachy, when many of us know it is not.

I implore you to follow the freedom of information policies of this country and state and provide the information I have requested.

"We the STRS stakeholders will be ever vigilant, not because we desire to be, but because the personal greed of our money managers has forced us to be."

Tom Curtis
STRS Stakeholder

Michael Nehf to Tom Curtis, February 20, 2009
PM Subject: RE: 021909 Curtis To Nehf, Employee Counts

Tom,

I recently reported to the Board how the number of STRS employees has decreased over the years. STRS is also the only one of the five public pension systems to manage its real estate portfolio with its own staff, thus saving thousands of dollars in investment fees. I’ll work with staff on your request, but hopefully you witnessed positive results from this week’s Board meetings.

Sincerely,
Mike Nehf

Curtis to Nehf, February 22, 2009
Subject: 022109 Curtis To Nehf, Re Your Response

Hello Mike,

I greatly appreciate your quick response and willingness to provide the figures I have requested. I hope the information might be a valuable snapshot for you as well, possibly for future planning.

During the CORE/STRS meetings held a few years back, Steve Mitchell made us all very aware of the benefit of the investment department and the money saved. So, too, have the many STRS consulting reports I have read over the past 5 years. However, the operation of the investment department is completely over my head, or that of anyone who has not had a strong investment background; but then you know this.

I also realize there are few complaints when times are good and the department is producing at, or far above the 8% benchmark. However, that is another issue, and one I have absolutely no expertise in. I am a technologist and I look at things in a very different manner then do most other educators. I am a problem solver and use failure to my advantage, to better a procedure or process. I find so many others abhor failure and simply try to find blame and point fingers at others less likely to be able to defend such. Prior to teaching, I had a background in industry and manufacturing and know that one has to manufacture a product to make a profit. The employees of the STRS do not manufacture goods as such; they are there to provide a service. You and they were hired because of our money. Herb Dyer's culture was simple, but very wrong! His thinking, and I quote, "...it's the Board members' money to spend as they see fit." He made that statement to a retiree and again before the ORSC. The members of the ORSC quickly informed him that was not the case. His comments were in all of the major newspapers in Ohio and the AP press. I believe he felt that he and the investment people were the "chosen few" who were going to handle our money as they saw fit and needed no input from the stakeholder. Well, he failed, and the educators of Ohio are the big losers, because the cost of HC has never been properly funded and is bleeding retirees dry. It has been said that Herb Dyer wanted the STRS out of the HC business. It looks like he has accomplished that, doesn’t it? (What a shame he became one of our executive directors)

There is one glaring fault I find with most of the elected board members. Collectively, they have little to no background in business and finance. They could attend 2 seminars every year and still have little true understanding of how the investment department operates. Many of them, still active teachers, could not possibly have the time to read the vast amount of materials they are provided and asked to read each and every month, and also complete the school work they have 180-189 days a year. In my opinion, they are pawns for both the STRS and the union management. Companies would never consider hiring one of them to make billion dollar decisions, but the OEA/OFT pay their way to be on the board. From my experience, educators are ignorant of whom they vote onto the STRS board. They simply listen to their union officials, like good sheep.

Mike, you are aware that the educators of Ohio have provided a continuous flow of income to the OSTRS since 1920. That plan went well and they added HC benefits in 1974. Management promised such and were paid handsomely for providing that added service and for managing our funds; but failed to fulfill the HCSF obligation, seeing that it was properly funded for the future.

Please check your Newsletter library and locate the 1992 Newsletter when Herb Dyer came to the STRS. His picture is on the front. He clearly states that a dedicated flow of income must be found for the HCSF. But guess what: management and the OEA took their eye off of that ball. They never made that the #1 priority. They did many other things, of a lesser priority. They built a beautiful building with all of the luxuries of corporate America; they provided for entertainment and travel galore; they paid a 13th check to retirees for an unprecedented 21 years; in short, they provided themselves with the best, including free cars -- all at the Fund's expense. So, what do we have left now, a few drops left in the HCSF bucket? (I wish I knew the real figures).

The stakeholder is left with a HCSF that is nearly dried up; the death spiral is already in progress. We probably do not have more then a handful of years left until the HCSF is gone. This is really going to upset the actives, for they have paid into a HC system that will be gone when they retire. What are you and the board going to say to them? The miniscule 1% that has been placed in the HCSF for many years now is a joke, compared to the other four pension systems. That is just one more reason management is not trusted by those of us who understand what has been taking place at the OSTRS for the past 3 decades.

Mike, we desperately need an executive director with the ability to operate the STRS in an efficient and cost effective manner. We need an executive director that will place the concerns and the future of the stakeholder first. Are you that person, because we need you to be? The abuses of the past cannot stand. We need you to provide the leadership necessary to turn the "business as usual" around. Dennis Leone has done his best, along with John Lazares’ support. As you know, he will leave the board at the end of August. Undoubtedly, the two unions will take all stops out to fill the open board seats with union pawns. If that occurs, we will repeat history once again, by having all of the board seats filled by union representatives. In my opinion, their financial influence should not be permitted in determining who will be on the board.

Through the use of the Internet, your stakeholders can easily communicate with one another, as you have witnessed by reading Kathie Bracy’s Blog. Her blog reaches more stakeholders each and every day. She does an absolutely outstanding presentation of the many issues that effect educators. John Curry does an equally outstanding job of researching information that is pertinent to the retiree.

Those of us that supported Dennis Leone’s historic document made quite a difference in the operation of the STRS beginning in 2003. No one thought we would. Herb Dyer thumbed his nose at Dennis Leone and would not even sit down and discuss the concerns he brought to the board. He was a very arrogant and rude man and was out of control. We brought about change by placing constant pressure on the executive director and the board. Damon Asbury and the OEA have attempted to take credit for the changes, but we all know who caused them to take place. There is still much to be undone. We, your stakeholders will continue to cause your administration and the board much concern, as we will never take our eye off of the operation, until we are all gone. We desire a pension system that we can all have trust and faith in. Right now, that is not the case.

You have to be aware that the STRS stakeholder is becoming increasingly fearful for his/her future. This is the pulse I get from those I talked with while getting signatures for two retiree candidates. If the stakeholder is going to suffer, then it is natural that they want the people handling their money to (at the very least) show good faith and restraint, not "business as usual." We saw "business as usual" with Herb Dyer after the $12.3 billion loss in 2001. He's gone and has a criminal record to boot. He received a handsome severance package, but he was forced to leave, like so many money managers of today. I can tell you first hand, being a disability retiree myself, no one wants to leave their profession under unfavorable conditions.

The STRS has been unable to provide the HC benefit I was promised by the OEA my entire career. My cost of HC for my wife and me, beginning in 2004, is in excess of one-third of my pension. Compare that to the $30/month for both my wife and me, and a 90-10% coverage, when I retired in 1998.

Yes, this all happened before you came, but most of the names and faces have not changed, and this is the legacy you inherited. If you did not understand why so many recent retirees are so untrusting and have little faith in the management of the STRS, I hope this snapshot allows for a clearer picture.

It looks like Steve Mitchell was wrong when he stated almost a year ago that the recession was going to be weak. Well, obviously, that was the signal for business as usual; what the heck, pay raises for everyone!

In response to your question, yes, I am pleased with some of the decisions finally being made to reduce costs. I've heard good reports about actions being considered but have not read about them yet. I must tell you though; I am very disappointed that our board allowed the huge salary increases given to everyone in fiscal 2009. When a company that produces a product has lost $8 billion dollars, which I believe was the case at the time when those raises were approved, they do not hand out 6%-15% pay increases, so why does the STRS? I believe I know the answer to that. The consultants were paid well to tell the board that those increases were justified. Who pays the bill, the goose that lays the golden egg, the stakeholder? Who has continually lost ground financially, the stakeholder? Who, has continually gained ground financially, the employees? What do you see wrong with this scenario? The cost of operation of the OSTRS is way out of line.

In conclusion, others and I feel management is taking unfair advantage of the lack of backbone, background and inadequate training of the STRS elected board member. Both Herb Dyer and Damon Asbury were masters at this game. Mike, you guys are supposedly to be the professionals hired to provide us with a comfortable pension. Both the OEA and the STRS promised us that we had the "Cadillac" of pension plans. We agreed to work for lower wages then we deserved, for the education required for a teacher. So, why can't the OEA and STRS management be trusted to provide us with what they promised? Is having faith and trust in one's own pension system too much to ask? Do any STRS employees place one dime into the STRS pension fund or have any investment in our fund? Correct me if I am wrong, but I don’t believe so. The only thing any employee has to lose is his/her job.

Tom Curtis,
OSTRS Stakeholder

Curtis to Nehf, March 3, 2009
Subject: Re: 021909 Curtis To Nehf, Employee Counts

Hello Mike,

It was my hope to have the numbers I requested by this time? Why the hold-up?

Would you kindly respond?

Thank you,
Tom Curtis

Nehf to Curtis, March 4, 2009
Subject: RE: 021909 Curtis To Nehf, Employee Counts

Tom,

My apologies. I was away for several days and will have staff respond with a copy.

Mike

Joyce Baldwin to Tom Curtis, March 5, 2009
Subject: 021909 Curtis To Nehf, Employee Counts

Tom,

Per your email request on February 19, 2009, Mike Nehf asked that I forward you the attached document.

Our apologies that the information was delayed with Mr. Nehf out of the office last week. I hope this information is helpful.

Best regards,
Joyce Baldwin

Curtis to Baldwin, March 5, 2009
Subject: Re: 021909 Curtis To Nehf, Employee Counts

Hello Joyce,

I could not open the attachment. It indicates that it is an unknown file type.

I was looking for a spreadsheet with employee counts, both part and full-time from 1990 - 2009 or present.

Thank you,
Tom Curtis

Baldwin to Curtis, March 5, 2009
Subject: RE: 021909 Curtis To Nehf, Employee Counts

Tom, I pasted the document into the e-mail.

Joyce

Memo
To: Mike Nehf
From: Robert Slater
Date: February 10, 2009
Subject: 2002-2009 Budget Savings and Associate Counts

Budget Savings

A schedule of administrative expense budgets and actual expenses for the eight most recent fiscal years is shown below. The total administrative expense budget increased from $89.1 million in fiscal 2002 to $98.8 million in fiscal 2009 – that is a 1.5% compound annual rate of increase. However, even that relatively small increase is skewed by significant increases in budgets for investment-related expenses, including custodial banking fees along with board-approved salary and incentive increases for staff in the Investment Department. Budgeted expenses in all other areas actually decreased by more than 16% over the period, a 2.5% compound rate of decrease per year.

Actual expenses were even lower, increasing 0.7% per year in total and decreasing 2.6% per year, on average, for all departments other than Investments. A summary of the most significant reductions over the period is also attached.

Click image to enlarge.

Associate Counts

Since June 30, 2002, the number of full-time equivalent associates has been reduced significantly. The chart below outlines the number of budgeted and actual full-time equivalent associates at the end of each fiscal year.

NOTE: Current staffing is 601 total associates or 584 FTE’s.

[See Summary of Actual and Budgeted Expenses, with % of Change in Budget, posted separately, immediately below this post]

Curtis to Baldwin, March 5, 2009
Subject: Re: 021909 Curtis To Nehf, Employee Counts

Thank you Joyce,

However, would you please remind Mike that I had requested the employee counts from 1990 - 2009, and would still like that information.

Tom Curtis

Baldwin to Curtis, Thursday, March 5, 2009
Subject: Re: 021909 Curtis To Nehf, Employee Counts

Thank you Joyce,

Would you also please remind him that I requested that both full and part-time numbers be listed separately. Because the employee count varies throughout the year, ask him to list the highest count per year.

Thank you for your assistance.

Tom Curtis

P.S. My wife Linda said, "Hello."

Nehf to Curtis, March 6, 2009
Subject: RE: Employee Counts

Tom,

STRS Ohio does not have this information available to copy for you. It would have to be compiled. I apologize that I cannot comply with your request. I reiterate that STRS is working diligently during these difficult times to serve our members’ most important needs. Tom, I hope you understand. Is there any additional information we can provide that we may already have developed?

Sincerely,
Mike Nehf

Nehf to Curtis, March 6, 2009
Subject: RE: Employee Counts

Dear Tom,

It is my understanding that we would have to create a document to provide you with this information. I’m checking with Human Resources to see what data they have. As you might imagine, STRS is working extremely hard during these difficult times to serve our members’ primary needs. I appreciate your patience on these types of requests.

Sincerely,
Mike Nehf

Curtis to Nehf, March 6, 2009
Subject: Re: Employee Counts

Hello Mike,

I had no thought that what I requested would be readily available to copy. Whether the information I requested would have to be compiled or not, the freedom of information act makes it clear that you will provide such. I would think, especially to a stakeholder, so your apology is not warranted. You are on very shaky ground Mike, when you start providing such excuses for not providing public information.

Please reconsider your position and have one of our many excellent employees put this together in a timely fashion. I have waited long enough, while you have been dragging your feet.

If I do not receive the information by the end of next week, I will file a complaint against you with the proper authorities. That is not what you desire, is it?

Tom Curtis
Curtis to Nehf, March 7, 2009
Subject: 030609 Curtis, Re Nehf, Re Employee Counts

Hello Mike,

Thank you for passing my request along to the HR department. I am confident that HR will be capable of fulfilling my request.

Would you kindly have the person in HR contact me either by phone or email on Monday? I would like to make sure they understand my request and thus would not have to duplicate the search at a later date. I find that good communication is essential to getting the job done the first time. I like efficiency.

And, this is a primary concern of mine and many other retirees. I am sorry you do not seem to feel that way.

Mike, with all due respect, if you want to know about difficult times, you should be in my shoes, your stakeholder. There is no greater feeling then knowing, that both the union and retirement system you provided a dedicated flow of income into throughout your career, could not uphold promises they made to you all that time.

But then, you won't have to experience that with the retirement system you belong to, will you?

Tom Curtis

03.10.09 Response from Mr. Nehf...None to date