Saturday, February 25, 2006

RH Jones to Duane Tron: What we need to do on the local and state levels

February 25, 2006

We need to stay on top of who is running for the Boards of Education in each of our nearly 900 (Way too many.) School Districts here in Ohio. Each active/retired teacher has a responsibility to the children, not only ourselves, in this fight against those who want destroy public education. We need to attend the local board meetings not only where we work, but where we live. And we need to monitor who we vote for in the State Bd. of Education, as well. We have the numbers, let's do it this time, and forever after. These law breaking representatives have awakened a powerful tiger who is hungry to eat them alive in the voting booth this next election.

RHJones, CORE & SummitCRTA Legislative CMTE

Jim Reed: Dennis Leone's reports should be required reading for any qualified STRS Board member or candidate

From Jim N. Reed, February 24, 2006
Kathie, again, thank you for your time and effort to keep this blog churning out STRS-literate information. Heaven knows, there are many educators who need to tune in on a regular basis.
After talking to Tom Curtis the other evening and suggesting Dr. Leone's 2003 reports be accessible on one of CORE's web sites it appeared like magic on your blog almost immediately.
The information included in those reports is so succinctly damning that I can not imagine any prospective, active, disabled, retired, rehired educator being left in the dark about what transpired in the STRS over the past decade.
It disgusts me to think that any contributing educator, employer, or tax payer would purposely remain ignorant about these obscene abuses that have rippled into all of our lives. Those reports need to be required reading for any qualified STRS Board member or candidate.
It seems to me that Dr. Leone's research documents are at the core of CORE and need to be visible and easily accessed as long as any of the abuses on the infamous list continues to exist. The shorter the list becomes the longer are our chances of reviving ORC 3307.15 to its ethical and legal intent.
Jim N. Reed

Duane Tron: Elimination of spousal coverage hitting the actives now (Xenia schools, home district of OEA prez Gary Allen)

" maybe they will see what STRS did to spouses of STRS retirees"
-- John Curry
From Duane Tron, Friday, February 24, 2006
Subject: Whoops!
Dear All,
The Xenia City School teachers rejected a proposal tonight during negotiations with the Xenia City Schools BOE.
Where have we heard this before? The school system wants to eliminate health insurance for all non-employees. I think at STRS they called this eliminating the spousal subsidy.
Xenia City Schools wants to only provide insurance for employees and everyone else will have to go outside and obtain health insurance!
Folks, this is just the beginning! We are ALL under attack! Actives thought when it was happening to us it was exclusively OUR problem. Guess what!??
I think there are a lot more actives who are going to start listening to what we have been saying! Our political leaders are deaf, dumb, and blind. This cannot continue!
Xenia is just the beginning of this movement. The Xenia Teachers Association rejected the proposal almost overwhelmingly. I want to hear the OEA explain all of this to actives across the state. I want to hear how they're going to spin and weave this one.
Do you know what's disgraceful in all of this? Gary Allen, OEA President, was a teacher with Xenia City Schools before moving up within OEA. I would call it poetic justice except my heart honestly goes out to the Xenia teachers!
I will support them 100% to put a stop to this nonsense! Please ask all retirees to step up and help actives put an end to this disgraceful conspiracy!
We have a lot of political clout and it's past time for us to step up and start exercising it in elections. We MUST impact the upcoming governor's race to demonstrate to the political elite of this state that we have power and we mean business. If we fail to act we might as well go and crawl in a hole without a whimper. Just crawl!
Please share with everyone!
Duane Tron
St. Paris, Oh 43072

Allen responds to Leone (Oh my!)

From: Molly Janczyk
Sent: Friday, February 24, 2006
Subject: Leone and Allen to meet

Gary returned Dennis' call today and they set 3/8 at their date to meet. Just FYI.

From Paul Boyer to the authors of a newer blog: Some prevarications noted

Sent February 24, 2006

Dear Gary, Jim and Curt:

Upon receiving your mail yesterday about your STRSWatch blog, I immediately pulled it up and read all of it. Now, I do not think I know any of you personally and I am wondering if you are still active teachers or retirees. You are all evidently strong OEA supporters and believe OEA has done nothing wrong. Let me say that I am an OEA/NEA Life member and when I was an active teacher, I was probably one of the strongest supporters of OEA in my local and state. I thought they were really looking out for us but, boy, did I get my eyes opened three years ago.

You say you are concerned about STRS continuing to be able to take care of the retirees but you seem to evidence a lot of anger against those of us CORE members who have worked diligently over the past three years to save STRS. I am proud to say that I am one of the leaders of CORE and was name by Dr. Leone as one of five whom he considered to be "Core of CORE" at his inauguration speech last September.

Some of what was on your blog yesterday were out and out prevarications, especially the speech by Ruth Weeks. The Board did not willingly make all of the changes they have made in the past three years. Most of the changes have come at the insistence of the CORE members. For several months I was chair of a special CORE committee that met monthly with Dr. Asbury and some of his staff to discuss needed changes. This committee was formed at his invitation.

Another of your letter writers said that his local was the only one to send a rep to the board meetings. Now, I do not know if he was speaking of his OEA local or his retirement local. I will tell you that many of the local County Retired Teacher Associations have been regularly sending reps to the board meetings, some at their own expense and some reimbursed by their local.

Now, I for one, as others have written to you, welcome you if you really want to work to save STRS but please remember that to do that, you must work WITH us, not AGAINST us.

You may post this if you wish.

Paul L. Boyer
Retired since 1985
Life member OEA/OEA-R,
Proud to be named
“Core” of CORE

RH Jones: Urgently Needed 13th Check as Consumer Prices Rise

February 25, 2006

To all:

The Associated Press reporter, Jeanne Aversa wrote this week that: "U.S. consumer prices go full speed ahead. Energy costs rise, push inflation index higher". In short, the government's most closely watched inflation barometer released last
Wednesday, the Consumer Price Index, advanced by O.7 percent.

I would like to remind everyone that this is the State Teachers Retirement System, not the Shaft Those Retiree's System. Granted we retirees received a 3% Simple COLA (non-compounding) with Bill 190, but that does not keep us up with inflation as would the additional and timely 13th check, as well.

The old STRS BD and some employees came up with the "smoothing" idea. "Smoothing" the up and down years of investment income to justify, in the recent up years, the shorting retired members of an ORC allowable supplementary check! A recent STRS report stated that there are 95 retirees over 100-yrs old; 3,010 are over 90-yrs. I ask: is this being fair to them? Or, for that matter, any retiree? It is therefore obvious, with the loss of the 13th check, that the STRS retirees are paying for improvements to entice actives to retire.

Note: Dr. Dennis Leone's original report, recently placed on Kathie Bracy's Blog, put the 13th check in a negative light. Leone, later on, rescinded that aspect of the report.

Every new BD member has to be educated on the importance of retiree financial security; not only is it important that there is an available HC/Rx but inflationary protection is also important. The new BD voting 5-2 that new members Chapman & Flannagan be sent to Florida at a cost to the STRS of $7,000 demonstrates that the old BD thinking of entitlement still exists. This $7,000 growing in investment compounding would better serve its members than this obvious paid vacation. What happened to in-house and electronic workshops for BD members? Not only does this NOT go down well with retired members, this does not go down well with any concerned Ohio citizen! It is very poor Public Relations at this critical time. In good faith, Chapman & Flannagan should refuse this expensive "training" offer. It seems to me that when we have a terrific in house investment staff
that can achieve over 12% interest this last quarter, we have plenty of talent at 275 E, Broad ST., Columbus OH, to instruct new STRS BD members.

RHJones of CORE and the SummitCRTA Legislative CMTE

My response to OEA

February 24, 2006
Would somebody please tell me why the hell (please pardon my "French") Dennis Leone should be looking for Gary Allen in the first place? When you get kicked around by the playground bully over and over, and he never apologizes, why should YOU go looking for HIM? OK, the Bible says to turn the other cheek. WHO is the slanderer here, and WHO is turning the other cheek? You be the judge.
Kathie Bracy

Friday, February 24, 2006

NEA to let local chapters join AFL-CIO

New York Times

February 24, 2006

School Union Will Let Locals Join Federation

By Steven Greenhouse

Is it time for retirees to launch a campaign among the actives? Together We Can!
-- Kathie Bracy, Member over 45 years, AFL-CIO

The nation's largest labor union, the National Education Association, has decided to let its local chapters join the A.F.L.-C.I.O., labor officials said yesterday.

The decision by the association, which represents 2.7 million teachers and administrators and other school employees, will buoy the A.F.L.-C.I.O., which has been reeling because unions that represented nearly one-third of its members have seceded in the last year.

A spokesman for the teachers' union declined to comment on the decision. An official of the labor federation who insisted on anonymity, said its president, John J. Sweeney, and the president of the teachers' union, Reg Weaver, would make their announcement on Monday at the winter meeting of the federation in San Diego.

The move was in part orchestrated by the other large teachers' union, the American Federation of Teachers, which is in the federation and has long had a tense relationship with the N.E.A.

The education association has 13,200 chapters, and officials predicted that over the next five years hundreds of its chapters, perhaps thousands, would affiliate with the federation, which represents nine million workers.

For the federation, the move means more money, members and lobbying muscle. For the teachers' union, it means that the union can use the considerable lobbying power of the federation on issues like vouchers and education financing.

In 1998, the education association rejected a proposal to merge with the American Federation of Teachers, a move that would have made the association part of the umbrella federation.

The A.F.T. was founded as a militant union. The education association long considered itself as a more genteel professional organization. But in the last few decades many of its chapters have acted as unions, negotiating contracts with school boards and cities.

Thursday, February 23, 2006

Dennis Leone's unmasking of STRS in 2003: 'STRS Organizational Matters and Spending Practices'


May 16, 2003

MEMO TO: All STRS Board Members
Herb Dyer, STRS Executive Director
FROM: Dennis Leone, Superintendent, Chillicothe City Schools

Over the past three months, I have studied information supplied to me by STRS staff in an attempt to better understand issues that have received considerable news media attention recently. It also has been my desire to learn the truth about numerous STRS financial issues that have been on the minds of many STRS active members, retired members, and employers. I have reached the following conclusions:

1. Membership Issues: According to the STRS Comprehensive Annual Financial Report for fiscal year 2002, STRS has 424,171 total individual members. This includes 178,557 active members, 105,300 retired members, 15,730 re-employed retirees, 106,746 inactive members (eligible for refunds only), and 17,838 terminated members (eligible to receive a benefit at some point in the future). There also are 944 employers that send their portion of retirement contributions to STRS. The bulk of these (899) are school boards that represent public school districts, county ESCs, vocational schools, MRDD boards, and community schools - all of which have contributed 14% of every employee's annual salary to STRS since January of 1984.

CONCLUSION: The make-up of the current 9-member STRS Board really is not representative of its membership. Only one member of the Board represents retirees and no one represents the 944 employers that make the very existence of STRS possible. It would seem that the Ohio School Boards Association should either have a seat on the STRS Board or some official role in the STRS decision-making process. The 944 employers send more dollars to STRS than all active members combined, and therefore they need to have direct involvement and a voice in how the millions they send in are spent. Retirees, likewise, are under-represented and feel taken for granted.

2. Declining Assets: To set the record straight, STRS assets peaked on August 31, 2000 at $58.7 billion. Assets dropped significantly over the next 2 years - hitting a low of $41.6 billion on September 30, 2002 - before rebounding slightly six months later to $42.4 billion on March 30, 2003. The net $16.3 billion drop in assets between 8-31-00 and 3-30-03 represents a loss in assets for STRS over the 2-year period. Enron stock started declining continuously in the summer of 2001, prior to the September 11 tragedy. Unfortunately, nationally recognized external investment consultants utilized by STRS - some of which had been quite helpful is assisting STRS, benefit from the stock market in the past - provided bad advice in this instance. Before STRS finally ceased buying Enron shares in late November of 2001, $66 million was lost. The Columbus Dispatch reported on April 18, 2003, that STRS "underperformed" most pension funds nationally in 2002 in the area of investments. The report, based on a national study conducted by Milliman USA, stated that the median loss in investment revenue for public employee retirement systems nationally in 2002 was 8%. The loss at STRS, however, was 11.6%.

CONCLUSION: Mr. Stephan Mitchell has served STRS for the past 30 years, the last 20 of which have been as Deputy Executive Director in charge of investments. It has been published that STRS employs twice as many investment specialists as PERS (even though PERS has greater assets). Mr. Mitchell also has acknowledged that STRS has the largest investment staff of any teacher retirement system in the nation. While the investment returns at STRS have not been good over the past 3 years, and while some argue that STRS should have had a "stop loss" provision in place to prevent the huge losses experienced in the Enron fiasco, STRS investments were quite successful prior to 2000. Mr. Mitchell has had a good track record at STRS and retired members have benefited greatly from the productive investments by his department. Due to the collapse of Enron and other corporations, STRS needs to reassess its policies and practices for investing the membership's money to help ensure that investments are better protected. Even if stock market advice received is normally reliable, it seems there needs to be greater consideration for the use of "stop loss" orders to trigger an investment pull-out at a certain point after the stock has declined (to protect prior gains and/or minimize continued losses).

3. Staffing and Administrative Expenses: According to the STRS Comprehensive Annual Financial Reports, administrative expenses climbed at STRS 17.4% per year during the 6-year period between 1996 and 2002. (Administrative expenses include such things as salaries and benefits of STRS employees, legal services, travel, supplies, printing, computer services, etc.) The Columbus Dispatch reported on November 3, 2002 that in the specific area of salaries, STRS costs went up 26% in one year alone between 2000 and 2001. During the same one year time period, the Dispatch reported that total administrative expenses at STRS went up 25%. During the 6-year period between 1996 and 2002 - according to data supplied by STRS staff - the number of people employed at STRS rose from 414 to 725, an increase of 12.5% per year. In a letter dated February 28,2003 from STRS Executive Director Herb Dyer to the Ohio Retirement Study Council, Mr. Dyer wrote that 137 new employees were added in 2001 alone, and 69 of those were in administration.

CONCLUSION: While it is true that a number of new employees were needed to staff the new STRS headquarters in the areas of security, information technology, and various membership services, it is hard to accept these types of increases at a time when the total assets at STRS have plummeted a staggering 28% ($16.3 billion). When the school boards that send dollars to STRS experience declining assets on the home front, they do things like freezing salaries, cutting supplies, laying off employees, and even closing schools. In a nutshell, they reduce expenses by instituting cost-cutting measures. The STRS Board and administration have not satisfactorily demonstrated that they have reduced costs in their "house." While the administration is to be commended for reducing the total number of STRS employees in recent months to 707 (after peaking at 735 in February of 2003), much more needs to be done. To begin with, there needs to be a shift in what the STRS Board considers as priorities. The Board currently is not in touch with the managerial principles and fiscal realities from which their members and employers must operate under in order to survive. The STRS Board and administration are living a professional lifestyle that is completely foreign to their own membership. They need to emulate their membership. They need to set an example, and show they understand how it important it is to do so. This situation must change.

4. Costs Associated With New STRS Headquarters: A STRS summary of construction costs for the new and renovated building that opened in September of 2001 shows that a total of $94.2 million was spent. Included in this very nice facility is a fitness center for STRS employees that the staff estimates cost $426,000, and a child care center for STRS employees that the staff estimates cost $818,000. Also included in the cost for the new building was $869.235 for sculptures, artwork, and polished stones. One sculpture cost $378,500, another cost $168,125, another cost $112,500 and yet another cost $100,000.

CONCLUSION: The membership of STRS is NOT sending in a portion of their annual salaries to enable the Board and the administration to spend an incredible $869,235 on sculptures, artwork and polished stones. The new STRS building is not a museum, is it? It is outrageous that these purchases were allowed to occur. There is simply no acceptable answer for it. The need for the new STRS building to have a costly fitness center and a child care center is a subject for debate. What is not a subject of debate is that there are substantial annual STRS operating costs associated with the child care center. When Board members have been asked about the child care center at regional meetings, some have implied that the operating costs for the child care center are covered by the fees that are charged to the users in the STRS building. While it is true that fees are charged, they only covered 46.6% of the total child care center operating costs in 2002 - according to data supplied by STRS staff. The other 53.4% of the operating costs associated with operating the child care center in 2002 - according to data supplied by STRS staff- is picked up by STRS. And how much did this cost in 2002? The STRS Board offered up $487,560 to operate the child care center. STRS members and their employers do NOT pay their required retirement contributions so the STRS Board can annually pick up 53.4 % of the operating costs of a child care center for STRS staff members. If Latch Key programs operated by school districts do not pay for themselves through fees, then they're discontinued. The $869,235 that was spent by the STRS Board on sculptures, artwork, and polished stones, and the $487,560 that was spent by the STRS Board in 2002 to operate a child care center were simply wrong. Both represent a managerial and fiscal embarrassment. The STRS Board seems to forget that their members are in a period of financial decline.

5. The 13th Check: For 21 consecutive years starting in 1981 and ending in 2001, STRS awarded a 13th check to retired members. This check was not based on prior retirement contributions of retired members or their former employers. It was based on positive STRS investment earnings each year - earnings that occurred from the utilization of the prior contributions of retired members and the current contributions of active members. According to data supplied by both STRS and the Ohio Retirement Study Council in Columbus, the total amount awarded during this 21-year period was $711 million. If one adds the lost investment income to that amount, the total price tag for the 13th check was $1.4 billion. On December 11, 1996, a Joint House/Senate Legislative Committee of the Ohio General Assembly released its 8-month study of Ohio's public retirement plans. Included in this committee's final report was a proposal from the Ohio Retirement Study Council. It recommended that the 13th check to retired STRS members be disbanded. Despite this recommendation, the STRS Board continued to hand out the 13th check for 5 more years at a total cost of $233 million. (And this total does not include another $52 million that was lost in interest earnings during the same 5-year time period.)

CONCLUSION: While retired members deserved the 13th check as a way to help deal with inflation, some now feel that all of those dollars really should have been put into the STRS health insurance fund or in a rainy day fund. According to NEA, no other state has done anything close to what Ohio has done with its 13th check. Only four other states provide bonus checks to retirees, and all of those do so intermittently and/or only with specific legislative approval on an annual basis. It deserves noting that immediately after STRS received the recommendation in December of 1996 to disband the 13th check, literally thousands of teachers and retirees wrote to legislators and STRS Board members to voice their opposition to the proposed disbandment. In fact, OEA urged its members to write letters at that time. While the 13th check seemed like the right thing to do at the time, whether it should ever have started is now being questioned. Had STRS honored the recommendation it received in 1996 regarding this fund, the projected deficit for the STRS health insurance fund for 2004 would not be there. In fairness to STRS, what the Board did in 1996 is what some school boards and collegiate trustee boards do - they respond to the vocal and written pressure of their constituents.

6. Cash Reimbursements for Unused Sick Leave and Vacation : Existing Board policies permit STRS employees to receive reimbursement on an annual basis for up to 9 days of unused sick leave and 9 days of unused vacation time. Employees must have a balance of at least 20 sick leave days and 5 vacation days to qualify. In 2002, according to data supplied by STRS staff, the STRS Board paid out $701,948 in sick leave reimbursements and $342,980 in vacation leave reimbursements. Collectively, this employee benefit cost the STRS budget $1,044,928.

CONCLUSIONS: How many school districts provide all full-time employees an annual cash reimbursement for unused sick leave and unused vacation leave? It would be one thing to provide such a benefit to a select few, but to provide it to all full-time employees is inconsistent with the practices of the overwhelming majority of STRS members that are employers. It is common for school districts to provide a sick leave severance check to employees when they retire. It also is common for school districts to award a small cash amount of a few hundred dollars to employees who have perfect attendance. What STRS does is not common. These two policies need to be dropped, except for perhaps a few individuals. It deserves noting that until 2002, the STRS Board paid 100% of the family health insurance premiums of employees. Last year was the first time in STRS history that employees had to pay a portion of the Board's total premium cost. The number of STRS employer members that pay 100% of their employees' family health insurance premiums is, indeed, very rare.

7. Annual Bonus Checks to STRS Employees: There are 3 major types of bonus checks that STRS administrators and investment personnel are eligible to receive on an annual basis on top of their base salary and base salary raise. Investment employees are eligible to receive two major bonus checks annually, while non-investment administrators are eligible to receive one major bonus check per year. According to data published in the STRS 2002 Staffing, Compensation, and Benefits Review, the following summarizes the total number of full-time STRS employees who received these bonus checks over just the 2000-2001-2002 three-year period:

Year /Employees Receiving Bonus /Total STRS Cost
2000 290 $3,534,002
2001 345 $6,168,175
2002 395 $5,752,233
3- Yr. Totals: 343 avg. per yr: $12,274,410

In 2002, according to data supplied by STRS staff, there were 82 STRS employees with total salaries (base salary plus bonus checks) in excess of $100,000. Thirty-three (33) STRS employees received total salaries in 2002 that were larger than the current 2003 salaries of the- governor and the chief justice of the State Supreme Court. In other words, 33 STRS employees earned in excess of $155,000 in 2002. Fifteen (15) of these cleared $200,000. The following represents the distribution of bonus checks that STRS employees received in 2002:

Total Bonus/Amount/Number of Employees Receiving
$10,000 - $19,999 55
$20,000 - $29,999 17
$30,000 - $39,999 14
$40,000 - $49,999 7
$50,000 - $59,999 2
$60,000 - $69,999 7
$70,000 - $79,999 7
$80,000 - $89,999 1
$90,000 - $99,999 3
$100,000 - $109,999 1
$110,000 - $119,999 5
$120,000 - $129,999 1
Total Receiving Bonuses Over $10,000: 118

In 2001, there was one investment employee who received single bonus checks of $110,000 and $68,880 on top of her base salary of $164,000. This brought her total STRS salary in 2001 to $342,880. And according to Mr. Dyer's February 28, 2003 letter to the Ohio Retirement Study Council, all investment personnel also received a 3.2% base raise in 2001.

CONCLUSION: It is almost incomprehensible that during a three- year time period when STRS total assets declined a huge 28% ($16.3 billion), the STRS Board spent $12.2 million on bonus checks for employees. The dollar amounts associated with the bonus checks are mind-blowing. For the 944 employers that send STRS employee contributions each month, the bonuses represent fantasyland finances. Who could have guessed that one STRS employee received single bonus checks in 2001 of $110,000 and $68,880 on top of her $164,000 base salary? Who would have thought that 34 STRS employees would receive bonus check totals in excess of $40,000 in 2002?

STRS Board members and administrators defend the bonus checks awarded for several reasons. First, they say, the money used for the bonuses for the investment personnel comes from a pool of dollars that was received when investment earnings were positive in years past. They say that since investment revenue has declined, money will not be available for these bonuses for very long in the future. We shall see. Secondly, and most importantly, they state firmly that the bonuses for investment personnel have been based on the employee's ability to achieve both an individual investment benchmark and a total fund investment benchmark. Under this standard, an investment employee still could receive a bonus check even if STRS assets decline, as long as the performance of the stock he/she is managing doesn't decline as much. A third reason STRS Board members and administrators defend the bonuses is they risk losing valuable employees to the private sector (where they can receive the bonuses and higher salaries). While this concern could very well be valid, it is not fair or reasonable to expect the STRS membership to accept it given the realities of the financial problems facing everyone else.

In 2002, 65 STRS administrators received bonus checks. Since they had nothing to do with the investment earnings, why did they receive the bonuses at all, given the overall decline in STRS assets? All of them received a base salary increase. While maybe there is some logic in providing a few top STRS employees some type of small bonus for exemplary work, it defies logic for bonuses to be awarded to 395 employees in 2002...and big bonuses at that. There are a lot of excellent school treasurers in Ohio who invested money very well for their school districts in the 1990's. Did any of them get big bonuses for bringing interest earnings into their school district? If any did, it was a rare circumstance and it likely was a very small bonus. Properly investing the school district's money is part of the treasurer's job. That is why they receive a base salary. The large number of bonuses STRS gives its administrators must stop immediately. Bonus checks for so many investment personnel must stop as well. It they must be given, they should go to a select few, and they should more realistically reflect the realities facing the 944 employers and the thousands of individuals who are members of STRS. On November 13, 2002, according to the STRS 2002 Staffing, Compensation and Benefits Review, a company called Buck Consultants recommended that STRS do a better job of "establishing a clear link between individual performance and overall organizational success." The consultants analyzed recent STRS practices for bonuses, and wrote:

"The absence of a direct linkage among organization-wide performance and absolute performance (versus indexed) and incentive payouts is inconsistent with best practices."

To an outsider, the above would seem to mean that if STRS is failing to show profits with its investments, employees shouldn't be receiving bonus checks. Ultimately and unfortunately, it will be the STRS Board who determines what constitutes organizational success, not the membership. Is there any wonder how a membership survey would turn out if the STRS Board took the time to ask their membership what they feel about these issues?

8. Travel-Related Expenses for STRS Board Members: According to data supplied by STRS staff, $177,009 is expected to be spent in 2003 on travel-related expenses for Board member/administrator development, training, professional seminars, and conferences, and for investment transactions, plus real estate transactions. In the three previous years, the total amounts spent were $186,116 (2000), $174,167 (2001), and $170,001 (2002). On May 31,1995, the Cleveland Plain Dealer called into question the fact that Board members were turning in bills for trips to places like Hawaii and Palm Springs, for lodging at the nation's top hotels, for dining at expensive restaurants, and for beach bar bills. The article said that one Board member named Jack Chapman, who is a current Board member, spent $36,736 the previous year all by himself. According to the article, a planned trip by STRS Board members to China two years earlier was canceled after the State Attorney General Office complained that such a trip would create an image of "junketeering." In recent years, while no STRS Board member has spend money like the Plain Dealer claims Jack Chapman did in 1994, Board members still spend a great deal of membership money on out-of-state travel expenses. The total travel-related expenses and the number of trips requiring airfare over the past 3 years are shown for each Board member below:

Total Expenses Paid/Number of Trips in 2000.2001. & 2002 Requiring Airfare:

Hazel Sidaway $54,216.60 25
Jack Chapman $49,647.11 34
Eugene Norris $47,148.00 21
Deborah Scott $39,916.30 16
Gloria Gaylord $32,941.87 14
Joe Endry $11,727.43 7 (2 yrs.)
Rick Moore $10,437.95 10
Michael Billirakis $ 9,923.28 7
Paul Shreve $ 8,174.91 4 (2 yrs.)

CONCLUSION: While there certainly are valid reasons for Board members and administrators to attend professional seminars and be properly trained, and while the STRS membership wants to be effectively represented at real estate/investment transactions, was it really necessary for Board members to spend so much money for so many out-of-state trips over the past 3 years? The STRS Board and administration say yes. The STRS membership says no. One would think that after the Plain Dealer wrote the article in 1995 about STRS Board member expenses for out-of-state trips, and after a 28% decline in assets ($16.3 billion) since August of 2000, maybe - just maybe - expensive trips to places like Hawaii would cease. Not so. Board members Eugene Norris, Deborah Scott, and Hazel Sidaway spent thousands of dollars to go to Honolulu in 2000. Board members Jack Chapman and Gloria Gaylord spent thousands of dollars to go to Kiawah Island off the coast of South Carolina in 2001. Chapman liked it so much that he went back in 2002. Board members Michael Billirakis and Joe Endry spent thousands of dollars to go to Anchorage, Alaska in 2002. Perhaps, in the minds of Board members, the dollar amounts spent and the out-of-state trips taken are not excessive or exorbitant. The STRS Board just simply doesn't understand that if the boards representing the 944 employers that are members of STRS took trips like these at a time when their organization was experiencing financial difficulties and/or declining assets, they'd be run out of town. The public wouldn't stand for it. The "public" that represents STRS is the membership - 178,557 active members, 105,300 retired members, 15,730 rehired retirees, and 944 employers.

Recommendations: The $100,000 sculpture sitting outside the STRS Board room on the 6th floor is entitled "Integrity." The inscription under the sculpture reads:

"Integrity. .. ..guiding all that we do at STRS Ohio, from retirement Board actions to counseling members and investing money. This sculpture symbolizes integrity through the bronze figure representing members, intertwined with the stainless steel figure providing the security so highly valued by members and benefit recipients alike. The spiraling shape captures the boundless energy and strength that characterizes the system's mission and vision."

1. If the STRS Board truly believes it has the "integrity" to "provide security so highly valued by members," then NOW is the time for the Board members and the administration to have a new priority, a new focus, and a new philosophy regarding their past spending practices. No one is blaming STRS for the downturn in the nation's economy or for the national health care crisis. But when your assets have declined by a huge 28% ($16.3 billion) over just 2 years - and you tell your membership at the same time that there's no longer enough money to pay for health insurance or an inflationary increase (the 13th check) - you need to fully understand that:

The Board cannot spend $869,235 for sculptures, artwork, and polished stones in a new/renovated $94.2 million building. The Board cannot increase administrative expenses 25%, increase administrative salaries 26%, and hire 69 new administrators in the same year.

The Board cannot give STRS employees annual cash reimbursements totaling $1,044,928 for portions of unused sick leave and unused vacation leave.

The Board cannot spend $487,560 per year to provide child care services for STRS employees in a center that the Board spent $818,000 to construct.

The Board cannot give 395 employees gigantic bonus checks every year (34 of them over $40,000 in 2002 alone) totaling $12.2 million over 3 years.

The Board cannot give out bonus checks, period, except to very select few, and only if STRS assets exceed the asset high that was achieved in August of 2000. What the Board has done in the immediate past is tell the retired membership that it didn't have funds for a 13th check, but then came up with the funds for its own internal 13th check - the one that's a huge bonus increase for 395 employees.

The Board cannot take trips so many trips in a single year, go to places like Honolulu, Anchorage, and Kiawah Island, or allow single Board members to have 10-15 airfares and travel-related expenses totaling anything close to $36,767 in one year.

2. It is recommended that dollars currently set aside for future employees bonuses be put into the STRS health insurance fund.

3. It is recommended that you seek legislation to change the make-up of the STRS Board in such a way that there is increased representation from retired members and new representation from the 944 employers.

4. It is recommended that you layoff employees, cut costs internally, and initiate steps to reduce total administrative expenses to their pre-August of 2000 level - which is when the total assets at STRS started to decline.

5. It is recommended that you receive serious in-service training (at a Columbus location) from managerial experts who can help you better relate to the financial conditions currently facing your individual members and employer members, how your membership is dealing with said conditions, and how STRS can help them.

6. It is recommended that you survey your entire membership - as corporations do with their stockholders - specifically to see how they feel about the seven bullet points on pages 11 and 12 of this memorandum. You might be surprised at the answer.

Dennis Leone: 'Restoring Faith and Trust in STRS' -- Why is it STILL relevant today?

Date sent: Mon. 11 Aug 2003 08:52:27 -0400
From: Dennis C. Leone
Subject: Restoring Faith and Trust in STRS

August 8, 2003
I sent the following report entitled "Restoring Faith, Trust, and Confidence in STRS" to the STRS Board and the Ohio Retirement Study Council on Friday, August 8th. Please feel free to share it with the teachers in your district. I am hopeful that the STRS Board and the Study Council will adopt some of the things that I recommended. We shall see.
Dennis Leone,
Chillicothe City Schools

August 8, 2003

MEMO TO: All STRS Board Members
All Ohio Retirement Study Council Members
FROM: Dennis Leone,
Chillicothe City Schools

SUBJECT: Restoring Faith, Trust, and Confidence in STRS
I would appreciate it, if you would read this document carefully. On May 16, 2003, I presented a 13-page position paper to the STRS Board entitled "STRS Organizational Matters and Spending Practices." Much has been discussed over the past 3 months about STRS and its operations. It is my hope that the 417,000 individual members of STRS, as well as the 944 employer members, are better represented in the future by their pension system. It also is my hope that all interested parties become committed to the absolute awareness that much needs to change at STRS, and that the changes must occur immediately. It will serve no purpose for the STRS Board and its executive director to send out the kind of letter that went out to individual members and employers respectively on June 20 and June 27. Clearly, the membership is not interested in being told that things really are okay or that consultants have justified past spending practices. When times are difficult financially for members and employers, that type of rhetoric is counter-productive and rather insulting to people who have made education their life-long work.
What must occur now is for the STRS Board to take the necessary steps to restore faith, trust, and confidence in STRS. If the proper steps are taken, and a meaningful change in spending practices occurs, the overall reputation of STRS can be restored. If the STRS Board members believe anything, they must believe this: While many (including myself) were rather naïve in the past about what really was happening inside STRS, the membership will not be fooled again regarding the implications of future
Board actions and the end result of changes that are implemented in the immediate future. The membership needs to see and feel that the changes are real. With this spirit in mind, it is recommended that the STRS Board adopt the following steps now to restore faith, trust, and confidence in STRS:

1. Make Meaningful and Deep Cuts in Personnel and Expenditures: Take the necessary steps to reduce the STRS staff by 20% (which constitutes 140 positions). It simply is not enough to tell the member-ship that you have a hiring freeze in effect and that the STRS budget for administrative expenses will be decreased by 3% in fiscal year 2004. This doesn't fly when STRS documents show that administrative expenses increased 17.4% per year for 6 years between 1996 and 2002, and when other STRS documents show that 311 new employees were added in the same time period (constituting a 75.1% increase in staff). In the business of school boards and college boards - after we make real cuts in non-personnel areas - we then reduce staff through a Reduction in Force (RIF) action. We set a target for a desired dollar amount to be achieved, and then enough employees are reduced through a RIF action to meet the target. Real cost-cutting measures need to be implemented by the STRS Board. Staff reductions through attrition will not suffice. The cash savings achieved through a RIF action need to be distributed to retirees in the form of a partial restoration of the 13th check - in an effort to help them reduce their increased health insurance costs. This allocation must occur.
2. No More Bonus Checks or Cash Awards for Non-Investment Personnel and Restructure Bonuses and Cash Awards for Investment Staff: Things got out of hand at STRS beginning in 1998. This was the year that bonuses and cash awards increased nearly three-fold from the year before, and according to STRS data, total amounts went out as follows: 1998 -- $2,733,920; 1999 -- $2,676,720; 2000 -- $4,964,377; 2001 -- $6,413,625; 2002 -- $5,896,233; and 2003 (through March) -- $2,102,322. This means clearly that in the past 5 ½ years, the STRS Board permitted Mr. Dyer to award $24.4 million in bonus checks and cash awards - making it necessary to send another $3.2 million to PERS to satisfy that pension system's retirement contribution requirement (since STRS employers belong to PERS). The Board needs to return to the days prior to 1998, when no bonuses were given to non-investment personnel, except to a select small number. Bonuses given to investment personnel in the future should only occur, if the accounts managed by said personnel produce substantial dollars for STRS. It is not good enough to conclude that investment staff members deserve a bonus because the accounts they manage have declined less than the national average. If their accounts don't produce money for STRS, bonuses simply should not even be considered. Also, the STRS executive director should never decide unilaterally who gets bonuses. This policy must change! Even in the best of times, the STRS Board can never, never allow a reoccurrence of what happened in 2002, when 395 staff members were awarded bonus checks, when 34 different STRS employees received total bonus checks in excess of $40,000, and when 33 staff members received higher annual salaries than the Governor and the Chief Justice of the State Supreme Court. The pool of dollars set aside from prior interest earnings (which was to be used for bonus checks in the future) needs to be transferred into the health care stabilization fund (if permitted by IRS) or distributed to retirees in the form of a partial restoration of the 13th check - in an effort to help them reduce their increased health insurance costs. This must happen.
3. Sell or Auction The Artwork, and Stop the Deception Regarding the 1% Statutory Guideline - While the STRS Board may not be able to recoup the entire $869,235 that was spent on sculptures, polished stones, and artwork, it would be received well by the membership if the Board could recoup at least half of that amount and use the cash to revitalize the 13th check for retirees in order to help them with their increased insurance costs. STRS Board members are kidding themselves if they think their 417,000 individual members and 944 employers believe the artwork is necessary to run a pension fund. The money never should have been spent in the first place. It also is time to stop deceiving the public and the membership about the decision that was behind the purchase of the artwork. STRS Director of Member Services Gary Russell ($102,860 base salary in 2003, complimented by a $20,572 bonus in 2002) wrote to retiree Cindy Justice on July 10, 2003, and said the following: "Expenditure guidelines (for the artwork) were drawn from Section 3379.10 of the Ohio Revised Code, which stipulates that 1% of state money appropriated for the construction of public buildings be spent on the acquisition of works of art." Even the casual reader would conclude that this statement implies the STRS Board had to spend the money it did on artwork. This statement also has been repeated by STRS Board members and other STRS staff members. It is a terrible deception. Section 3379.10 of the Ohio Revised Code does not apply to STRS, the State Inspector General determined in 1996 that STRS is not a state agency, and no state money was used to construct the building. Instead of implying that the artwork was a necessary expenditure, it is time to admit the truth - which is that the STRS Board voluntarily chose to spend membership money to buy the artwork by using a statutory guideline that doesn't apply to STRS. The Board needs to show good faith to the membership (including Mrs. Justice) by not only acknowledging that the purchase of the artwork was inappropriate, and that the constant reference to the 1% guideline is wrong, but that sincere efforts will be made to dispose of the artwork so the Board can help send cash to retirees in an effort to help them with their increased health insurance costs. The Board might be surprised over how positive the response would be from the membership regarding this recommendation.
4. No More Widespread Annual Cash Reimbursements for Unused Vacation Time and Unused Sick Leave -- Current practice and policy must be changed immediately. While it is perhaps common for a select few staff members to have perks that others don't have, current STRS Board policy makes this benefit available to all full-time employees, every year. For the highest paid STRS employees, it represents another annual bonus check of between $10,000 and $20,000. It also represents an unnecessary annual expenditure of membership money that exceeds $1 million per year. Simply put, the membership and Ohio taxpayers are not sending dollars to STRS for these kinds of employee perks. If the STRS Board continues to provide these perks to all full-time employees, a matching dollar amount should be set aside, then distributed to retirees in the form of a partial restoration of the 13th check - in an effort to help them reduce their increased health insurance costs. If it is important enough for the Board to provide this special financial benefit to STRS staff members, then it is important enough for the Board to provide special financial help to retirees. The Board needs to show good faith to the membership by immediately adopting a policy to address this issue.
5. No More Parties and Gala Events Costing the STRS Membership Thousands of Dollars -- On June 19, 2003, which was the day before the STRS Board instructed Executive Director Herb Dyer to show more respect to the membership, to tow the line financially, and to be more cost efficient, Board members themselves participated in the spending of $4,100 of membership money during a private retirement party at the STRS headquarters for fellow board member Hazel Sidaway. Other activities have produced even worse examples of spending membership money. On August 27, 2000, a special
dedication ceremony was held for the "Discovery Park" outside the STRS headquarters. STRS forked up $18,810 for the event, paying for food, stage and chair rental, disposable Instamatic cameras (what?) lapel pins, and knit shirts. Then, three months later on November 16, 2000, the STRS membership paid $15,899 for the dedication ceremonies of the new STRS $94.2 million building. What was included in this total cost? Dinner, wine, gift boxes, aluminum commemorative plates for attendees, plus air fare and lodging for former Board members and former staff. How did this possibly happen? How, when a Cleveland Plain Dealer article in 1995 revealed that member-ship money was used for beach bar bills in Florida, is it possible that five years later thousands of dollars of membership money was used for wine, gifts, disposable Instamatic cameras, PLUS travel and lodging for visitors? It all has to stop and it must stop now. These types of expenditures represent a betrayal to the individual members, the 944 employers, and to the taxpayer. I wonder what the State Auditor would say to a school district that was spending money in this manner? The Board needs to show good faith to the membership by immediately adopting a new policy that forbids use of STRS dollars for parties and gala events.
6. Stop the $1,000 Dinners For Board Members and Staff Members At least twice in the past three years, Board members and staff members have gone out to dinner following committee meetings or other miscellaneous STRS work, and - instead of grabbing something to eat at Wendy's or Pizza Hut - they have gone to outrageously expensive restaurants and spent over $1,000 of membership money (averaging about $70.00 per person). The membership also paid for alcohol at these gatherings. How was this ever allowed to happen? It can never happen again. In fact, Board members and staff members who participated in the unnecessary $1,037 dinner at Lindey's Restaurant in Columbus on March 13, 2002 (following a committee meeting), should re-pay STRS for this dinner. Without a doubt, the State Auditor should cause this re-payment to occur. The Board needs to show good faith to the membership by immediately adopting a policy that forbids this type of expenditure and strictly forbids the purchase of alcohol with STRS money at any time.
7. Eliminate the Membership Funding of Child Care Services and Food Service Operations for STRS Staff Members -- The taxpayers of Ohio and the individual members of STRS are not sending in $1.2 billion and $827 million respectively to subsidize child care services and food service operations for STRS employees. It was bad enough that the child care center cost $818,000 to construct, but never again can the membership pay $487,560 per year to operate the center. Further - while it is nice to have a full-service cafeteria inside the STRS headquarters - the salaries, bonuses, cash awards, fringe benefits, supplies and materials associated with running it exceed the income received from meals purchased. All of this means that the membership $88,397 in 2002 to provide cafeteria services for STRS employees. The options appear to be simple: Charge STRS staff members enough to fully pay for the two operations, or shut them down. If the decision is made for STRS to get out of the child care business, the Board could rent out the space and gradually recoup the $818,000 that was spent of membership money to construct the facility. It is proposed further that if the Board is able to rent out the facility, revenue received should be distributed to retirees as a partial restoration of the 13th check - in an effort to help them reduce their increased health insurance costs.
8. Close the STRS Fitness Center, Sell the Equipment, or Rent it Out - This facility cost $426,000 to construct. The Board needs to sell or auction the equipment, or rent it out, to recoup - over time – the construction cost. The dollars received from a sale or rent need to be distributed to retirees as partial restoration of the 13th check - in an effort to help them with increased health insurance costs. As in the case of the child care center, the Board and the STRS Administration should be committed to looking for creative ways to generate income and help the retiree financially.
9. Sell Half of STRS-Owned Cars and Abolish Existing Policy that Permits the Personal Use of STRS-Owned Cars - STRS owns 16 vehicles -- 10 vans, 2 Durangos, 2 sedans, 1 truck and 1 station-wagon -- that have a combined value of $428,056. And of course, each car has an STRS-purchased insurance policy. Eight (8) of the vehicles are assigned full-time to the executive director, his 4 deputies, and 3 directors. Board policy permits these 8 individuals to use the cars assigned to them for personal use like vacations, fishing trips, shopping, etc. Were the make and model of cars selected on the basis of what would serve STRS the best, or were they (like the vans and the Durangos) selected because they were preferred by the employee for his/her personal use? The policy also permits the family members of said employees to drive the vehicles, as long as the family member also is picking up or dropping off the STRS employee at any location. With the exception of the executive director, the STRS Board should not be providing cars to staff members. The employees need to turn in mileage reimbursement requests, which 99% of school district employees in this country are required to do. Half of the cars should be sold immediately. The others - except for the one assigned to the executive director - should be parked at the STRS garage, where they need to stay unless needed for STRS business.
10. Request the Ohio Retirement Study Council to Appoint an Individual to Expenditures For Board Members and Staff -- If a school district has 50 employees and board members with American Express credit cards, as well as 13 employees with BP gas cards, the State Auditor would tell the school district that such a practice invites abuse. Why are there so many people who have credit cards at STRS? Why do any Board members have them? There needs to be an independent reviewer assigned to examine all credit card receipts and travel expenditures of Board members and staff members. This independent person would be in a position to determine if purchases were excessive or improper. This is necessary due to the $170,000 of membership money that is spent per year for travel-related expenses. Why is there an unnamed employee inside STRS who keeps writing me to say that the "skeleton in the closet" at STRS is cost for staff travel, staff expenditures at meetings, and staff credit card receipts? Why does this person keep urging me to look into this?
11. Reduce and Consolidate Board Member Trips by At Least Two-Thirds – In 2002, seven Board members (Chapman, Scott, Billirakis, Sidaway, Gaylord, Endry, Marshall) went to the same meeting in Boston and spent a total of $8,002.05. The year before, seven Board members (Chapman, Scott, Billirakis, Sidaway, Gaylord, Schreve, Moore) went to the same conference in Boston and spent $9,627.54. This is completely unnecessary. In a period of economic decline when the individual and employer members of STRS are cutting back in order to survive, the Board should be sending to these meetings only one or two Board members - who can return and share their findings with the rest. When Board members Scott, Norris, and Sidaway went
to Honolulu in 2000, the three of them spent a total of $5,285.91 for hotel accommodations alone. When Board member Jack Chapman traveled to Kiawah Island in 2001, and then returned in 2002, he spent a total of $2,284.70 for hotel accommodations alone. With 39 trips taken between 2000 and 2002, Chapman took more trips than any other Board member from Ohio's five pension systems. And of the $530,284 that STRS Board members spent between 2000 and 2002 on trips, $218,500 was for out-of-state travel. This craziness must stop. In the immediate future, Board members must: (A) Turn in their STRS credit cards; (B) Reduce their air fare by two-thirds: (C) Consolidate their trips; (D) Limit the number of Board members attending the same meeting; and (E) Focus on attending meetings in Ohio. The Canton Repository was correct when the editors wrote: "Stop the STRS Culture of Entitlement."
12. Stop The Shameful Practice of Deliberately and Consciously Paying More Than Necessary For Air Fare - This, all by itself, represents grounds for some Board members to step down. The Ohio Administrative Code forbids the purchase of first class plane tickets by STRS Board members. What this writer has learned with the help of a retired teacher who now works for a travel agency, is an absolute, undeniable fact that while first class tickets have not been purchased, "upgraded" coach tickets - costing four or five times more than the coach tickets that the rest of the world buys - have been frequently purchased. This allows Board members to bump up into first class seats if first class tickets have not been purchased (and, at the same time, skirt around the "no first class" regulation of the Ohio Admini-strative Code). Here's an example that has been repeated many times: One Board member purchased a plane ticket in 2000 that cost $1,007.00 to fly to a meeting in New York. The ticket was booked in the "Y" class from Delta Airlines, which is the more expensive upgraded coach class. A much less expensive coach class ticket for this same flight – if purchased at least 30 days in advance -- costs only $258.50. There are other problems. Sometimes, tickets automatically have cost STRS in excess of $1,000.00 -- instead of approximately $250.00 -- simply because they are purchased a few days before departure. There also are frequent examples of flights being "re-booked," requiring STRS to pay for a second, higher priced ticket on top of a "re-booking" fee. At a bare minimum, the Board needs to show good faith to the membership by immediately adopting a policy requiring the lesser expensive coach ticket to be purchased at least 30 days in advance. The policy needs to state further that the Board member will have to pay the difference if a upgraded coach ticket is purchased, if the ticket is purchased less than 30 days in advance, if there additional fees for "re-booking," or if there is are additional costs for purchasing a new, second ticket. How could Board members have a clear conscience on this issue? It is outrageous that these higher priced tickets have been deliberately purchased with membership money.
13. Eliminate Special Bonus Contract Provisions For the Executive Director and the Deputy Executive Director of Investments; Redefine Their Job Descriptions and Personal Contracts -- The personal contracts for these two individuals have provisions that give them a bonus based on a weighted average of the bonuses that are awarded to the people that report to them. In other words, the more bonuses they approve, the more they receive personally. This contract provision must go. Also, the Deputy Executive Director of Investments has a contract clause stipulating that if he is fired due to malfeasance, he will receive a year's salary at that time.
This must go as well. These two contract provisions are not in the best interest of the STRS membership.

****The Board also needs to show good faith to the membership by announcing that a nine-member committee comprised of the following people will examine the job descriptions and employment contracts of the executive director and the deputy executive director of investments, and make recommendations to the Board: Three retirees selected by ORTA, two active teachers selected by OEA, one active teacher selected by OFT, one active school administrator selected by BASA, one college president selected by the Inter-University Council, and one school board member representative selected by OSBA. It would be understood that all active members serving on this committee would need to have at least 25 years of service.
14. Offer the Same Health Insurance Plan to STRS Employees That the STRS Board is Forcing on Retirees -- The STRS Board is providing its own 707 employees a health insurance plan that is less costly than the plan retirees are now forced to accept. The STRS employees have health insurance that requires a monthly single plan payment of only $47.66, and a monthly family plan payment of only $121.33. By comparison, the plan forced on retirees (with 30 years of service) costs $135.00 monthly for single coverage, $447.00 monthly for the retiree's spouse, plus another $131.00 per month for any dependent children. Why is the Board treating STRS employees any differently than retirees? (In fact, it wasn't until 2002 that STRS staff members had to contribute anything toward their health insurance.) The Board members need to show that they understand they are running a pension system for the retiree, and require employees to be on essentially the same plan. Retirees even need to be given the opportunity to pick insurance provisions that are superior to what the STRS employees receive. Projected savings achieved through this change should go to a partial restoration of the 13th check - in an effort to help retirees with their increased insurance costs.
15. Immediately Investigate the Forced Nature of the New LifeMasters Disease Management Program -- How could it be that retirees are being signed up, against their will, for a program they knew nothing about previously. STRS has entered into a contract with LifeMasters (total STRS cost not known), which we're told is supposed to save STRS money in the long run. Mr. Dyer sent letters to retirees saying that the program is voluntary, but the letter fails to say that STRS already has signed up retirees without their consent. Retirees have received personal, intrusive phone calls from nurses representing LifeMasters that have been offensive to them. Mr. Dyer's letter to the retirees says that they "can expect to receive a telephone call" from a LifeMasters representative, and if the retiree does not wish to participate, THEY (the retirees) are expected to call LifeMasters and indicate they do not wish to be part of the program. Something is wrong with this picture.
16. Publicly Support in Good Faith the Following Legislative Initiatives: (A) House Bill 227 to increase the number of retirees on the STRS Board; (B) Senate Bill 104 to give the State Inspector General the independent power to investigate all STRS operations; (C) Senate Bill 105 to require a financial disclosure statement of all STRS employees, including investment staff; (D) The desire of the Ohio Retirement Study Council and the State Auditor to have an independent audit of STRS; (E) The desire of State Attorney General Jim Petro to remove the State Attorney General and the State Auditor from the STRS Board and replace them with two retirees.
17. Take the Lead in Supporting, in Good Faith, the Following Initiatives Before They Are Submitted as Proposed Bills: (A) Redefining the definition of an "active teacher" member of the Board to prevent what happened this year from happening in the future when Board member Michael Billirakis advertised himself in STRS publications as a "social studies teacher for the past two years at Perry High School in Lake County," when in fact he has never taught there; (B) Creating a minimum number of days that an "active teacher" member of the Board works in the home district, thereby eliminating the notion that he/she has become a full-time, traveling STRS Board member and preventing what Board member Jack Chapman has done for at least 10 years - missing about 75 school days per year; and (C) Establishing new procedures for removing current members of the Board for misconduct, violations of policies, improper expenditures, etc. Since all of these initiatives are currently being considered by lawmakers, Board members need to be part of the solution instead of part of the continued problem and support such constructive change. Doing so would go a long way toward helping restore faith, trust, and confidence in STRS.
18. Drop the Current Practice of Sending STRS Staff Members To Districts Throughout the State to Conduct "Personal Finance" Workshops For Active Members -- While this may seem like a nice thing, it also represents an unnecessary cost to the membership. The workshops are far different than the counseling sessions that are needed and effective. These workshops cover things like IRA's, stocks, and personal investments, etc. There are many for-profit and not-for-profit agencies that can provide such counseling, as many feel the STRS costs associated with staffing, cars, and transportation for the workshops need to be eliminated. The dollar saved through dropping this practice need to be distributed to retirees in the form of a partial restoration of the 13th check - in an effort to help them with their additional insurance costs.
19. Consider an Educator as the New Executive Director - It would be in the Board's best interest for an educator with sensitivity to retirees to be seriously considered for the position. An external nine-member committee as described in #13 in this memo needs to be used in the screening process. An educator as the executive director also would help Board members better understand that thousands of retirees are able to perform the work functions of positions at STRS, and able to show more sensitivity to retirees in the process. The Board needs to show good faith to the membership by immediately adopting a resolution in support of utilizing a committee like the one described in #13 above in the process for selecting a new executive director.
20. Miscellaneous Recommendations Which Will Help Restore Faith, Trust and Confidence in STRS: Utilize a nine-member committee as described in #13 above to secure an appraiser to properly determine the value of the STRS headquarters. This committee should be charged with coming up with a recommendation pertaining to whether there are advantages to selling the building, and whether - by selling the building - this could generate dollars to be used as a partial restoration of the 13th check to help retirees with their increased insurance costs. Utilize a nine-member committee as described in #13 above to make recommendations to the Board pertaining to changes that occurred in 1989 and 1999 to raise the "index" for yet-to-be retirees at a higher rate than what retirees received. Both groups were treated equally prior to 1989. This discrepancy needs to be investigated by such a committee. Discontinue publicizing that STRS has consultant reports recommending that all personnel receive bonus checks. This is a distortion of the real truth. The consultant firm that Board President Debra Scott referred to at the July 9 Ohio Retirement Study Council meeting - the Russell Investment Group - only has recommended bonuses for investment personnel, not the non-investment staff. State Representative John Boicerri twice asked Mrs. Scott during the July 9 Study Council meeting if the firm she was referring to had recommended bonuses for non-investment personnel, and twice she improperly said the Russell firm had. Utilize the nine-member committee as described in #13 above to assess whether there needs to be greater use of "stop loss" orders to trigger an investment pull-out at a certain point after a stock has declined (to protect prior gains and/or minimize continued losses). This committee also can have the function of assessing the ratio of external managers versus internal managers of stocks. Since there is teacher member and retiree member representation on the STRS Board, Board members need to develop a new, formal mechanism for seeking input and involvement of other member groups in the decision-making process at STRS. These include citizens, school administrators, OSBA, and college presidents. While it is understood that these groups cannot vote, they certainly could have a formal linkage to STRS. The Board members need formal in-service training, at an Ohio location, that is designed to help them better relate to the financial realities facing retirees and the 944 employers. The Board needs to formally acknowledge to the membership that poor judgment and terrible mistakes as described herein have been made. Such an acknowledgment also needs to firmly state how the Board members will correct the mistakes to help retirees in the immediate future and how they will better represent their entire membership in order restore faith, trust, and confidence in STRS.

Wednesday, February 22, 2006

Tom Curtis to a CORE member: Great expectations for the new STRS Board

February 22, 2006
Hello Jan,
Molly Janczyk passed along your comments to all CORE members, concerning the positive direction the new board is headed. I too feel as you do and have great expectations of this new board, as they must decide on how to secure our future pension and health care for the rest of our lives.
You probably know this, but one of our candidates is from Medina Co., Mark Fredrick. CORE has endorsed Mark and will help to get him elected to the board in April. We must have candidates that are independent thinkers and will make all decisions based upon 3307.15 and not those who have political and/or organization agendas clouding their thinking, as in the past.
CORE will always attempt to replace those who allow their organization to influence their vote on the board This is the only way we will ever get our retirement system back on track and in control of the membership.
Our funds and retirement system are currently at the mercy of the STRS management and are being held hostage. They tell us what we will and will not do.
Thus far, the current management has accepted no new ideas from the membership, concerning changes that might lessen the cost of operation. Changes they have made were only made because Dennis Leone, John Lazares and CORE have been there every month since early 2003 pressing for those changes. Had we not been there, it is very doubtful the changes would have taken place.
However, there is still a need to replace those on the board that have other agendas driving their thinking. Conni Ramser and Mike Billirakis (past OEA pres. term expires in 2007) are both loyal OEA proponents and follow similar thinking of the past OEA dominated board. For exanple:
Conni Ramser, a current board appointed member is a past OEA executive committee member and current local union president. While neither of those positions should be an issue, concerning her being seated on the board, her affiliation with the OEA is what got her seated by the past OEA controlled board.
She did not get elected because of her experience, knowledge or the expertise needed to be a competent board member. She has little background that would be of much consequence in adding value to the STRS board. Conni was chosen by the past OEA dominated board to complete Jack Chapman's remaining term of 2- years, becasue she was a member of the OEA executive committee. Two of the five candidates for that seat were far more qualified for the position then was Conni Ramser. It made no sense to select her based upon qualifications.
One of those far more qualified was Thomas Hall, an Economics professor at the University of Miami. He agreed to run again this year. I feel he has a great deal of knowledge to bring to the board.
Conni Ramser is running for election by the membership this year. Due to her attitude, behavior and unwillingness to read about the abuses by the prior board, I personnally hope she is replaced this election. We need someone that is willing to at least read about what has happened with the past board, which she to date is unwilling to do.
Shockingly, Conni Ramser recently acknowledged in an email to a CORE member that she has never read Dennis Leone's papers and therefore will not comment on such.
I find this unbelieveable, as she was (still is) a local union president, when Dr. Leone's papers were written and distributed. I personally asked her to read Dr. Leone's papers many times. After learning that she has never read these historical papers, I provided her with copies of such on February 2nd at the STRS board retreat.
In my opinion, her failure to read these papers is because she is loyal to the OEA. The OEA president, Gary Allen, slandered Dr. Leone's firt paper, calling it full of allegations and misrepresentations and has never apologized for doing such. No one has found any of Dr. Leone's information to be false. She has been asked many questions concerning Dr. Leone's findings and past OEA board member actions. However, she has ducked all of these questions by saying she has no controll over Gary Allen and the OEA and will not comment on such. This is a clear confirmation of her loyalty to the OEA.
I have attached the flyer for each candidate CORE has endorsed. Please print copies and pass them out to any actives you know or can still have contact with.
Take care,
Tom Curtis
CORE Advisory Committee Member

Monday, February 20, 2006

Want to join CORE? Here's how

To learn more about CORE (Concerned Ohio Retired Educators), you can go to the website:
Membership is open to any Ohio educator, active or retired, their family members, or any Ohio resident. Registering helps to build a database of CORE's membership and contacts for sharing information throughout the state (and elsewhere, in some cases), in order to keep educators updated with information pertaining to our retirement and health care.
You will be added to the CORE Alert e-mail list for important messages (sent occasionally). You can also opt to be on an email list for more regular communication.
Please send your name, address, telephone number and e-mail address to:
P.O. Box 141358
Columbus, OH 43214
If you prefer, you may download a membership form from the website and send that in.
Contributions in any amount are always welcome for expenses such as mailings, campaign materials, attorney consults, etc. Dues are NOT mandatory for membership, but a suggested one-time donation for those who wish to make such a contribution is $5.00.
If you wish to contact someone about CORE via e-mail, inquiries may be directed to my e-mail address,
Please join -- CORE is grass roots; CORE is making a difference!
Kathie Bracy (blogger)

February Board News from STRS: Retirement Board Actions and Discussions

February 20, 2006
Last week, the State Teachers Retirement Board held several committee meetings, as well as its monthly meeting. Following the regularly scheduled meetings, a report titled "Board News" is posted on the STRS Ohio Web site, as well as mailed to a number of members and education organization representatives who have requested it. As a registrant of the STRS Ohio news e-mail list, you will also receive this report each month. The February report follows.
HEALTH CARE ACTUARIAL VALUATION REPORT RECEIVES BOARD REVIEW The February meeting of the Retirement Board included the annual actuarial valuation report of the system's Health Care Stabilization Fund from the system's actuary, Buck Consultants. Health care costs for the STRS Ohio Health Care Program are paid out of this fund. Currently, monies for the fund come from premiums charged to STRS Ohio retirees and their dependents who are enrolled in the program, 1% of employer contributions and investment earnings on these funds.
The valuation report tells the Retirement Board two things: (1) the solvency period of the fund, and (2) what percentage of employer contributions would be needed to fund the health care program on full-reserve basis. While STRS Ohio has calculated both these numbers for several years, the latter figure will become increasingly important next year when public retiree health care plans will be required to include this information in their annual financial reports.
As of Dec. 31, 2005, the Health Care Stabilization Fund contained $3.465 billion and is projected to last until 2021. Last year's report showed a solvency period of 2018, but two years were added due to better-than-projected investment returns on the fund for calendar year
2005. In addition, STRS Ohio expects to receive its subsidy from the Medicare Part D program earlier than originally anticipated. During the board presentation, it was noted that, while the solvency period for the fund extends for 15 years, the principal in the fund will begin to slowly deteriorate beginning in 2009 and the members' portion toward the program's gross health care costs will begin increasing dramatically.
The actuarial valuation report also showed that the funded status of the health care program has decreased to 36.7% for 2006 from 38.4% in 2005. Consequently, this means the contribution rate needed to fully fund the health care program increased to 4.58% of employer payroll from 4.17%. This percentage is still in line with the proposal discussed during the recent Health Care Program Member Education and Engagement Campaign conducted by STRS Ohio and the Health Care Advocates for STRS (HCA). That campaign gauged support for increasing member contributions to STRS Ohio by 2.5% and employer contributions by 2.5% of teacher payroll. These increases would be phased in over a five-year period, in 0.5% increments. Due to the results of that campaign, and with the continued support of the HCA, STRS Ohio is pursuing legislation to enable these contribution increases to occur. Plans for continued member education and engagement on this topic are also being developed.
Based on the results of this actuarial valuation report, the Retirement Board and staff will begin looking at plan design and premium options for the health care program for calendar year 2007. It is anticipated that premium rates will be determined in August.
DISABILITY APPLICATION PROCESS STREAMLINED At its February meeting, the Retirement Board voted to approve several changes that will streamline the disability application process for STRS Ohio members. The changes shorten the disability application process while preserving a member's ability to appeal the denial or termination of disability benefits. However, the appeal will now be heard by a three-member Board Review Panel. This ensures members will still be able to appeal in person directly to board members and receive a peer review, but also allows more board time to be spent on global Retirement Board issues. The three-member panel will be in place for members who file a disability application or for recipients whose disability benefits are terminating on or after July 1, 2006.
ASSOCIATE COMPENSATION DISCUSSION CONTINUES The Retirement Board continued its discussion of the compensation and benefits study recently completed by Aon/McLagan. Benefits to the membership of making compensation adjustments to key managers and specialists were outlined and closely examined by the board. These benefits to members were viewed as "investments" in the system's success and included:
- Sustaining above-market returns on the investment portfolio;
- Retaining a high level of expertise across key areas of STRS Ohio, thus ensuring uninterrupted excellent pension and benefit services; and
- Ensuring the lowest possible level of risk attributable to management decision-making.
The board is expected to take action on staff recommendations at its March meeting.
RETIREMENT, INVESTMENT TRANSACTIONS APPROVED The Retirement Board approved the following retirements and investment transactions:
- 22 disability retirements were granted.
- 115 active members were approved for service retirement; 148 inactive retirements were approved.
- In January, fixed-income purchases totaled $464 million, domestic equity purchases totaled $632 million and real estate purchases totaled $48 million.
BOARD RETREAT DISCUSSION RESULTS IN ADDITIONAL GUIDING PRINCIPLES When shaping various strategies for the provision of health care coverage, pension benefits and services for STRS Ohio members, the staff uses "guiding principles" adopted by the Retirement Board as its parameters. During the board's annual planning retreat earlier this month, the board reached consensus on several additional guiding principles during its discussions about pension funding. The Guiding Principles for Benefits now include these additions:
- Manage the retirement plan options offered to the membership as long as it's cost-effective.
- Provide a benefit package with the highest level of financial security possible within funding limits while striving to be a top quartile pension plan.
- Strive to meet the financial goal for pension benefits of having a funded ratio of at least 85% and an amortization period of no more than
30 years for the unfunded pension liability.
- Consider pension benefit improvements only when the funding period is less than 30 years and the funding level exceeds 85%.
- Recognize the length of Ohio service credit when allocating available pension resources.
The Health Care Program Guiding Principles were enhanced with this addition:
- Health care costs should be allocated realistically between active members, employers and retirees.
STRS OHIO POSTS 12.08% RETURN FOR CALENDAR YEAR 2005 During the February board meeting, it was reported that STRS Ohio posted a 12.08% return on its investment funds for calendar year 2005. This rate of return exceeded the total fund benchmark (a hybrid index of industry benchmarks) by 1.48%. All asset classes outperformed their benchmarks, with real estate and international investments doing particularly well. The market value of the total investment fund totaled $63.4 billion on Dec. 31, 2005.
STRS Ohio manages approximately 80% of its investment assets internally versus using outside commercial money managers, a practice that saves STRS Ohio approximately $70 million every year.

Sunday, February 19, 2006

Molly reports on Friday session (2/17/06) of Board meeting

From Molly Janczyk; Sent: Saturday, February 18, 2006; Subject: STRS: FRI: /17/06 Employee Compensation and other issues
Many interesting items were discussed yesterday at STRS by the Board.
1. Employee Compensation was given thorough discussion:
-Leone and Lazares both feel the Investment Team and Key Staff are essential for our futures. Both stated they realize the need for compensation. Lazares: " No one has written more letters complimenting the staff than I have. Am I right Damon? Damon: Yes. Lazares: Have any of the other board members done such?" No response. Lazares: "I have written at least 20. I am contacted by retirees needing service. For ex., a lady in need of experimental meds for her cancerous tumors given a death sentence and refused the $10,000 per month meds for treatment. I contacted Sandy Knoesel who contacted the lady with approval of the meds which did not yet have FDA backing. I got a call from her crying and thought it was dire news. Her husband got on the phone to tell me her tumors have dissolved and she is in remission." I have asked Slater to help retirees who call me and he has done so. These staff members have done excellent jobs of helping retirees time after time and I appreciate their efforts."
-Regarding compensation: Some pts: Slater is highly qualified for his position and could be making much larger salaries in private sectors. Leone and Lazares feel that Mitchell, Slater and Knoesel and other key staff are essential to STRS and need compensation to reflect their talents.
Lazares: POINT: We are asking people for money. I am in an unusual position on this board of dealing daily with active, retired educators and have many legislative ties and meet with school boards. I have to decline raises when my teachers receive no raise. I do not feel I can receive a raise when they do not. We face anti tax groups now raising up to speak against school board increased contribution legislation. Damon has to face the ORSC next month. Michelle Schneider called me to ask about the unfunded liability recently. She is incensed that we are so high stating STRS promised 2 yrs ago to reduce it.
Leone: I have no problem paying Knoesel, Mitchell and Slater as well as key staff for the job they do for us and they should be well compensated - paid well.
Lazares: Slater is paid low for private sector and he has a lot to do with investments. So, he needs to be well compensated for his overqualifications and job done for public sector.
Leone, Lazares, Buser: No problem paying what they deserve to keep key staff. Reasoning: For investment staff, they are paid based on what they earn. Mitchell had to release 2 investors for not producing. If they don't produce , they will also leave as they will not receive good pay. Also, we have come to learn some specialists at STRS are very hard to come by when they are very highly qualified. Lost key staff because we could not keep due to money. We need good staff and it is key to our survival.
Lazares: 'We have to find ways to justify compensation to our membership and to compromise on this issue.'
Fisher: Feels it is micromanaging to know each employee's salary.This came up at retreat.
LEONE: LAZARES: RAMSER AND PUCKETT: All want to know what they are voting for and supported seeing all the individual salaries before voting.
Puckett: The increases seem too high and this is not a good time for overcompensation-supports seeing salaries and justifications for increases.
Lazares and Leone: Open minded and want to keep talented people.
This issue was up for vote on Fri. and postponed due to the input of these board members.
2. Board Policies: Agenda:

*Public Speak: Board members can now answer participants on the spot to address hit and run speakers or respond after public speak, if they choose. Passed 10-0.
*Fisher wanted to amend policy to allow political appointees to hold the chair and vice chair positions.
LEONE: CHAPMAN: FLANNAGAN:RAMSER: ALL SPOKE AS TO WHY THESE POSITIONS NEED TO BE HELD BY ELECTED BOARD MEMBERS as private sector appointees cannot relate as well to public pension issues. The motion was defeated .

Leone and Lazares feel our investment staff should go to any necessary conferences and inservice the board members.
Leone: "I would rather spend time with Mitchell on these issues."
Lazares: "Better to give needy retirees $7000 and let our staff inservice us.
LAZARES AND LEONE voted no on the trips feeling it looks bad to retirees to spend money on something which can be accomplished inhouse. Also, this has been a source of anger and mistrust for retirees asking why money cannot be saved being that no board member can ever gain the expertise needed in this area. Board members are there to protect the system and act on behalf of retirees. We have a talented investment staff to explain items of importance. Anything THEY do not know should be the topic of THEIR inservice and they can transport that info back for staff and board members.
From: Teresa Pressler; Subject: Employee Compensation Date: Sat, 18 Feb 2006
Has anyone heard what happened Friday A.M. regarding the employees? Just curious.
Larry KehresMount Union Collge
Division III
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