Saturday, April 18, 2009

A list of 'dangerous half-truths,' please

Kathie Bracy to Bill Leibensperger, April 18, 2009
Subject: Half-truths
Dear Bill,
Something you mentioned in a recent letter to an educator has me very concerned:
"Mr. Stoll's recent appearance on WKRC-TV is just another example of the spreading of dangerous half-truths that jeopardize the integrity of the system."
This is a pretty serious charge; would you please send me a list of the "dangerous half-truths" you are referring to in connection with Jim Stoll's TV appearance (or any other connected with Mr. Stoll) so I can investigate them?
Thank you.
Kathie Bracy

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John Curry to Bill Leibensperger: You have let down your OEA membership re: their retirement security

From John Curry, April 18, 2009
Subject: Your letter to a concerned active educator
Bill...from a recent letter your wrote to an active educator (listed below). I have included my comments in red italics.

From Bill Leibensperger (no date)
Dear (Name omitted)
Carol Correthers does support strong operational controls and understands that members expect STRS to run their operations in a prudent way. I think you can rest assured that Carol will always make good decisions based on intelligent deliberation and a strong commitment to all members of the system. Certainly she will not try to alarm members with "the sky is falling" kinds of messages, as she understands the gravity of the position for which she is running. (Bill, Jim Stoll has recently enlightened active educators as to the financial condition of OUR retirement system. This not-so-good-news was only recently related to all STRS stakeholders by official communication in the form of a mail-out by STRS just this past month [only after Mr. Stoll had alerted active educators.] The "snail mail" release from STRS was issued because of increased pressure by Jim Stoll and others to inform STRS stakeholders of the miserable shape that STRS, as well as other public pension systems in this country, are really in and have been in. Neither STRS nor the OEA has taken an active roll in educating the educators of this serious predicament we are all in and have been in.. Your OEA membership depends upon you to keep them abreast of their retirement security and your organization has let them down in this respect.) You will find her very accessible. (I have yet to see her contact information issued so that she can be contacted in reference to her views re. STRS. If this contact information was issued then I'm sure you will be glad to furnish this information forthwith as Mr. Stoll has related this same information to all who were interested in contacting him.)
I am guessing that you are responding to the deceptive communications from her opponent (who, by the way, did not choose to participate in OEA's rigorous screening process). I am certain that you are among the majority of members who are "frosted" over the whole bonus thing. (Apparently some of your very own OEA endorsed "active" teacher STRS board members weren't just "too frosted" over the "whole bonus thing" as they, at the March 2009 board meeting, continued to vote "no" to an amendment which would have temporarily frozen the investment bonuses. Those OEA endorsed "active" teacher board members who didn't vote in the affirmative to freeze the bonuses were Tim Myers, Mark Meuser and Conni Ramser. Only one of the OEA endorsed active board members, Tai Hayden, had the wisdom to vote with the majority [to freeze the bonuses] on that day.) Unfortunately, there are those (including a current Board member who is supporting Mr. Stoll) who would pander to our emotions and fears in order to make themselves look good, rather than work collaboratively with others to protect the integrity of a very strong system that will take care of all of us for the rest of our lives.(Bill, that "very strong system" who is taking care of this 30 year retiree also currently wants $967 per month to "take care" of this retiree and my spouse with an 80/20 PPO healthcare plan that the same 30 year dump truck driver retiree under OPERS pays only $80 per month for the same coverage for spouse and self...what happened to OEA leadership on this issue? Does OEA's leadership and concern for educators discontinue when an educator retires and quits paying OEA dues?) Mr. Stoll's recent appearance on WKRC-TV is just another example of the spreading of dangerous half-truths that jeopardize the integrity of the system. (In my mind, a prime example of a "half-truth" is when your President, Ms. Frost-Brooks, takes the position that STRS investor "bonuses" are distasteful when, in fact, the move to quash bonuses was, during the March bonus vote at STRS, given a nose-thumbing by the majority of your OEA endorsed active teacher board members.) Why he believes that our hard-earned pension money belongs to the taxpayers is beyond my understanding. (The issue of whether or not taxpayer monies cease to be taxpayer monies once the school district receives the tax monies from county treasurers continue to be one of disputed legal interpretations and I won't attempt to judge whether, in fact, it is still taxpayer monies once it arrives at the local school district or not. But, what I will relate is that of those "taxpayer monies" that do go to the local school currently are 14% of every "teacher pay" dollar a contributing school system pays to STRS for retirement for their teachers. The teachers contribute 10% additionally, so....the taxpayer, in my mind, has every right to be concerned where and how tax monies are spent.) Who does he think he would represent?
Mr. Stoll's email has selected "facts." One of the important ones missing is that the Board did approve a new bonus policy without a dissenting vote (Bill, you forgot to mention the bonus issue 5-5 tie votes that took place just before the final "new bonus policy" vote was cast after the majority of your OEA backed active educators just couldn't seem to be able to vote for a temporary suspension of bonuses. After Ex. Director Nehf stated that he could live with a bonus suspension the majority of your endorsed "active" board members changed their previous votes so as to align with the majority. This, Bill, is a real example of a "half-truth" to your membership.) after much deliberation and preliminary voting. Another fact that is difficult for us as teachers to understand is that bonuses are actually the way investment staff are paid throughout the industry. STRS investment staff have outperformed the industry, but the Board in their wisdom and in respect to the members they serve have passed a policy that curtails bonuses when there are losses (even when the losses are significantly less than the overall market).
It is important that we protect our retirement by electing intelligent, reflective, and hardworking representatives who will do their homework and never put any personal interests ahead of the well being of current and future retirees. I hope we can count on you to support OEA-endorsed candidate Carol Correthers. She has my vote.
Please let me know if I can be of any further assistance.
Bill Leibensperger
Vice President
Ohio Education Association
P.S. Bill, please spend your and the OEA's energy and money to find that "dedicated stream of (healthcare) revenue" that you and the OEA have touted for the better part of the last decade rather than your current and past practice of only giving it "lip service." To many retirees.... the sky has already fallen!
John Curry
A retired educator and STRS stakeholder

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Friday, April 17, 2009

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

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

Mr. Meuser,

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

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

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

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

Bill Stewart
Business Dept. Chair
Fairfield Sr. High School

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

Dear Mr. Stewart,

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

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

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

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

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

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

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

Mark H. Meuser
STRS Board Member

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

Mr. Nehf,

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

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

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

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

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

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

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Shirlee Zerkel: Letter to the Editor re: Bonuses and raises for STRS investment staff

Lima News, April 16, 2009
Letter: Teachers lose billions, but bonuses continue
Shirlee Zerkel, Lima
Teachers and retirees in the Lima area are watching their retirement system assets tumble, but bonuses and raises for investment staff have gone up.
The Ohio Retirement Study Council, a group that oversees all five of Ohio's public retirement systems, released information April 8 that compares the investment performance of each of the five Ohio retirement systems. Five years ago, the State Teachers Retirement System was No. 1; three years ago, it was fourth; one year ago, it was fifth. Just two quarters ago, it was still fifth out of five in performance.
This makes it difficult to understand why the STRS Board voted only to suspend PBIs instead of eliminating them.
The September bonuses could total more than $3 million. The 2008 bonuses were in excess of $6 million. These same investment staff associates received a hefty raise that took effect July 2008. The raises averaged 6.1 percent with the highest being close to 15 percent. This outrageous spending of the teachers' and taxpayers' contributions happened while the investments that the staff were overseeing lost more than $30 billion in value. These bonuses should stop completely because STRS' investment performance is in fifth place among the state's pension systems.
We need candidates who are willing to speak out, like Jim Stoll and Bob Stein, on the STRS Board.

Thursday, April 16, 2009

Dennis Leone re: Jim Stoll TV interview 4/16/09

From Dennis Leone, April 16, 2009
Subject: RE: TV Coverage of PBI and STRS Compensation LOCAL 12 in Cincinnati
This was an EXCELLENT, EXCELLENT news report………..and 100% accurate. It saddens me to keep seeing how STRS is convinced that our investment staff is at the bottom 25% of those in the private sector. Never mind that only the California State Teachers Retirement System pays bonuses as high as Ohio, and that to only 13 people……not 87. Has anyone noticed as I have that of the 4 states that have recently stopped bonuses (Pennsylvania, Texas, Massachusetts, and soon-to-be Missouri), their bonuses pale in comparison to the bonuses awarded at STRS.

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STRS Ohio 2009 PBI Preliminary Analysis
Click images to enlarge

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PBIs (bonuses, Performance-Based Incentives) for STRS investment staff

Base salary increases for STRS investment staff 2008-2009

Click images to enlarge

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WKRC-TV in Cincinnati: April 16 interview with Jim Stoll re: STRS bonuses; link to video

Bonuses Paid While Fund Loses Millions
WKRC-TV, Cincinnati
April 16, 2009
See video: Bonuses Paid While Fund
Loses Millions
[Click images to enlarge]
It's a retirement plan
you help pay for, even if you've never heard of it. The State Teachers Retirement System in Ohio is partially funded by taxpayers and partially by teachers themselves. Like just about everyone these days, the plan has been hit hard by the troubled economy.
But as Local 12 Reporter Jeff Hirsh shows ... compensation for pension fund staff has been going north ... while their investments have been going south.
The State Teachers Retirement System of Ohio ...STRS... is no stranger to controversy. Several years ago, Local 12 revealed the agency spent thousands of dollars on artwork and out of town trips, and millions of dollars on bonuses, while benefit costs skyrocketed. Now, a critic says, they're at it again.
"Absolutely, it's the Wall Street establishment mentality at a public pension system."
Jim Stoll is the athletic director at Sycamore High School, and a candidate for the STRS board. Stoll says STRS has lost 33 billion dollars the last 18 months .... 42 per cent of the fund's assets ... and yet, the agency plans bonuses for 87 investment employees. One bonus is as high as 162-thousand dollars. The total is more than 3-million and that's on top of recent salary increases.
Jim Stoll, STRS Board Candidate: "This guy was making 270-thousand dollars. In one year, he got a 39,500 dollar raise. Then there's a bonus on top of that? A bonus on top of that."
STRS says having both fixed pay and bonuses is "a commonly accepted practice" in the investment field. It says STRS is in the bottom 25 percent of total compensation in the industry ... and it says STRS is run in an "extremely cost-effective" manner. Plus, STRS plans to temporarily suspend the bonuses, paying only 7/12ths of the planned amount to eligible workers.
But Jim Stoll says any bonus is outrageous when retired teachers may face benefit cuts due to STRS losses. If elected, Stoll says, he'll push to get those bonuses cut to zero.
"Teachers should, taxpayers should be up in arms."
The STRS says it paid health and pension benefits to 126-thousand retired teachers and their families last year ... totaling nearly five-billion dollars. The agency's board will vote on the bonuses this fall.
[Note: In October 2007, STRS assets were valued at $80 billion. In March 2009, the value was estimated to be $48 billion.]

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Urgent message to active teachers from Jim Stoll

April 13-14, 2009
TEACHERS - If You Were Planning To Retire After 30 or 35 Years With Full Benefits and Medical Coverage - You MUST READ This Before Voting In The STRS Election.
Dear Fellow Teachers:
Those of you who are active teachers and contribute to STRS already have received or will be receiving ballots to elect a new member to the STRS Retirement Board. CORE as well as former STRS Board Member and one of the original educators who revealed STRS spending malpractice in 2003, John Lazares, has endorsed me, James A. Stoll, for this position.
Like many of you, I have contributed to the STRS fund for more than 20 years. During the past several months, I have been actively encouraging the STRS Board to limit their frivolous spending, which needed to start with eliminating the "Bonus" Plan (PBI) for STRS Investment Associates. I exposed the enormous STRS salaries and bonuses by disclosing the attached schedules to teachers and retirees throughout the State. Thereafter, the STRS Board responded to pressure from members. The Board, however, voted only to "suspend" (as opposed to eliminate) these outrageous bonuses, which topped out at $259,200 for one of our Investment Associates. It has come to my attention that many Strs members are under the misconception that the bonuses have been eliminated – this is not true. In fact, the Board is planning to pay "7/12" of the 2009 Bonuses in September 2009 (some as high as $165,000) ........... for losing more than thirty billion dollars ($30,000,000,000) of our pension assets. For those who are interested, I have attached a spreadsheet [click here to view] of the 2009 Preliminary Bonus figures for these "7/12" Bonuses. The STRS Board has not and probably will not, publish this information -- I had to make a public records request to get it! You have the right to know how your retirement funds are being spent.
We have all heard the phrase, “No Good Deed Goes Unpunished.” It appears that my persistence has ruffled the feathers of some at the STRS and the OEA. My disclosure of the enormous losses and inexplicable expenditures has been characterized by the OEA as a "cynical exploitation of the Emotions of Educators." Let me assure you that there is nothing cynical about me or my desire to fix this problem that is jeopardizing our futures. Let me also assure you that I do not care how many bureaucrats get upset in the process. As for “the Emotions of Educators” – I submit that the Educators in Ohio certainly should be emotional about this travesty.
Here is my response to those at the STRS and OEA who chose to criticize me. Educators do have a "Right To Know" how 10% of every one of their paychecks is being spent. Taxpayers do have a right to know where 14% of their School Board's dollars are going. Teachers, Principals, Superintendents, School Board Members, Retirees and Taxpayers have a "Right to Know" that 83 STRS investment associates are going to receive their 7/12 Bonuses in September unless a CHANGE is made. Some of these bonuses will be as much as $165,000, despite a loss of over $30,000,0000,000 in the past 18 months.
In its March ENews to teachers and retirees, the STRS sent the following message and I quote: "This means that, unless changes are made, the system would eventually be unable to PAY members earned benefits. As a result the (STRS) Retirement Board needs to look at options, other than higher investment returns, to strengthen the solvency of the pension fund. These options could include, changes to contributions, the minimum retirement age, early retirement factors, cost to purchase service credit, the retirement formula, cost of living (COLA) or how final average salary is calculated."
IN OTHER WORDS: The Board is exploring changing and/or cutting your retirement benefits while at the same time planning to pay huge "Bonuses" to their staff. Interestingly, in the vote to suspend the bonuses (a 6-3-1 vote), former OEA-endorsed Board Members Tim Myers and Mark Meuser voted AGAINST suspending the bonuses and Connie Ramser abstained.
I would love your vote, but only if you agree with me and believe that paying these outrageous salaries and bonuses, while planning to cut our benefits, cannot be tolerated.. If you want what I want -- to reign in spending, keep benefits as they are, and hold investment staff accountable for losing 40% of our pension assets -- then I would encourage you to vote for me, because that is what I intend to fight for.
I am providing the following links for those interested to read for some unbiased media reports of STRS so you can form your own opinion and not take my word or the word of others.
Just this week, there were reports of Governor of Missouri speaking out about similar atrocities occurring in that State’s public pension system. Governor Jay Nixon called the bonuses “unconscionable” after the Post-Dispatch brought them to his attention. He stated, “It defies common sense that these folks would preside over the loss of almost $2 billion and receive bonuses,” he said Friday.” Nixon said it was “especially galling” that the investment staff received five- and six-figure bonuses in a year when the rest of the state work force is getting no raises. “This bonus system is clearly broken, and we’re going to fix it,” Nixon said. is also a great resource for STRS Ohio issues.
Fellow Educators, our system is broken and I intend to do everything in my power to help fix it. I appreciate you taking the time to read this message. If you want to take direct action I'd encourage you to Email STRS Exec. Dir. Mike Nehf and the STRS Board and tell them to "Eliminate the Bonuses." Feel free to copy (cc) me on the email if you wish.
James A. Stoll
Director of Athletics
Sycamore High School
STRS Board Candidate
7400 Cornell Rd.
Cincinnati, Ohio 45242

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Active teacher to Laura Ecklar: I see a lot of spin and very little common sense

Now this response makes "sense to me." Thanks [~~~] for clarifying things for Ms. Ecklar.
Jim Stoll
From [Active teacher, name withheld], April 16, 2009
Subject: Re: Response to E-Mail
Ms Ecklar,
Thank you for your response. From my vantage point I see a lot of spin and very little common sense. Freezing salaries through 2010 is not overly impressive. Most of us in the real world have experienced wage freezes from a number of years already. Comparing compensation practices of public vs professionals is at the center of my anger in that this culture of rewarding without producing results is what has gotten our entire country into the mess it is in.
What I know is the STRS has lost a tremendous amount of money through the investments that they have made. I could care less if that loss is more or less than the average - it is still a loss and that will directly impact on my retirement. You can spin it all you want, but when your job performance results in significant losses you don't deserve double digit raises and any type of bonus. What happened in 2004 or how the investment set up at STRS saves money is irrelevant. The bottom line is we didn't do very well with our investments in the past year..
This concept simply parallels the AIG fiasco. How in the world can AIG take billions of tax payer money to stay afloat and then turn around a reward executives with bonuses? When will common sense ever enter the picture in the investment world??
It really should be a very simple concept - if you perform well you get rewarded and when you don't perform well you don't get rewarded.
Rewarding ANYONE at a time when retirement benefits are at risk is inexcusable. Please make sure Mr. Nehf knows how I feel.
From Laura Ecklar, April 16, 2009
Dear [~~~],
Our executive director, Michael Nehf, has asked that I respond to your recent e-mail regarding eliminating bonuses for our Investment Department staff. As you will read below, based on recent actions by the Retirement Board, base salaries for all STRS Ohio associates have been frozen through June 30, 2010, and Performance-Based Incentives or PBIs have been reduced. Please know that we recognize that there is a significant difference between compensation practices and levels for most public educators versus investment professionals. Further, we know that it can be difficult to understand how investment staff could be rewarded for their work when the overall value of investments has declined. So, if I may, I would like to share some additional information with you about our PBI Program for eligible Investment Department associates and other staff compensation. As you read through this, I hope you will see why we have a PBI Program, as well as get a sense of the changes our Retirement Board has recently made in compensation, not just for investment staff, but for all STRS Ohio staff, in recognition of the current economic times.
In managing our billions of dollars in investments, STRS Ohio has three basic choices. We can hire outside investment managers, we can do much of the investing "in-house," or we can purchase only passive investments, which require minimal staff. Though we use all three methods for portions of our investments, associates in the Investment Department handle about 80% of STRS Ohio's investments in-house.
STRS Ohio's members have been well served by the system's dedication to managing a large percentage of the system's assets internally and actively. STRS Ohio benefits from significant cost savings each year due to the lower cost of internal management by STRS Ohio associates compared to paying fees to external money managers. The savings from internal management totaled $100 million in calendar year 2007 alone. Additionally, for the time period of July 1, 2004, through Jan. 31, 2009, the net value added from active management after deducting all direct investment costs, including earned PBI payments during that period, was .65% or about $1.8 billion. This represents the additional value brought to STRS Ohio through active management by STRS Ohio associates and external managers, above and beyond passively indexing system assets.
To compensate these Investment associates, the Retirement Board uses a combination of a base salary and variable pay (pay that is "at risk"). Eligible Investment Department associates can receive an additional percentage of their base salary through a PBI payment, based on total investment fund performance and their individual goals over one- and five-year periods compared to the respective benchmark.
The Retirement Board's goal is to maintain total compensation for eligible Investment Department associates (base salary plus maximum PBI) at the bottom quartile (25%) of total compensation levels in the private market (i.e., 75% of private sector investment professionals can earn more).
The PBI payments made in September 2008 included our last fiscal year, which ran from July 1, 2007, through June 30, 2008. During that time period, the total investment fund return was a negative 5.44%. However, the benchmark return was a negative 5.79%. When markets decline, the value of our investment assets decline. Conversely, when markets go up, the value of our investment assets goes up. Our goal throughout is to minimize losses and maximize returns beyond the markets' performance.
So, in the case of fiscal year 2008, our total fund return beat the composite benchmark return and the value of investment assets stood at $70.3 billion. Active management by our STRS Ohio Investment Department associates and external managers resulted in an additional $215 million beyond benchmark returns for the investment fund, and your pension plan benefited. That is why PBIs were awarded.
If you still have your October 2008 STRS Ohio newsletter, you will see an article and accompanying chart that shows the performance of each asset class against its benchmark, resulting in the net value added that I refer to above. (The October newsletter can also be accessed via the STRS Ohio Web site at
As you know, the global markets have experienced a rapid and significant downturn since last summer. For STRS Ohio, this has meant a drop in the value of our investment assets by more than $22 billion since July 1, 2008. As of March 31, 2009, the estimated market value of investment assets is $47.8 billion. And, it has resulted in the Retirement Board examining whether current compensation levels for Investment associates should be maintained during this period of significant loss in asset value. During the last several months, the board has made changes to the PBI Program that include:
* Suspending the current PBI Program for 2009 as of Feb. 1, 2009. With this suspension, calculations for any earned PBIs for this fiscal year will generally be based upon the performance results for the first seven months of the year, and the longer five-year period (the board will not be voting on these PBIs until September 2009); and
* Reducing any earned PBIs for the 2010 PBI Program by up to 60% if the total STRS Ohio investment fund has a negative absolute return.
Several weeks ago, the board approved a further change to the 2010 PBI Program that states if STRS Ohio's total investment fund earns a positive absolute return, but the total market value of investment assets is less than $65 billion at June 30, 2010, then each PBI payment will be reduced by three percentage points for every $1 billion (and fraction thereof) of the shortfall from $65 billion. At its April 2009 meeting, the board will be presented with the final fiscal year 2010 PBI Program document for approval.
The board also implemented a salary freeze for all associates in February that extends through June 30, 2010, as well as an associate head count freeze. This will reduce expenditures in the coming fiscal year by about $2 million.
The March STRS Ohio newsletter includes a lengthy article about the impact of the global market downturn on STRS Ohio and its impact on our long-term pension fund liabilities and our health care program. As a result, the Retirement Board has begun a long-term contingency planning process to address these issues.
It is absolutely imperative that STRS Ohio watches every dollar that it spends, whether markets are up or down. However, just reducing operating expenditures cannot solve the long-term issues we face in funding pensions for future generations of teachers and a viable health care program. We are in the midst of challenging economic times. We will continue to do our best to help members understand where their dollars are being spent - and why.
We hope, in turn, that you will continue to read our newsletters, visit our Web site and register for our e-mail news service to keep abreast of your board's discussions and decisions.
I apologize for this lengthy response, but your comments are important to us and I wanted to make sure you had complete information. Again, thank you for writing and sharing your viewpoint with us.
Laura Ecklar
Director, Communication Services

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MOSERS "ain't" seen nothin' yet! Let's go fishin'!

From John Curry, April 16, 2009

Today's article in the (Springfield, MO) features some questionable retirement system travel. The Show Me folks are just now investigating one of their retirement systems, MOSERS (Missouri State Employees Retirement System), re. bonuses and have happened upon the discovery of another misspending and entitlement practice - globetrotting. It's kind of like opening up a can of worms at the first tug of the pull-tab on the lid above. Following the "amateur-globetrotting" on their dime article below is an example of "professional globetrotting" accomplished on the Ohio public's dime several years ago...... 2002 to be exact. Will the fishing be as good this year for the Missourians as it was for the Buckeyes in the past? Let's hope they catch every fish in the pond! However, $2,688 (even at today's prices) was just a "drop in the worm bucket" compared to the cost of ours, wasn't it?
Smith recalled asking Jetton, "Now that you've gone to London, are you coming to the meetings?"
April 16, 2009
State pension plan paid for Jetton trip
European visit made, but meetings missed.
The Associated Press
Columbia -- The former speaker of the Missouri House appointed himself to a state pension board and attended few meetings, but traveled with the agency last year to London.
The Columbia Daily Tribune reported Wednesday that the Missouri State Employees' Retirement System, called MOSERS, paid $2,688 for then-House Speaker Rod Jetton to take a six-day trip to London in July 2008.
Board members made the trip to talk with investment company officials about what is being done with the retirement system's funds. Some of the investment firms are headquartered there.
As speaker, Marble Hill Republican Jetton appointed himself to the board in September 2007. He left the House at the end of 2008, barred by term limits from seeking re-election.
Agency officials say Jetton missed seven meetings but attended a two-day board conference, the London trip and one other meeting.
"I felt it was unfortunate that he chose to go to one event and that happened to be in London," said Todd Smith, Gov. Matt Blunt's appointee on the board.
Smith recalled asking Jetton, "Now that you've gone to London, are you coming to the meetings?"
Jetton did not respond to the newspaper's requests for comment through two telephone messages and a visit to his office in Jefferson City.
In an e-mail to the Tribune, Jetton said that he is proud to have served on the board.
"During my time of service I tried to educate myself on the financial investments MOSERS' makes with our retirement funds. Since MOSERS' is backed by the Missouri taxpayer it is important that a close eye be kept on all investments," he wrote.
Sen. Jason Crowell, a client of Jetton's political consulting firm and a current member of the MOSERS board, said the meeting was an important function.
"It's like we are kicking the tires before we buy a car," he said.
Now, MOSERS stakeholders, here's some Professional globetrotting accomplished by some former Ohio STRS Board members back in 2002 ...fasten your seat belts! I have highlighted those former Ohio STRS board members who were OEA endorsed "teacher members" of the STRS Board during "our" travel junkets.
STRS paid $70,418 for trips in 2002
Canton Repository, August 9, 2003
Copley Columbus Bureau chief
COLUMBUS — The State Teachers Retirement System board created an online form to evaluate the conferences its members attend.
The electronic form was created because a paper one wasn’t being used, said Laura Ecklar, a spokeswoman for STRS.
But few board members use the electronic version, either, and those who do almost always say the seminars are “excellent.”
Critics of the pension fund say out-of-state travel by board members is indicative of STRS’s excessive spending habits.
In 2002, the first year evaluations were filed, nine current and former board members made a total of 49 trips to conferences, costing STRS $70,418. They filed 13 evaluations.
The top traveler that year was Jack Chapman of Reynoldsburg, who spent $14,684 on 12 trips. He was followed closely by vice chairman Eugene Norris of Columbus, who spent $14,573 on seven trips. Norris’ per trip cost, however, was higher at $2,044. Chapman filed seven evaluations, the most by any board member. Norris didn’t file any evaluations.
In June 2001, the board’s Committee on Board Orientation and Development asked the STRS staff to create a mechanism so members could file reports of their trips online. The evaluations were intended to help current and future board members decide whether it was worthwhile — in terms of education and cost — to attend similar seminars sponsored by the same organizations.
Ecklar, director of Communication Services, said there was no cost involved. Her office developed the wording and appearance of the form, while the fund’s Information Technology Services programmed it for the internal Intranet. She said several months were required to develop and test a program. The form became available in January 2002.
Ecklar called the form a success because board members are using it.
Hazel Sidaway of Plain Township, a former board member and now-retired Canton teacher, chaired the committee that initiated the electronic form. In the committee’s last report that was presented at the board’s June meeting, seven meetings were recommended “as beneficial.”
Three of those seven meetings were sponsored by the International Foundation of Employee Benefit Plans. Yet, two evaluations comment on the organization’s seminars. The annual meeting of the National Council on Teacher Retirement is recommended based on two evaluations, one that said it was “good” and the other said it was “excellent.” The recommendation of the annual meeting of the National Conference on Public Employee Retirement Systems is based on one evaluation.
Chapman was the first to use the electronic form in February 2002 and, is the most frequent user of the program. According to STRS documents, Chapman is the only board member to file evaluations in 2003.
Chairwoman Deborah Scott, who at the June board meeting urged members to file evaluations, submitted one from the six trips she took.
None of the seminars were panned. In fact, 10 of the 13 evaluations said the meetings were excellent and others were said to be good, but still were recommended for other board members to attend.
Joseph Endry rated a convention in Anchorage, Alaska, as excellent “because of very current information about retirement system concerns.”
Chapman recommended the same meeting “based solely on the opportunity this convention provides for trustees to network with peers.” One of the sessions he attended discussed “the loss of faith in corporate America.”
In 2002, State Teachers Retirement System board members made 49 trips to conferences for which they were urged to file voluntary evaluations.
Michael Billirakis spent $5,932 on four trips, filed no reports.
Jack Chapman spent $14,684 on 12 trips, filed seven reports.
Joe Endry spent $9,030 on six trips, filed two reports.
Gloria Gaylord spent $3,803 on four trips, filed no reports.
Paul Marshall spent $1,224 on one trip, filed no report.
Rick Moore spent $2,735 on three trips, filed no reports.
Eugene Norris spent $14,308 on seven trips, filed no reports.
Deborah Scott spent $6,167 on six trips, filed one report.
Hazel Sidaway spent $12,535 on seven trips, filed three reports.

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Rephrasing the question to Mary Ann: 'How many layoffs is STRS planning?'

From John Curry, April 16, 2009
Subject: Re: Mary Ann...Oregon School District
Mary Ann,
I understand the effects upon those Oregon educators, their families, and the community. But, this is becoming common practice with the advent of the current downturn in the economy. Unfortunately, it is a fact of life. Now, ....... about the second sentence in my letter to you, "How many layoffs is STRS planning on due to the current economic crunch and the tremendous loss of investments at STRS?" Is STRS doing or planning to do what other entities of government do when faced with similar financial difficulties?
From Mary Ann Cervantes, April 16, 2009
Subject: RE: Mary Ann...Oregon School District
About 91 total on the block if we go to the second tier. That includes all faculty and staff. In our school there are 12 teachers in the first tier, with a total of 25 in the district. Another 13 are charted for tier 2.
This is just awful. Our school is designated Excellent. This will crush us.
I am glad to be able to give up my job to another when I retire. This was part of my decision. The other side is that those left will have some terrible effects to deal with.
Mary Ann
[Ms. Cervantes is retiring from her position as Counselor with the Oregon City Schools, effective July 1, 2009.]
Joke of the Day
"The PBI program may be interpreted, amended, rescinded and/or terminated at anytime by the Board."
~ STRS Board Policies, p. 33


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.

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Jim Stoll available to speak to your retired educator group during April
Call him at: 513-615-4690


Wednesday, April 15, 2009

Mary Ann -- Isn't this YOUR school district?

From John Curry, April 15, 2009
Mary Ann,
Isn't this your school district? They are reacting to the current economic crisis by layoffs. How many layoffs is STRS planning on due to the current economic crunch and the tremendous loss of investments at STRS?
Toledo Blade, April 15, 2009
School board in Oregon plans teacher, staff layoffs
Blade STAFF writer
The Oregon school board last night approved a plan to lay off 31 teachers, 2 administrators, and up to 30 other staff members next school year to save nearly $3.2 million a year.
If that isn't enough, 13 more teaching, administrative, and staff positions will need to be eliminated, bringing the total savings to nearly $3.8 million, Superintendent Mike Zalar said.
The plan Mr. Zalar recommended also calls for union employees to forgo a raise next year as they have in the past, have no increase in health-care premiums, and agree to other changes. Eliminating jobs through attrition instead of layoffs no longer is enough, he said.
"There just aren't enough other places to go in the budget without affecting the quality and overall integrity of our education," Mr. Zalar said.
Oregon is facing a $1.9 million deficit in the 2009-10 school year, an amount expected to balloon to $7 million the following year. Without any changes, the deficit would be nearly $23.5 million in the 2012-13 school year, Mr. Zalar said.
More than 150 district employees, parents, and residents packed Clay High School's library for the board's meeting. The district now has 434 employees and 3,872 students. Students, Mr. Zalar said, will encounter minimal impact from the changes. Classes will be slightly larger, some will be phased out or eliminated, and others will be offered less frequently, he said.
The community must understand that the district has not been mismanaged, but funding changes and shortfalls on the state level have caused its budget problems, David Schafer, president of the Oregon City Federation of Teachers, told the crowd.
Much of the district's recent financial woe is attributed to House Bill 66, which is gradually eliminating personal tangible property taxes on the value of business equipment and inventory. The Oregon district has lost about a quarter of its annual revenue - more than $10 million a year - because of the tax law change, officials said.
In the last three years, the district has reduced annual expenditures by $3.5 million. Mr. Zalar plans to give the community an update on the district's financial status at 6 p.m. April 23 in Clay's auditorium.
Contact Julie M. McKinnon at: or 419-724-6087.

Shirlee Zerkel: Questions to Sandy Knoesel about LifeMasters

From Shirlee Zerkel, April 15, 2009
Subject: Fwd: Question about LifeMasters
She did not answer my second and third question. She does mention a cost for LifeMasters of a little over 3 million but does not say whether that is per year. She does not say what fund it comes out of.
By the way she says it is a volunteer program. How can that be so when a friend of mine was automatically put on it. She received a letter from S. Knoesel concerning the fact. My friend has been trying to reach Ms. Knoesel and there is no response.
Ms. Knoesel stated that it was a service that checked with a patient between doctor visits to help keep a chronically ill person from needing to be hospitalized. That was not the type of service I received when I was automatically put on it a number of years ago because of my diabetes. First indication I had that I was on the program was a phone call from a very pushy person who told me they were a nurse and needed to ask me some questions. The other 3 calls in a year's time were not helpful either when I asked her some medical questions. My experience with this service told me that it was a waste of teachers' contribution money. Unless STRS can show the exact figures of the savings from this service I feel it should be stopped because it is a 3 million plus drain on the health care fund.
Shirlee Zerkel
From Sandy Knoesel, April 15, 2009
RE: Question about LifeMasters
STRS Ohio continues to provide LifeMasters on a volunteer basis to eligible participants. The purpose of the LifeMasters’ program is to provide assistance to those with specific chronic conditions between doctors’ office visits to maintain their quality of life and help to prevent conditions from becoming worse that would then require a hospital stay. Hospital stays cost more for the enrollee as well as the Health Care Stabilization Fund, not to mention the health complications that the enrollee must endure that triggered the hospital stay. Administrative costs are less than the savings received from the LifeMasters’ program; so, technically, there is no cost to the program. However, I assume that is not the information you were seeking. Total expenditures for the LifeMasters’ program is $3.25 million; however, the program’s savings are the more than the expenditures.
Sandy Knoesel
From Shirley Zerkel, April 13, 2009
Subject: Question about LifeMasters
Dear Sandy:
Do we still have LifeMasters?
What does it cost the system each year?
Does it come out of the Health Care Fund?
Shirlee Zerkel

Tuesday, April 14, 2009

Dr. Leone speaks in Mansfield

From John Curry, April 14, 2009
April 14, 2009
State board member not optimistic about teachers' pensions

News Journal
MANSFIELD -- Although Dennis Leone didn't come bearing good news, he left Monday's Richland County Retired Teachers Association meeting to a standing ovation.
Leone, a retired educator and board member of the Ohio State Teachers Retirement System, visited the Mansfield-area Masonic Temple to break bad news to a crowd of about 100.
He said STRS does not have enough assets to guarantee future pensions.
"Two years ago when I came here, I told you our total assets at STRS were peaking at $80 billion -- that's billion, not million. We were having wonderful returns on our stock market investments," Leone said. "By the end of March this year, we were at $48 billion, so we dropped $32 billion. Something that very much upset me with our board is that for about six months, we kept sending out newsletters that said, 'Your pension is fine, don't worry.' All that time I was yelling at them to stop.
"We'd be a public relations nightmare if everyone knew the truth."
He noted that 70 percent of STRS holdings are in stocks.
Leone said the delay in the matter wasn't the only issue causing strife with the board, whose members are split on a number of concerns. The divide, he said, mainly pitted active teachers against those who are retired.
One of the more contentious issues is trying to decide when teachers can retire. The current retirement age is 51.
"The retirement age should be at least 55 for teachers," Leone said. "I think that will be raised in the future. I'm sure if that does happen, we would phase it in. A lot of states have the '85 rule,' which means you can't retire until your age and service add up to 85."
Leone said bonus checks for the 90 STRS in-house investment staff members is another hot issue. The board could approve as much as $3.3 million in bonuses for fiscal year 2009.
"I get told we save so much because we don't have external money managers. I say, 'So? It's their job,' " he said. "I think we should get to a minimum of, like, $60 billion before we start passing these (bonuses) out. That's like, when I was superintendent, a teacher coming up to me and saying, 'Well, even though my students test scores went down from last year, there are other classes that did worse than mine, so I should get a bonus.'
"I supported bonuses when we were doing well financially, but not when we're losing money like this."
He said bonuses will likely average around $50,000 per person for staffers earning an average base salary of more than $150,000.
In an
April 1 letter to board members and the retirement system's executive director Mike Nehf, Leone said approving bonuses for millions of dollars while the board is taking steps to preserve pension solvency and the health care stabilization fund could push state officials to take action to stop them in the future.
Legislation on the matter, he said, "is around the corner in Ohio."
In that letter, and another dated
April 3, Leone pointed out how Massachusetts and Colorado recently passed legislation that would prohibit their states' pension funds from issuing employee bonuses during a year when the funds lose money. Three other states -- Pennsylvania, Texas and Wisconsin -- already had closed such loopholes.
Before leaving, Leone took several questions from the audience, including why he wasn't going to run again when his four-year term ends this year.
"I was hoping no one would ask that," he said with a laugh.
"We need you!" the woman said.

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