STRS Spending Critic Offers Recommendations

August 11, 2003 (PLANSPONSOR.com) - The man who triggered inquiries that resulted in the early resignation of the executive director of Ohio's State Teacher Retirement System has a list of additional suggestions for the fund's operation.

According to the Akron (Ohio) Beacon Journal, Chillicothe Schools Superintendent Dennis Leone has sent to the Ohio Retirement Study Council – and to every superintendent and principal in the state – a 13-page report outlining more than 30 proposed changes to the STRS board.   The Ohio Retirement Study Council oversees the state’s public pension funds.

“They need to take steps to show the retirees they do care about them and can help them,” Leone said of the board members who represent 400,000 active and retired Ohio teachers.

Board members of the Ohio State Teachers Retirement System (STRS) voted last week to accept the resignation of embattled executive director Herb Dyer (see  Dyer Steps Down From Ohio STRS Post ).   The resignation was the culmination of the publication in May of a number of lavish spending practices at the fund, which drew criticism in the wake of cuts in benefit programs and declining assets in the $47 billion pension fund (see  Ohio Pension Fund Hit for Lavish Spending Practices ).   Caught in the market downturn along with the rest of the industry, the Ohio fund lost 21% of its value over the past three years, according to published reports.   Preliminary results for fiscal year ending June 30, 2003, indicate a positive return of 2.1% for the year, according to the fund’s Web site.  

Dyer joined STRS in January 1993, when the pension fund was just $26.3 billion.   He had previously managed the Maryland State Retirement Systems.   As part of Dyer’s agreement with the Ohio fund, he will remain on the payroll, virtually in name only, through the end of February, at which time he will retire at the age of 65.  

STRS “Steps”

Among Leone’s recommendations are that STRS:

  • Lay off 140 of its 688 employees (between 1996 and 2002, the staff grew from about 400 to more than 730, according to the report).
  • Eliminate bonuses for employees not involved in pension fund investments and award bonuses only to investment personnel who make money for the fund.
  • Sell the $869,000 in artwork bought for the $94.2 million STRS headquarters built in downtown Columbus, and evaluate whether the building also should be sold.
  • Eliminate — or end STRS funding for — childcare services, a full cafeteria, and a fitness center for pension fund employees.
  • Offer the same health insurance to STRS employees that will be provided to retired teachers beginning in January.
  • Instead of sending seven members to the same conference — as happened last year at a cost of $8,000, according to Leone — one or two could go and share the information with the others.

Leone said any savings achieved through the changes should be given to retired teachers through a partial restoration of the so-called “13th check,” an extra payment that retirees had received annually until 2001. That money came from STRS fund interest.

Newly appointed Interim Director Dr. Damon Asbury, an ex-teacher and currently a STRS deputy executive director, said the board would consider reforms of the travel and expenditure policies.   According to the Beacon report, he said Leone’s report has items worth considering. Others he has reservations about; a few he disagrees with, he said, according to the report.

Leone, who had not calculated how much his recommendations might save STRS, according to the Beacon report, hopes its board members will consider his proposals before Friday, when they are to meet to review the concerns about spending practices.

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