May 20, 2005

Board Receives Election Results, Speas Honored for Board Service
As a result of the recent election, three new members will be joining the State Teachers Retirement Board on Sept. 1, 2005. Mary Ann Quilter Flannagan will fill a contributing member seat on the board, while Jeff Chapman and Dennis Leone will fill the retired teacher seats. Their four-year terms run through Aug. 31, 2009.

The May Retirement Board agenda included a resolution recognizing W. David Speas for his service since being appointed to the additional retiree seat on the board by Gov. Bob Taft on Sept. 28, 2004. Board members expressed their appreciation for his commitment of time and expertise in education and board governance on behalf of the membership of STRS Ohio.

Retirement Board Approves Budgets for 2005–2006 Fiscal Year
During its May meeting, the Retirement Board approved the budgets for the 2005–2006 fiscal year (July 1, 2005–June 30, 2006). The operating budget, which totals $85,953,800, reflects a 1% decrease from the 2004–2005 fiscal year budget and is the lowest operating budget for the system in the past five years. The capital budget totals $2,994,900. Allocations to the State of Ohio include $325,000 for the Ohio Retirement Study Council (the legislative oversight body for the public pension funds in Ohio) and $25,000 to the Treasurer of State’s Office for check processing. In reviewing the budgets, Executive Director Damon Asbury noted that the board may revise them at any time during the fiscal year.

Health Care Strategic Plan Adopted
A comprehensive Health Care Strategic Plan for 2007–2009 was adopted by the Retirement Board. This plan outlines steps the board and staff will take to control medical and prescription drug costs; encourage members to take an active role in managing their health; and engage members in discussions regarding how to fund health care coverage in the future. Extensive input was provided by the Health Care Advocates for STRS during the development of the plan. Future issues of the STRS Ohio newsletters, as well as the STRS Ohio Web site, will present details about the plan’s components.

Prescription Drug Management Program Continued
During its May meeting, the Retirement Board approved the continuation of the Prescriber Advisor program, which is a prescription drug management tool. Using this program, an independent company analyzes STRS Ohio’s prescription drug claims data and sends letters to physicians, alerting them to any safety, compliance or drug interaction problems their patients could experience.

Since the program began in September 2004, almost 35,000 letters were mailed to more than 12,000 physicians, alerting them to potential problems in their STRS Ohio patients’ drug therapy. The changes made by these doctors resulted in savings of about $1.1 million to the STRS Ohio Health Care Program, while the program fee for STRS Ohio during the same time period was about $94,000. In addition, program participants benefited from the improved safety and enhanced medical value of their prescription drug therapy.

LifeMasters Continues to Improve Participants’ Health and Reduce Medical Costs
The second-year results for the LifeMasters Supported SelfCare, Inc. program show that the program continues to improve the health of its participants while reducing health care claim costs that would have otherwise been incurred by the participants and STRS Ohio’s Health Care Stabilization Fund. The disease management program now involves nearly 6,900 people who are diagnosed with congestive heart failure, diabetes, coronary artery disease or chronic obstructive pulmonary disease. The total health care expenditures (medical and prescription drug) for these individuals were $17.65 million lower than expected. After accounting for the fees paid by STRS Ohio, the net savings was $15.32 million. This is in addition to the more than $6 million in reduced claim costs experienced in the first year of the program. The program evaluations for each year were conducted by Health Data Management Solutions, an independent third-party auditor.

Retirement, Investment Transactions Approved
The Retirement Board approved the following retirements and investment transactions:

• 27 disability retirements were granted.
• 78 active members were approved for service retirement; 45 inactive retirements were approved.
• In April, fixed-income purchases totaled $306 million, domestic equity purchases totaled $1.774 billion and real estate purchases totaled $59 million.

Additional Items Reported at the Meeting by Executive Director Damon Asbury

ORSC Receives Positive Pension Funds Investment Report at May Meeting
At its May meeting, the Ohio Retirement Study Council (ORSC) received the semiannual investment report from its consultant, Evaluation Associates. In commenting on the six months ending Dec. 31, 2004, Evaluation Associates noted that all five Ohio public pension systems posted strong investment growth, with STRS Ohio leading the pack with a 9.21% total fund return. The report also noted that STRS Ohio has outperformed its benchmark for the past one-, three- and five-year periods. As part of his remarks to the ORSC, Jeff Van Orden of Evaluation Associates noted, “…the funds appear to be managed in a prudent fashion” and “…are making efforts to keep costs down.”

Coalition Presents Mandatory Coverage Briefing to Senate Staff
STRS Ohio, through the Coalition to Preserve Retirement Security (CPRS), is working hard to make sure mandatory Social Security coverage of state and local government employees does not become part of anyone’s solution as the sides continue to do battle over Social Security reform. A briefing for U.S. Senate staff was held on May 13, 2005, in Washington, D.C. The presentations contained strong arguments against mandatory coverage and the harmful impact it would have on the states.