By Phil Kabler
Staff writer

Instead of costing the state millions of dollars, the transfer of nearly 15,000 teachers and school personnel from a 401(k)-style plan to a defined benefits plan will save the state about $22 million in pension costs, legislators learned Monday.

That's a far cry from initial estimates that the transfer could cost the state as much as $78 million, to subsidize pensions for teachers and service personnel who transferred to the Teachers Retirement System but had limited assets in their Teachers Defined Contribution plans.

Harry Mandel, actuary for the state Consolidated Public Retirement Board, told a legislative interim committee that surprisingly large numbers of TDC participants at or near retirement age did not transfer.

However, he said, a surprisingly high percentage of under-40 teachers and service personnel voted to switch to TRS.

"Our overall results are costs well below what we expected," Mandel told the Joint Standing Committee on Pensions and Retirement.

The retirement board had projected that nearly 100 percent of all teachers and service personnel age 65 or over would switch to the pension plan with defined benefits.

However, only 50 percent of TDC participants over age 70 transferred, and only 69 percent in the 65-to-69 age group opted out.

Those age groups posed the greatest potential liability to the state, since taxpayers would have had to essentially subsidize their entire pensions.

"I really don't have any idea why the over-70 group didn't come over," Mandel said. "It was really a matter of, 'Give us 25 cents and we'll give you a dollar back.'"

The retirement board had projected that fewer than 10 percent of teachers and school personnel under age 40 would transfer to the defined benefits plan.

For younger teachers - particularly those planning to move out of state at some point - staying in the 401(k)-style plan could have been the more rational option.

As it turned out, more than 75 percent of the 40-and-under age group voted to switch.

Instead of costing the state millions of dollars, the transfer of nearly 15,000 teachers and school personnel from a 401(k)-style plan to a defined benefits plan will save the state about $22 million in pension costs, legislators learned Monday.

That's a far cry from initial estimates that the transfer could cost the state as much as $78 million, to subsidize pensions for teachers and service personnel who transferred to the Teachers Retirement System but had limited assets in their Teachers Defined Contribution plans.

Harry Mandel, actuary for the state Consolidated Public Retirement Board, told a legislative interim committee that surprisingly large numbers of TDC participants at or near retirement age did not transfer.

However, he said, a surprisingly high percentage of under-40 teachers and service personnel voted to switch to TRS.

"Our overall results are costs well below what we expected," Mandel told the Joint Standing Committee on Pensions and Retirement.

The retirement board had projected that nearly 100 percent of all teachers and service personnel age 65 or over would switch to the pension plan with defined benefits.

However, only 50 percent of TDC participants over age 70 transferred, and only 69 percent in the 65-to-69 age group opted out.

Those age groups posed the greatest potential liability to the state, since taxpayers would have had to essentially subsidize their entire pensions.

"I really don't have any idea why the over-70 group didn't come over," Mandel said. "It was really a matter of, 'Give us 25 cents and we'll give you a dollar back.'"

The retirement board had projected that fewer than 10 percent of teachers and school personnel under age 40 would transfer to the defined benefits plan.

For younger teachers - particularly those planning to move out of state at some point - staying in the 401(k)-style plan could have been the more rational option.

As it turned out, more than 75 percent of the 40-and-under age group voted to switch.

"What we're hearing today is good news in terms of potential liability to the state," said committee chairman Sen. Dan Foster, D-Kanawha.

"However, I worry about some of these folks who apparently don't have a whole lot of money who will be dealing with these TDC retirements," he added.

Also during legislative interim meetings Monday:

A legislative audit uncovered serious problems with finances at Bluefield State College's athletic department.
Those issues included directly depositing cash advances for team travel expenses in excess of $250,000 into the athletic director's personal checking account between July 2005 and June 2007.

While there was no indication the funds were misused, the auditors concluded the director could have directly benefited by earning interest on his personal account from the state funds deposited there.

Also, the athletic department reported a total of $12,850 in ticket and concession revenue, but a lack of receipts or adequate recordkeeping made it impossible for auditors to determine the total number of tickets sold, or total amount of revenue that should have been collected from those sales.

Paul Hill, higher education vice chancellor for science and research, told legislators he expects that alternative energy research will account for a majority of the "Bucks for Brains" research initiatives at West Virginia University.
This spring, the Legislature set aside $50 million of state lottery profits for matching grants to fund high-tech research initiatives at WVU and Marshall. Under the law, WVU is eligible to match $35 million of the $50 million endowment.

Hill said WVU is likely to have a "huge focus" on energy research with its "Bucks for Brains" funds.

"At least half of the positions that are created by this will be in the energy sector," he told an interim committee.

                               ACLI NEWS RELEASE

Landmark West Virginia Law Protects Semiors; Leads Way For Rest of the Nation

Washington, D.D.  (March 13, 2008  West Virginia governor Joe Manchin III  (D) signed today landmark legislation that protects senior citizens from an abusive practice called stranger-oriented life insurance (STOLI), said Frank Keating, president and CEO of the American Council of Life Insurers. (ACLI)

"Senior citizens in West Virginia can thank their government officials for being in the forefront of the effort to deter STOLI.  These contrived transactions aim to turn a product intended for a financial protection of families and businesses into a windfall for hedge funds.  The legislation passed by the West Virginia legislature and signed by Gove4rnor Joe Manchin, SB 704, provides seniors with the highest level of protection in the nation and we urge other states to follow West Virginia's lead," Keating said  

In STOLI transactions, investors such as hedge funds or their representative profit for the death of insured individuals by inducing seniors to purchse life insurance for the sole purpose of selling their death benefits to the investors.

In additionm, the seniors may be asked to turn over their medical records to the investors and respond to reguar questions about the state of their health.  Moreover, senior may face unexpected taxes, fees, and legal concerns.

SB 704 combines key features of model laws developed by the National Association of Insurance Commissioners (NAIC) and National Conference of Insurance Legislators (NCOIL) to combat STOLI.

First, SB 704 establishes a five-year moratorium of the settlement of STOLI policies, the centerpiece of NAIC's model.  Seond SB 704 establishes a legal definition of STOLI and identifies it as a fraudulent act, the major elements of NCOIL'S Model.West Virginia is the first state in the nation to enact legislation which combines the best features of the NAIC and NCOIOL models.

"These tombstone contracts offend our deepest-held notions of the value of human life.  We hope other states will see the wisdom in the approach taken by  West Virginia fto protext senior citizens and reaffirm the social purpose of life insurance," Keating said."

:I n addition to Governor Joe Manchin I want to thank ..............et al and DELEGATE SHARON SPENCER (d-Kanawha) for the leadership of SB 704" Keating said.

Byline: LAWRENCE MESSINA THE ASSOCIATED PRESS4:27 PM 10/3/2007

MARTINSBURG - The Legislature faces a potential price tag of as much as $215 million if it wants to aid the nearly 20,000 teachers and school workers whose 401(k)-style retirement accounts lack sufficient funds in all but a handful of cases.

A study presented during interim meetings Sunday offers five different ways lawmakers might merge at least some of these defined-contribution accounts into the Teachers' Retirement System.

The priciest option would promise crossover enrollees the same pension benefits as if they had been in TRS all along. TRS is a defined-benefit plan, which guarantees a pension based on salary and years of service.

But without charging those enrollees anything extra, this approach would increase the huge TRS funding gap by up to $215 million, study author Peter Verne told the Joint Standing Committee on Pensions and Retirement.

The least-costly approach would allow enrollees to keep their individual accounts separate, but join TRS as if they were new employees, Verne said. But that route offers little to enrollees ready to retire.

The individual accounts allow enrollees to invest what they and the state contribute each month. The average account contains just $33,944. Of the 1,100 enrollees age 60 or older, only 23 have more than $100,000. None has more than $157,000.

The other options would require higher payments from enrollees to ensure full benefits, charge interest on those "makeup contributions," or reduce the years of service counted toward pensions.

Verne also said that the state could actually save money adopting any of these scenarios - but only if all 19,851 individual account holders agreed to the terms.

"We know that's not going to happen," said Verne, with Buck Consultants in Washington, D.C. "We just had a vote that tells us that's not going to happen."

The Legislature sought to merge the two teacher pension programs in 2005 by reopening TRS, closing the 401(k)-style plan to new members and allowing its enrollees to vote on joining the older fund.

About 56 percent of enrollees took part in the special election, with 61 percent voting for the merger. But more than 1,000 enrollees then sued to block that move, arguing it would illegally take their investment earnings.

A Kanawha Circuit judge agreed earlier this year. The retirement board has appealed that decision, and could hear Tuesday whether the state Supreme Court will hear the case.

Verne said the cost of a voluntary merger will depend on the age and years of service of those enrollees who agree to cross over. Board Executive Director Anne Lambright said at least 64 of the plaintiffs now say they wish they had voted for the merger.

Her office also has reviewed the account holdings of all those who signed on to the lawsuit.

"Many of those people have done extremely poorly," she told the committee. "Some have done really, really well."

The session ended on March 10, 2007 at midnight.  At five minutes prior to midnight, Speaker Rick Thompson turned to the delegates and announced, "our work is finished."

Three bills that I sponsored were completed during this session.  HB 2717 Enacting a Retirement System for Emergency Services Personnel passed the house on February 26 and was sent to the Senate.  The Senate passed the bill on March 8 with an amendment and the House concurred with that amendment on March 9.  The legislation was completed on March 23, with Governor Joe Manchin’s signature.  HB 2717 allows those in EMS to retire at age 50 with 20 years of service.  I was most proud of this bill as it began in the Pensions and Retirement Committee, which I chair.

HB 2825 eliminates the provision that allowed private clubs segregated on the basis of race or color to obtain a license to sell alcoholic beverages.  The House passed the bill on February 16 and the Senate on Match 9.  The Governor approved the legislation on March 18.  This legislation amends the Code of West Virginia, 1931 removing race or color as part of the application process for the licensing of private clubs.

HB 2944 enhances the end of life care given to residents of nursing homes.  Passed by the House on February 26 and the Senate on March 10, this legislation allows persons living in a nursing home facility to elect the use of hospice if they decline to the state of terminal illness or has a physicians order for comfort measures only.  This will allow nursing home residents to have a choice in their end of life process.

I sponsored forty-four pieces of legislation this past session.  I was disappointed that HB 2947 Requiring the Ethics Commission to investigate allegations of legislators, staff and lobbyist offering to serve alcoholic beverages to persons under twenty-one years of age never made it out of the House Judiciary Committee.  This bill would have made coercing or intimidating persons less than twenty-one years of age into committing illegal acts a violation of the code of ethical conduct.

I continue to work diligently for the citizens of Kanawha County and our great state.  I am truly a public servant and look forward to serving you throughout my term in office.

Delegate Spencer, along with the rest of West Virginia's Democratic legislature, had an extremely productive session this year. Here are some of the things the Democratic legislature accomplished in the 2006 regular session.

1. Increased safety measures in coal mines to protect our state's miners.

2. Expanded Access to Affordable Health Care.

3. Increased PROMISE and other Higher Ed Scholarships.

4. Raised the Minimum Wage.

5. Supported our State Police with a much deserved pay raise.

6. Established a drug task force with the State Police to help localities fight drug crime.

7. Provided local governments more tools to save taxpayers’ money by allowing voters to elect to reduce overlapping services with the Metro-Government bill.<,/p>

8. Reduced the debts in the teachers’ retirement system by allocating an additional $568 million, $234 million above the normal yearly payment – saving taxpayers’ money on interest payments in the future.

9. Increased funding to the state’s higher education institutions general budgets.

10. Added $60 million worth of state funds to Medicaid to cover cuts by the Republican controlled Congress.

11. Reduced the amount of the scheduled increase in PEIA premiums.

Charleston Daily Mail
February 22, 2006

Oversight of Agencies Found Lacking Jennifer M. Karmasek, Daily Mail Staff

Regional Education Service Agencies, the mishmash of administrators and specialized services offered at eight offices around the state, have come under fire in recent weeks after one agency reported close to $1 million in funds missing.

Millions of dollars of expenditures rolling through the agencies and an undefined position on the bureaucratic hierarchy make RESAs lightning rods for controversy.

The executive directors of the agencies make well over $80,000, and some pull down as much $90,000 or more. That's almost as much as some county superintendents earn; yet they have fewer responsibilities and manage much smaller staffs.

Together, the eight RESAs in West Virginia cost more than $40 million to run.

Yet few citizens probably know what the agencies do.

They serve as regional bridges between state and local school systems. They act as centralized locations for GED testing, teacher training and instructional resources such as videotapes. They also provide specialists, such as audiologists and school psychologists, for those schools that cannot afford such positions on their own.

To critics, however, they're "bureaucratic bungles," plagued by undefined oversight.

"I've watched RESA's since they started. They were supposed to be the great answer to regional education," said Kanawha County school board member Pete Thaw. "All they turned out being is another bureaucracy. They do nothing."

He added, "If they were a space program, they never would've gotten off the pad."

Others say that by centralizing services, RESA's have saved counties money and have proved helpful to educators.

Debbie Phillips, Putnam County school board president and a former House of Delegates member, said she wasn't convinced of the regional agencies' importance until she became directly involved in the educational process.

"When I was in the Legislature, I thought it was just another layer of bureaucracy that we didn't need," she said. "But if you don't have that direct contact, you don't know. It doesn't mean they're not important or valuable."

Those who lead the agencies are well compensated.

At RESA 1, executive director Carol Morgan makes $94,781 a year, the most of all eight RESA directors. At RESA 2, R.P. "Rick" Powell makes $88,401.

Charles Nichols at RESA 3 makes $85,844. That's the agency that represents Kanawha, Putnam and surrounding counties.

At RESA 4, director Elmer Pritt makes $88,000. Ronald K. Nichols at RESA 5 makes $85,615. Nick P. Zervos, director of RESA 6, makes $82,762. Gabriel Devono at RESA 7 makes $83,621, while John Hough, executive director of RESA 8, makes $89,250.

The directors oversee staffs of 20 to 60 people, mostly specialists like audiologists and psychologists, technology experts and miscellaneous office workers. The size of the staff depends on the number of counties and students served, the programs offered and the grants secured by each RESA.

County superintendents, on the other hand, oversee hundreds and even thousands of students, teachers and fellow administrators -- something some school officials say is a much tougher job.

"All RESA's have done is provide a lot of high-paying jobs to a lot of people who do nothing," Thaw said. "It's nothing compared to what our superintendents do."

Delegate Sharon Spencer, D-Kanawha, called the salaries too high.

"I think it's a lot," Spencer said. "And I think if we're spending people's money, then we should make sure these agencies are doing what they're supposed to. It's time we send a team of professionals in there and really look at how they're spending their money."

She added, "I want to know how many employees they have, all of their salaries, the time it's taking them to complete jobs and the quality of services they're offering. I think those are all very reasonable questions."

But Charles Nichols, who directs the RESA that serves Kanawha, Putnam, Clay and Boone counties, said the salaries of RESA executive directors are similar to county administrators because they have some of the same responsibilities.

"We have to work to meet standards, have to attend meetings, stay up on issues, just like county superintendents do," said Nichols, whose agency is designated as RESA 3. "We feel the duties we have are on the same plane or on the same level as those administrators in the county central offices or the state department."

Each RESA has an advisory council, which submits the director's salary to the state board for approval, said Joe Panetta, executive director for the state Department of Education's office of school finance. The director salaries, along with those of other RESA employees, are paid from state, federal and local funds.

RESA revenues and expenditures are in the millions and growing every year. For example, at RESA 3 in Dunbar, revenues and expenditures for fiscal year 2005 were more than $6 million each. In 1994, RESA 3's total budget was just $3 million.

More than 10 years ago, the eight RESA's had budgets totaling $20 million. Now, the expenditures are in the $40 million range.

School officials say county needs for additional services have caused the dramatic increase in funding. So have No Child Left Behind standards.

"We have a lot more programs and services we need to offer because of programs like West Virginia Achieves and No Child Left Behind," Nichols said.

Funding for these regional agencies come from a combination of federal monies, state appropriations and various grants. Close to 40 percent of their programs and services are funded through the state Legislature.

But that may change. Spencer, a member of the House Education Committee, said there's been recent discussion among some delegates and senators to move RESAs outside the school aid formula.

"No one wants to be the first to say, let's cut here," she said. "No one wants to cut, but now's the time to look at that. It's time we rein these agencies in."

Some local school officials agree, saying the money should go directly to the counties.

"It's a big, fat loser. It's a taxpayer's nightmare. They're just a vacuum cleaner for money," Thaw said. "If people only knew how much money was wasted on these things. We'd be better off chucking them and taking the money."

But Delegate Larry Williams, D-Preston, said not every county could afford to pay for the services provided by RESA's themselves.

"It depends. You'd have to weigh each county individually," he said. "If a county has enough money and an excess levy, they might have the capability of handling those services. But I don't think there are many of those counties in that kind of shape.

"A lot of counties really depend on RESAs."

The eight agencies, now governed by the West Virginia Board of Education, underwent a restructuring in 2002. Before their reorganization, they were considered independent bodies and were under the control of local school systems.

Although the state school board governs them, RESA employees, including their executive directors, are not considered state employees. They're not considered county employees, either.

This creates a gray area, said Nichols, a RESA executive director himself.

The executive directors define themselves as employees who "serve at the will and pleasure of the state board" and classify their staff as RESA employees, Nichols said.

But this calls into question the oversight of these agencies. Who do they answer to?

Each RESA is advised directly by a regional council made up of the county superintendent, a school board member from each participating county, a teacher, principal and a representative for the state superintendent. The executive director from each RESA reports to the state school board.

Phillips compared RESAs to a form of metro government, where municipalities agree to share certain services. But she said some additional supervision, or a more defined hierarchy, might help the agencies.

"I don't think it would hurt to give them some additional oversight. They do seem to be a bit gray," Phillips said. "They're providing a valuable service, but I think it's pretty obvious there needs to be some additional checks."

Following reports of financial discrepancies involving more than $1 million at RESA 1 in Beckley, West Virginia Board of Education members announced earlier this month that they're taking swift action to prevent it from happening again.

More than $1 million disappeared from the agency over the past five years, and no one has been able to explain where it went. Advisory board members recently accepted the resignation of Deborah Calhoun Mitchell, who served as RESA 1's executive secretary and chief financial manager.

At a state board meeting, members voted to conduct an investigation into all financial policies, practices and procedures at the service agency, which serves McDowell, Mercer, Monroe, Raleigh, Summers and Wyoming counties.

The board also has requested that state School Superintendent Steve Paine appoint someone to manage and oversee all financial functions of the agency.

State and federal criminal investigations have been launched, and a review of the agency's independent audits over the past five years is a possibility.

But is the state school board, which governs RESAs, keeping good enough tabs on these service agencies? That's the question some school officials and lawmakers are now asking themselves.

Williams, vice-chairman of the House Education Committee, said linking the agencies with the state Department of Education instead of the state school board, would be a viable option.

"RESAs do a valuable service to students in many counties and their county boards, but that's if they're operated right," he said. "In this case, either someone was good at covering their tracks or people weren't paying close enough attention.

"And that needs to change."

Williams, a former advisory council member for RESA 7, said the Department of Education could create more resources and would serve as a more effective source of guidance.

"The state department needs to have the ability to deal directly with RESAs. There's a lot more people at the state department, which would make it more efficient and allow for a more watchful eye," Williams said.

Thaw said lawmakers should consider cutting RESAs altogether.

"I think it's a terrible waste of money. If the governor was serious about cutting state government, the first people out the doors would be the RESAs," he said.

Contact writer Jessica Karmasek at 348-1796.

Blackwater Canyon and the surrounding area is a majestic, beautiful, and important part of all West Virginians' birthright. Sharon Spencer believes that we have a responsibility to protect this region for future generations. In 2005, Delegate Spencer co-sponsored a resolution calling for a study of a new National Park in the Allegheny highlands of West Virginia, including Blackwater Canyon.

Please join Sharon and the Friends of Blackwater, by signing their petition in support of the study here

For more information about the impact of a national park in the West Virginia highlands, please read this study about the economic impact of a national park in the West Virginia Highlands.