January

January, 2004

FROM THE PRESIDENT

Happy Holidays to everyone! Travel safely as you visit with family and friends. Find some time to relax and get recharged over the holiday season. One possible way to get recharged over the holidays may be to visit the website listed below

I challenge everyone in the Association to take time to look at this website and act on what they find – all I’ll say is SSSSH. Visit this website: http://home.hiram.edu/hal/

Bargaining has been slow and the latest deal the State has on the table is not a fair or equitable deal for the Association. We have language, pay, and insurance issues that need to be resolved. We’ll continue to bargain in 2004, dates to be determined. The changes being proposed to health insurance are complex and there are some fundamental issues that need to be addressed before we can come to an agreement on this issue. See your section president for more details on bargaining. Section presidents are provided an update on bargaining usually within 24 hours of the bargaining session via home email.

We submitted a request to the WERC to get a declaratory ruling on a couple of language items we’ve been bargaining about. We would expect to hear from them sometime in 2004 but we are on the WERC’s schedule.

We’ll be planning another Visit the Hill day for early in 2004 plan now to attend. Take the opportunity over the holiday to talk with, write, or email your political leaders and let them know how things are going in state government, politics, etc. Also take the opportunity to educate your families and friends about how things are running in State government. Everyone pays taxes and state employees know whether those dollars are being spent wisely or not.

Remember to be professionally and technically the best you can be at your jobs! It is how you can best serve the taxpayers of the State.

Respectfully,

Timothy R. Hanley

SEA President

Happy Holidays All !

Legislative report Nov/Dec 2003

Larry Legro 2nd V.P.

The answer to the pop quiz about the five foot long fishing pole and the 4 foot
restriction on the bus: Put the pole inside a 4 foot by 3 foot box. The diagonal of the
box is 5 feet and the 4 foot long box meets the requirements of the bus. For this one,
(as Attorney Willie Haus so astutely pointed out to me), you had to think "inside the
box." All you engineers figured that one out right? I put these kinds of things in my
articles to try and stimulate the members (and others) into reading the newsletter.

"There is no strategy at home. There's no policy at home. All there is, is politics." (A
comment from Wesley Clark at the Capitol 10/28/03 while criticizing the Bush
Administration for playing politics with the nation's economy.) True or False? (but
either way, see next paragraph below)

Salman Rushdie (author of Satanic Verses) spoke 10/27/03 at the UW Memorial Union
Guest Lecture series and told audience members the importance of protecting
freedoms of speech, ESPECIALLY when they do not agree with what's being said. "It
doesn't matter which side of the argument you are on. What matters is that one side of
the argument should not feel terrorized into not expressing itself." He used the term
"being Dixie Chicked" as an example of the after effects and possible consequences for
implementing one's free speech right." Rest assured, nobody can "Dixie Chick" me.

State Shepherd Almost Gets Fleeced By Private Consultant!!! (A true story)

A shepherd working for the state was herding his flock in a remote pasture when-
suddenly a brand-new BMW advanced out of the dust cloud towards him. The driver, a
young man in a Broni suit, Gucci shoes, Ray Ban sunglasses and YSL tie, leaned out the
window and asked the state shepherd, "If I tell you exactly how many sheep you have
in your flock, will you give me one?"

The state shepherd looked at the man, obviously a yuppie, then looked at his
peacefully-grazing flock and calmly answered, "Sure." The yuppie parked his
car, whipped out his notebook and connected it to a cell phone, then he
surfed to a NASA page on the Internet where he called up a surveillance satellite
system, scanned the area, and then opened up a database and an Excel
spreadsheet with complex formulas. He sent an email on his Blackberry and, after a
few minutes, received a response. (Note: all of this was done at the state shepherd's work
space too - a remote pasture that was always too small to properly work in).

Finally, he prints out a 150 page report on his hi-tech, miniaturized printer then turns to
the shepherd and says, "You have exactly 1586 sheep." "That is correct; take one
of the sheep." said the shepherd. He watches the young man select one of the animals and
bundle it into his car.

Then the state shepherd replies back: " If I can tell you exactly what your business is,
will you give me back my sheep?" "OK, why not." answered the young man.

"Clearly, you are a private consultant." said the state shepherd. "That's correct," says the
yuppie, "but how did you guess that?"

"No guessing required." answers the state shepherd. "You turned up here although
nobody called you. You want to get paid for an answer I already knew, to a question I
never asked, and you don't know anything about my business. Now give me back my
dog." The story has been edited slightly, but you get the point?, if not ask.

I have been keeping my eyes and ears open lately and was told by unnamed but very
high up source, that government (state, county, AND local) EACH, have so many
private contracts that it is almost impossible to account for the them or to account for the
money spent. Look at the sweet pension deal a few county board members and the
county executive of Milwaukee county passed until a reporter happened to discover
some of it and blew the story wide open. If creative accounting can be done within
something as open as a retirement system, just think how little the public really knows
about private contracts that government makes. Waste is the biggest tax to the
taxpayer. Make sure you tell this to others. By the way, not all contracts are bad, some
are even necessary, but unless someone keeps tabs on this, there is no way to know
the good from the bad. There are even state contracts with state employees, believe it or
not, and unless you have solid proof these exist, no one will talk to you about them. I
would be willing to bet that a state employee within the regular scope of their duties could
do the contracted work for less, or within their other duties. State contracts for full
time state employees? What's next? sending someone home WITH PAY as a
method of discipline (this happens too).

Okay I will get off the soapbox now. The economy appears to have picked up but
a bit of cautious optimism is to be the norm until it is clear the economy's recent
strength is real and sustainable. Federal interest rates will not rise until it is
absolutely positive that the economy is out of danger according to the federal reserve.
Bargaining is still a Seinfeld episode (It's about nothing). As of today, 12/17/2003 the
Governor has signed two contracts and the newspaper indicated that of the 17 contracts
out there, 5 have hearings before JOCER on Thursday 12/18/2003. That means that 12
contracts are still being "negotiated" and I use the term loosely. The meter is running
on the Three Tier employee contributions, and the state fully intends to collect it from
the employees (both reps and non-reps) retroactively starting from Mid-Nov. The
Governor has stated that over 8 years he plans 10 cut 11,750 state jobs, a number
which would reduce the state workforce to what it was when Gov. Thompson took
office in January 1987. There are approx. 508 fewer employees on the payroll since
Gov. Doyle took office. In all 227 employees have left as a result of the
mandated reductions in the 2003-2005 budget. OSER stated, "the biennial state
budget signed by Gov. Doyle eliminates 2,300 state positions in state agencies,
including the UW System." It is left to the agencies themselves along with the budgets
union contracts, civil service rules, and direction from the executives (Governor's
office )10 minimize layoffs with ordinary events such as retirements, and ordinary
attrition. Summary: You ain't seen nuthin yet, there is more to come. I have
summarized the overall effect on the state of the state with a graphic at the end of this
article.

There was a lot to discuss this past two months, but it is more of the same old same
old, such as corrupt CEO's, only now they are getting caught managing mutual funds
such as the Strong Funds and Edvest accounts. Bishops are telling legislators how
to vote on church related issues like abortion or be sanctioned by the church, but,... the
President has stated he would like the death penalty for Saddam, and no Bishop has
come out of the woodwork and told him he will not be allowed the Sacraments for this
way of thinking. So we have even more hypocritical thinking by the clergy. If
leaving their church is what it takes, so be it. This is America, we can start our own
church. I see many forms of this in the inner city of Milwaukee, so I know it can be done.
Heck, you can become an ordained minister for about $5 or $10 bucks via that wonderful
thing called the internet.

I am assigned with the task to redesigning our brochure, and I welcome ideas or
thoughts. Should we change our logo?, add this or that? It will take a while before it
becomes final.

Visit the Hill Day will be organized most likely in March 2004, so keep this in
mind. I am sure you all will be able to think up some things to tell your full time elected
leaders.

There has been a lot of partisanship at the Capitol this past year, more corruption of its
members, and more costly lawsuits that the taxpayers have to fund (the legislators get
unlimited funds for legal fees for these actions). Contracting out is still rampant
especially in a pre-election year and adding to this is no campaign finance refoffi1s. The
economy is picking up and the stalled "Job Creation Act" cannot be explained as to
how many jobs this will create, but considering the source of this legislation and
the perks it will provide to campaign contributors. .. .it is easy to see the motive
behind it. Watch for a massive lawsuit over open records from this one. I predicted this
about two weeks ago, and the Attorney General is being dared by the Legislative
Reference Bureau (LRB) to "go for it." Another money and time waster. I predict
Open Records and the Attorney Generals' arguments will prevail, LRB, the
Legislature and the Taxpayers (who fund this stuff) will all lose even though they win
on the issue of Open Records. I think it is time to elect new legislators, ones without
agendas, and ones who can present more open forms of government. There has been
too much closed door, behind the scenes, sneaky legislative, dealings this past decade,
and the only way to stop it is to clean it up.

It'll take time to vote the bums out, but you know what? This will probably never
happen. All we can do is expose it when it occurs, and fund it as a taxpayer, and hope
for the best.

The Wisconsin Retirement System (WRS) was provided a three year study of
key factor trends by the Actuaries Gabriel, Roeder & Smith. Norm Jones presented the
report of the following items:

. The annual actuarial liabilities are valued.
. In the annual valuation, assumptions are made regarding the future experience
of the WRS in various risk areas.

RISK AREAS

. Active Members
-Rates of Withdrawal
-Rates of Disability
-Patterns of Salary Increases
-Rates of Retirement
-Rates of Mortality

. Retirees
-Rates of mortality - normal lives
-Rates of mortality - disabled lives

Economic
-Rates of investment return by SWIB
-Inflation rates

WRS statutes provide for in-depth study of assumptions every three years. The
three year in-depth study of the assumptions provides for adjustments to be made to reflect
trend changes rather than year to year fluctuations.

The recommended changes for this three year study are as follows:

Wage inflation-- current assumption 4.5%. However, the actual wage inflation since 1981
for WRS has been 4.1 % annually. They recommend reducing it to the 4.1 %.

Investment Returns--Based on SWIB experience, the current assumption of 8% is a little
high and they are recommending reducing it to 7.8% per year.

These reductions provide an increase in the assumed spread from 3.5% to 3.7%.

These changes will not be used until December 31,2003, along with gains or losses
incurred during 2003 by SWIB.

For more information, review the memo dated December 10, 2003 from Julie
Reneau, ETF, entitled Effect of WRS Three Year Study including Actuarial Recommenda-
tions. All SEA Board members will have a copy.

A legislative report provided by Vicki Poole indicated there is very little change
with no action by the JSCORS as yet.

There were two new bills introduced, S.B. 285 (same as A.B. 599) - provides for
employers in the WRS covered by the Municipal Employment Relations Act (MERA) may
not pay the first 3% of earnings that the employee is required to pay under the WRS.
This one has been headed off because legislators didn't understand the economic advantage
when the employers pay the contributions with pre Social Security dollars.

The second bill, S.B. 344 (A.B. 692) - this bill is important for WRS annuitants because
it provides for ETF to reduce the minimum dividend below the current 2% minimum in the
current statutes (with current SWIB fixed fund income of 19.4%, a 1% dividend could be
provided May 1,2004.) Note: The Legislature has a goal to have these bills on the
floor in January 2004.

ETF staff are backlogged. Retirement estimates for active employees are at 2500, about
12-13 weeks. Death benefit calculations: There are 325 backlogged where there shouldn't
be any. ETF is making an emergency 1310 Request to the Finance Committee for additional staff
to replace ten positions cut from their budget request.

Melvin B. Sensenbrenner,
SEA Retirement & Health
Insurance Representative

ETF GROUP INSURANCE BOARD MEETING - NOVEMBER 18,2003

The Group Insurance Board meeting was lackluster.

Blue Cross-Blue Shield gave their 2002 Health Care Utilization Report to the
Group Insurance Board. It was very complete with national cost trends for medical
insurance, average age on Medicare, distribution of plan payment 1999-2003, average cost per
day and average length of stay, inpatient average cost per admission and admission rate.
Also, inpatient payments by major diagnostic category, outpatient payments by disease
category, professional payments (Doctors) by disease category, pharmacy cost per member
per month and customer satisfaction 2000 through 2003.

ETF ANNUITANT ROUND TABLE - NOVEMBER 13, 2003

For the SWIB Report, note the SWIB article in this SEA Newsletter.
The SWIB building remodeling is going well. They have moved in on the first
floor. Now the remainder of the first floor and the second floor work has started.
Expected completion is March 2004. The second floor will include a larger Board
Meeting room.

Dave Stella started on November 26, 2003 as the Executive Assistant.
The small group retirement counseling sessions for two to six people are rated good,
and they may continue them on Tuesday & Thursday for anyone considering retirement.
Drug cards are to be mailed in December 2003.

The twenty year increases in retirement from 1982 through 2002 for the fixed fund
was 327% and the variable was 296%.

Melvin B. Sensenbrenner,
SEA Retirement & Health
Insurance Representative

SWIB MEETINGS - NOVEMBER 12 & 18, 2003

The good news from SWIB this month, was the continued success b:' their port-
folio managers, which shows in the increased performance for the months of Aug. through
October.

                                            August 31 Sept. 30   Oct. 31      Benchmark

Fixed or Balanced Fund     +12.0%     +13.5%     +17.6%     16.8%
Variable Fund                     +l7.6%       +l7.5%      +24.5%     23.8%

The best news is Jim Severance small cap portfolio is up 83% this year to
the end of October. They have transferred dollars from his portfolio all year to
keep it within policy maximum percentages.

The fallout from the reorganization of real estate and alternative investments
is the bad news for SWIB. Two managers lost their positions: Jon Vanderploeg and
Franz Pool and they were provided golden parachutes as they were being pushed out
as noted in newspaper articles.

The SWIB is upset and held a closed meeting or. November 18th. The Board requested
the Attorney General to review the cases and represent them.

Also note articles about Pat Lipton's announcement that she will retire effective
January 2, 2004. An interim Director will be appointed by the Board and a nationwide
search will be conducted by an outside firm for a replacement. Note SWIB article
(12-10-03) in this Newsletter.

For more information, review newspaper articles provided to all SEA Board members.
Melvin B. Sensenbrenner
SEA Retirement & Health
Insurance Representative

SWIB MEETING - DECEMBER 1O, 2003

The latest news from SWIB is they named an interim Director today. Note
the press release for the Board that Dave Mills, Assistant Director at ETF,
was appointed by SWIB as the interil11 Director. Dave Mills' effective date
is December 11, 2003. For more information, review the press release and
newspaper articles that have been provided to all SEA Board members.

There is more good news on performance. SWIB continues to beat their bench-
marks at the end of November.

                                             November 30   Benchmark     Total Retirement Funds

Fixed Fund (Balanced)         19.4%             18.2%              $54.08 billion
Variable Fund                         26.6%             25.7%             $5.67 billion
(Also note other SWIB article in this SEA Newsletter.)

The Ad Hoc Search Committee of the Board has interviewed three research firms
already and has more to interview before hiring one to do the national search for
a new SWIB Director.

More information will be provided on Pat Lipton's national leadership in the
National Directors of Public Retirement Funds.

On December 11, 2003, I received a memo from Dave Mills, interim Director of
SWIB, regarding his appointment and that he intends to make decisions that are in
the best interests of all of us beneficiaries.

He would like US to contact him with any concerns or questions we might have.
This will be easy. Dave and I have been on a first name basis as I have been with
Eric Stanchfield, Director of ETF, also.

Melvin B. Sensenbrenner,
SEA Retirement & Health
Insurance Representative

WISCONSIN COALITION OF ANNUITANTS (WCOA) MTG. - DEC. 17, 2003

Pat Lipton, our first guest speaker, gave us some history and many thanks for
our support over the years for SWIB.

When Pat Lipton started at swm in 1982, the fund was at $6.9 billion, with only
40 employees. When she became Director in 1989, the fund was at $22.8 billion. Now
in 2003, we are at $65.7 billion with 104 employees when she is retiring.

The performance report is the same as that noted in the SWIB article for
December 10,2003 in this Newsletter. Pat also shared with us two new areas of
investments; one in a real estate index fund, which makes their investment more liquid,
and second, they are increasing by $200 million investments in emerging markets.

Pat's goal was for Senior Management Team succession planning and she is very
comfortable with the senior staff as she is now retiring, and Dave Mills was appointed on
December 10th by the Board as interim Director, who may also apply as permanent
Director in the national search.

We all wished Pat Lipton well in her retirement with a standing ovation for ajob
well done.

Sandy Drew had two handouts. One was SWIB Proposed Legislative Changes,
which are included in the previous SWIB article, and the second handout was a a new
rule by the SEC on nominations for Corporate Board of Directors to be independent and
represent the interests of the shareholders, not corporation management. Sandy has also
included a draft memo to the SEC that we may want to consider sending for support
of the new SEC Rule.

Dave Stella, was our second guest speaker who returned from Denver, Colorado
on November 26, 2003, and is very glad to be back.

Dave said he learned three things while he was in Denver: (1) When people say
trust me (you can't trust them); (2) When they say it will never happen (it happens);
(3) When they say it costs too much (they made a bad calculation).

During his two year stay, he was in the middle of consolidation of The Teachers
Retirement System in Denver with the State of Colorado system, similar to Wisconsin's
consolidation in 1982. They said when he arrived that it would never happen and it did!
In the first two weeks back, he has already been promoted from Executive
Assistant to Deputy Secretary of ETF after Dave Mills was appointed interim Director
of SWIB on December 10th.

Dave Stella mentioned the following major issues facing our retirement system:

1) Contribution rates will increase because of the down market and effect
of Act II. The employers have seen reduced contributions through the
1990's to a low level and now they will be looking for help. Wisconsin's
problems are minor compared to other state systems.

2) Defined Contribution Retirement Plans are not always more economical
for employers and are not as good for the employees.

3) ETF- no good deed goes untouched. SIPD payments have created
problems with the IRS fine of$50.00 for each mismatched name and
Social Security number that ETF used. A normal year is 116; however,
they ran over 2000 so they are looking at a $170,000 fine from the IRS.

4) Private retirement funds have major under funding problems, which will affect
corporation profits.

Bill Ford reported that the JSCORS is planning on a hearing for S.B. 344/A.B. 692
for the ETF Administrative Rules revision, removing the +2% threshold for dividends.
Their goal is to have these bills on the floor in the January 2004 legislative session. Watch
for hearing date and time when I receive them.

The next WCOA meeting is scheduled for January 21,2004. Suggested topics
were Medicare drugs and Navitis state drug system.

Melvin B. Sensenbrenner

WISCONSIN COALITION OF ANNUITANTS (WCOA) MTG. - NOV. 19,2003

Ken Johnson from SWIB reported that the total funds managed by SWIB have
increased from 55 billion dollars in 2002 to 65.1 billion dollars at the end of October 2003,
over approximately 13 months.

Ken also reported about the two SWIB investors in the private market area who
were forced out by reorganization. Note more details in the SWIB article (ll..,12 & l8) in this SEA
Newsletter and newspaper articles provided to all SEA Board members on this subject.
SWIB is requesting four legislative changes to improve their investment policies
and a tax exemption for the building they own and occupy (more than 75% of the area). However I
the state has paid the city of Madison for all services provided to the building while DOA
owned it.

The other three items are as follows:

1) Combine the two reports to the legislators into one report covering both their
goals and investment results.

2) Update statutory authority to reflect changes in investment practices regarding interna-
tional fixed income investments.

3) Authorize SWIB to sell securities short. Most institutional investors, including
public pension funds, use shorting as a means of hedging against market declines.

Sandy Drew reported on three new retirement bills introduced, A.B. 599 & S.B. 285,
which requires all local government employees to pay the first 3% of required retirement
contributions. It appears the Legislators haven't figured out that it costs more $ when you
use Social Security income to pay for these contributions of about 14.5%. The 5% employee con-
tribution for retirement has been bargained for employer pickup.

The other bill is A.B. 638, which covers health benefits of retirees who are returning
to work after retirement. There is no Joint Survey Committee hearing scheduled yet.

Sandy Drew also mentioned that ETF is requesting a statute change to change the
minimum dividend of +2% to something less so they could match their policy of the -.5%
that they will be following in the future as an administrative rule.
The next WCOA meeting is set for December 17, 2003.

Melvin B. Sensenbrenner,
SEA Retirement & Health
Insurance Representative