Thursday, February 21, 2019
STRS Speech by Bob Buerkle on 02/21/2019
Today my speech will be somewhat of a brief book report, intertwined with some of my own thoughts and experiences. Nassim Nicholas Taleb, author of the immensely popular 2007 book. The Black Swan, wrote another book in 2017 called Skin In The Game. I will read you three quotes from this book, in bold print below, along with some of my thoughts about how they apply to the STRS Management Bureaucracy and our Members.
“Bureaucracy is a construction by which you are conveniently separated from the consequences of your actions.” At STRS the Management Bureaucracy has no skin in our pension game. Instead, they have skin in the OPERS pension Game! As elected Board Members you do have skin in the STRS Pension game. As you might remember from former STRS Board member Dennis Leone’s last speech from this podium, you need to do your own research, independent and shared thinking and base your questions and decisions not just by what the STRS Bureaucracy tells you to do but what is the right thing to do. For instance, STRS Management thinks the goal of achieving a 100% funded ratio is more important than utilizing the rules and law established by ORC to be compliant and sufficiently pension solvent. Their lack of skin in the game speaks volumes. Please remember, Management decisions may be suggested to you but the Board has the final decision power, and significant culpability.
“There is no evolution, no learning from your mistakes without skin in the game.” If the decisions by STRS Management had applied to themselves would we have seen a different plan for “Strengthening” our pension system? We'll never know because STRS pays into OPERS. It would be interesting if STRS management is lobbying for OPERS to become a 100% fully funded by advocating a 5-year COLA freeze or advocating for no COLA until after 5 years of retirement. When the Fox is in charge of the “STRS Chicken Building,” all of us teacher and retiree chickens just look like tasty chicken nuggets to the Fox.
“Things designed by people without skin in the game tend to grow in complication (before their final collapse).” For instance, since at least beginning in 2009, I and others have informed this Board about ways that several other states had achieved pension reform that applied to new hires only, by creating a different “Tier or Plan” for them. Over thirty state plans made changes that only applied to new hires. This allowed those pension systems to honor the promises that had been made to their members who had already retired; something that STRS Ohio did not do. The Summer 2015 OPERS Newsletter states that the pension design changes of one or two years of lengthened careers and age 55 for retirement will save 3.2 billion dollars. The changes that STRS made will reduce the pension liability by 27 billion, but at what cost to our members? That 27 billion had previously been earmarked for retiree pensions, most of which was for our earned and promised COLAs.
As Board members you need to unravel this mess. You could begin by taking the actual 30-year return averages on STRS investments as a starting point, reducing that return average by 50-75 Basis Points for a margin of safety, capping the high limit of the “Earnings Assumption Rate” at 8% to 8.25% and adjusting it downward whenever the 30-year average dictates that it should be lower. If STRS had used this system They would never have had to lower the “EAR” below 7.75% in any past 30-year rolling period using its “prudent person” investment authority.
STRS OHIO BOARD MEETING: FEBRUARY 21, 2019
My name is Dean Dennis, I retired after a 35 year career with the Cincinnati Public Schools. I am the STRS Chair for the CFT-Retirees Chapter, and also the spokesperson for the Ohio STRS Member Only Forum on Facebook.
A doctor says to his patient, "I've got some bad news and some worse news, what do you want to hear first?" The patient says, "doc, give me the bad news first." The doctor says, "well, your tests show that you only have about 24 hours to live." The patient says, "What do you mean doc, 24 hours to live! Doc, what news could possibly be worse?" The doctor says, "well, I've been trying to contact you since yesterday."
Life is filled with bad news and worse news scenarios. Here's one that's not a joke.
Ohio teachers fulfilled their contractual obligations for their pension, retired, yet experienced STRS renege on a pension promise; again, after they retired.
STRS approached the legislature to reduce our COLA from 3% to 2% and freeze our COLA for a year. The promise of a COLA was clearly stated in STRS literature for decades. Teachers don't get rich teaching. Retirees plan on their COLA. Reducing the COLA and freezing it for a year was bad news and a low blow.
However, the worse news came on July 1, 2017. You voted to eliminate our COLA completely with only a promise to review the decision no later than June 30, 2022. This financial loss isn't just bad, it's devastating. It's also disturbing. As retirees approach the end of their life expectancy, you put their financial health on a 5 year hold. You had other options.
The question has to be asked, what did retirees do wrong? Were they wrong to go into public education thereby trapping themselves in a forced Defined Benefit Retirement Plan? Were they wrong in believing the rhetoric STRS told them, that the employer was assuming all the financial risks? Were they wrong in believing all the STRS literature and annual brochures which stated, "a cost-of-living increase of 3% is granted each year once a member retires," which was also backed up by Ohio statute which stated "a 3% COLA shall be paid"? Or were they wrong in believing STRS would keep its word?
Retirees want to believe that decades of working in our schools while paying an employee contribution rate significantly higher than that of their neighbors would pay off upon retirement. Perhaps they were naive.
There are many things that past and present STRS Trustees could have done differently. Being allotted only 3 minutes, I don't have the time to cover that ground.
However, there is one thing that you never should have done and that was to take from those whose careers have ended, the most vulnerable of whom you represent, those who have met all their obligations. Retirees should not have to make up for your past mistakes and future ambitions. You changed the rules of the game after the game was over. That is wrong. You need to keep your promises. There's a saying, "A promise means everything, but once it's broken, sorry means nothing."
We cannot snap our fingers and go back in time and be 21 years old and start our work careers all over again; but you can honor your promises.
February 21, 2019