Tuesday, April 23, 2019

Dr. Robin Rayfield Address STRS Ohio Retirement Board - April 18, 2019

Greetings STRS Board of Trustees and Staff. My Name is Robin Rayfield and I represent the Ohio Retired Teachers Association. I am a STRS beneficiary, having retired in 2011 after 30+ years of service.
I want to acknowledge the Board’s recent discussion regarding the Funding Policy at STRS and this policy’s impact on current retirees; specifically COLA. ORTA members are encouraged by the board’s decision to discuss this policy and encourage more detailed discussions on this policy and its implications.
The current Funding Policy and the notion that benefit enhancements/COLAs are not feasible until the system reaches a level of 100% funding are of great concern. Let me be clear, ORTA supports the Board’s desire to achieve a funding status of 100%. ORTA disagrees, however, that this desire should be a policy. It is unacceptable for ORTA members to be denied increases in benefits until 2034.
Under the current Funding Policy a great % of current retirees will not be alive in 2034 when STRS will achieve a level of 100% funding.
Instead, ORTA believes that progress should be made toward the goal of reaching 100% funding, but that this goal or guiding principle should not prevent retirees from receiving what was guaranteed at the time of their retirement. 
Certainly, retirees have been patient and have demonstrated this patience over the last few years of losing their benefits. However, now is the time for the Board of Trustees to abandon the 100% status as a policy and, instead, view 100% funding status as a goal or guiding policy. Progress towards this goal is reasonable, adherence to this as a policy resulting in a failure to meet obligations is not acceptable.
ORTA suggests that the Board review historical funding levels STRS has experienced as a guide to determine policy development, not an unrealistic 100% funding level. I’m sure that you will determine that STRS has rarely achieved a 100% funding level and has historically been at a level nearer to where we are at currently than 100%.
In closing, I suggest that STRS use the following analogy as this discussion unfolds:
Comparing STRS’s funding levels to our current levels of CO2 and their impact on climate change makes sense to me. We should reduce carbon emissions as it is good for our planet, just as making progress on reaching 100% funding is good for our pension system. However, we need fossil fuels to heat our homes, provide power to our factories, and to power our vehicles. The US has reduced emissions and have policies in place to reduce emissions, however, we all drove here to this meeting today. STRS should develop policies that allow retirees to continue to receive what they were promised, while making progress towards a 100% funding status.
Dr. Robin Rayfield, Executive Director, Ohio Retired Teachers Association (ORTA)

Friday, April 19, 2019

Bob Buerkle Addresses the STRS Ohio Retirement Board - April 18, 2019

Cost Of Living Adjustments Must Be Restored

In the Spring of 2009 Mr. Nehf addressed this Board and said that "without changes, the STRS would not be able to fund pension benefits sometime in the future." That seemed reasonable at the time since STRS investment experts had lost 48% of our money, from peak-to-trough, over the 18 month period between October 2007 and March 2009. Actuaries and STRS Staff scrambled their brains for months and months with "LEVERS, DISCUSSIONS and PROJECTIONS." I don't disagree with the fact that an action plan had to be developed and some things needed to be changed. I do disagree with the path taken, when better alternatives, with successful track records, were available but not considered.

I was not alone in the approach that many reasonable people would have selected, since 29 other State Pension Plans did so and developed "NEW PLANS (TIERS) FOR NEW HIRES." Nearly all of these systems grandfathered their pension promises to retirees and active members. Even the nation's two worst funded pension systems, Kentucky and Illinois, protected their retirees and current teachers. Their future pension changes will only apply to new hires.

I would also like to point out that New York has utilized this "TIERED" approach 6 times since the very large 1974 financial crisis. New York protected all of their retirees and actives in each of their plans for life. I might add that today New York is considered one of the strongest pension plans in the country. You know from 45 years of past-practice, what the rules are from the day you are hired and what your benefits will be at retirement. This is what STRS Ohio Members also used to think about our Pension Plan, but no more!

New "Tiers" may change the age, service, formula and contribution requirements for new hires but the teachers hired under these "new tiers" know the pension plan that they are being offered will not change and that their retirement rules are permanent. This allows members to plan for their retirement throughout their careers, knowing exactly what they will receive after their teaching careers are over. It also provides them with the opportunity to compare the New York Pension offer to other states. Knowing what STRS Ohio has done to their retirees and actives, why should anybody trust this system in the future?

In retrospect, how could Mr. Nehf or anybody have known that STRS investments would earn 36.13% by June 30th, 2011? They could not. But they also did not take action to help us after these facts were known! STRS had 15 months of time before Governor Kasich signed the Pension Bill that went into effect in 2013, during which a less punitive path could have been explored. This did not happen. In fact STRS took actions which created an additional 15 Billion dollars of debt by reducing their future "earnings assumption rate" from 8% to 7.75%, even though they had just made 13.54% and 22.59% in the previous two fiscal years. STRS later made things worse again, reducing the EAR to 7.45% which caused another 12 Billion of debt. It's time to own up to your actions.

Bob Buerkle
April 18, 2019

Thursday, April 18, 2019

Dean Dennis Addresses the STRS Ohio Retirement Board - April 18, 2019

My name is Dean Dennis. I retired with 35 years. I am the STRS Chair for the CFT-Retirees Chapter and the spokesperson for Ohio STRS Member Only Forum.
The STRS membership is nearly equally comprised of retired and active teachers.
Here is a 16 oz container [holding up a water bottle]. It represents the STRS retirees. It’s 100% full, or funded, due to retired teachers having contributed to STRS for 30 years or more, along with their employers. For at least 30 years you have had these contributions for investments and used them to average earnings of over 8%.
For every 30 year funding period, you always earned over 8%, although you have always assumed you would earn less. So in short, you exceeded your investment goals.
Investment goals are set to meet monetary promises to retirees, a COLA being one such promise. A COLA has been promised since 1971; it was even built into the STRS pension formula. Of note: in 1971, STRS was 59% funded.
Here is another 16 oz container. This represents the active teachers. It’s only 40% full, or funded. This is because the average active teacher in Ohio has only made contributions for 12.5 years. Therefore, STRS will still be receiving an additional 20 years of their contributions. Active teachers cannot be 100% funded from their monies while in the process of making contributions. If this container were to become 100% funded, it should only happen from total investments over a very long period of time and from good stewardship. It should never happen by diverting deferred compensation monies earned by and promised to retirees.
Now here is a 32 oz container [larger water bottle]. This represents both the retirees and active teachers when combined. Combined, the container is about 70% full or funded. Being 70% funded and having a 30% liability is actually the norm for a public pension system. The 30% liability exists because the retirement system makes future pension promises to new hires. This creates a needed liability. In public education active teachers become retirees and are replaced by new hires; there is always a flow of new contributions coming in. it is a dynamic system.
In closing, at the March Board meeting you stated your objective was to become 100% funded. I asked, “How are you going to do this when 170,000 of active teachers, on average, owe STRS more than 20 years’ worth of contributions towards their pensions?”
We know the answer; in fact, we are experiencing it. Your 100% funding objective cannot be shared by those you serve by the way you’re going about it. It’s just wrong. It’s worse than any collective bargaining agreement being violated.
Your retired peers are being irreparably harmed while being robed of their deferred compensation: their COLA. This isn’t ethical. We need your help.
Thank you.
Dean Dennis
April 18, 2019