Saturday, August 17, 2019

Teachers Address STRS Ohio Retirement Board, August 15, 2019

Bob Buerkle,  STRS Retirement Board Meeting, August 15, 2019

5 STRS Board Actions that Continue to Hurt Retirees 

STRS missed the payroll growth assumption. The 3% figure they had the actuary use missed the actual 4% growth rate by 25%, making the liability of our pension system look larger than it really is.  

The low inflationary period we have been in will not last forever.  The average inflation rate for the past century is a compounded rate of just over 3%. STRS Retirees could suffer greatly in the future because of this action. 

Retirees have had their COLA reduced to 0% by STRS actions. The STRS COLA was never compounded.  ORC 3307.67 says that STRS “SHALL” pay a 2% “Simple” COLA annually. This change in Ohio Revised Code has cut another third from the original benefit that was promised during your career and up through the COLA change of 2013. Meanwhile, massive bonuses, one over $400,000, are still paid to STRS Employees.

STRS lowered the Earnings Assumption Rate to 7.45%, which is about 3% less than our actual returns of 10.25% since the change was implemented 3 years ago.  It is also over 3% less than the average STRS returns for the last 10 years.

Finally, STRS investment portfolio return results, could have been as much as 30% higher by simply investing more in the same equities, all because the STRS chose to reduce their “Stock Exposure” from 73% down to just 51%.  (73% – 30% = 51%)  Was this done to slow our recovery and justify STRS actions? 
                           
Even with these policy changes, STRS has just completed another Fiscal Year and the results show that the ten-year investment return average is now 10.61%.  That is 315 basis points more than Callan Associates, the STRS investment advisors, have projected they would earn on the total portfolio.

The question is, why do retirees continue to be denied a COLA?

Dr. Robin Rayfield, STRS Retirement Board Meeting, August 15, 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.
As you may recall, in my comments to the STRS Board of Trustees in June, I commended the board for its decision to revise the funding policy at STRS to consider benefit enhancements at the 85% funding level. I also urged the board to consider ‘ad hoc’ benefit enhancements as the STRS retirement system is restored to a healthy funding level. I hope that the leadership at STRS, along with the trustees, are exploring ad hoc benefit enhancement, especially for the retirees in most need of assistance. 
Over the last few months I have visited several local chapters of ORTA and attempted to provide information regarding the pension system, with a focus on the loss of COLA. As trustees you are very familiar with the health of our system, but for many retirees, it is difficult to understand the changes at STRS that resulted in the loss of a promised benefit.
What is more difficult for retirees to understand (and for actives that continue to fund our system) is the lack of ‘shared sacrifice’ on the part of STRS employees. The recent salary increases, and enrichment of the performance-based incentives has created a lack of trust and confidence in the pension system. Speaking from experience as a teacher and as an administrator I can say that this mistrust and angst are common when others in the system are not feeling the pinch of unfavorable economic conditions.
I am convinced that the Board of Trustees for STRS does want all STRS members, active and retired to have confidence in the STRS system and to trust STRS with their retirements. I am concerned that the actions of the STRS Board of Trustees regarding salary increases and performance-based incentives will have the opposite effect regarding the confidence of STRS members.


Suzanne Laird, STRS Ohio Retirement Board, August 15, 2019

My name is Suzanne Laird. I retired in June, 2013, with 30 years experience and have been denied my full COLA for the past 5 years.

Good Morning, members of MY Board, and welcome to a new school year!

I’m sorry to inform you, but you’ve been retained due to inadequate AYP scores.

What’s AYP? Anyone?

(Please don’t ask Betsy DeVos for the correct answer.)

In the interest of No Board Member Left Behind, I’ll help you with the answer: AYP stands for Adequate Yearly Progress. 

Grade yourselves on this one: how well did you do last year? Did you really listen when educators took the time to speak to you about the impact of the increased number of years needed before retirement or the loss of the COLA after retirement?

I learned a lot from my students over 30 years; all we ask, every month, is that you humble yourselves and listen. 

There’s always one bright star in every class: last year, we witnessed a glimmer of hope as one of you chose to question the data, question the budget, question the manipulation of facts. Let us hope that Board member’s brave example sets the tone for the upcoming year.

Did you do your required reading over the summer? The one titled, United States District Court Class Action Lawsuit? I hope you took notes, because there’s a big test coming…….

Can anyone here spell “breach of contract”?


Dan MacDonald, STRS Ohio Retirement Board, August 15, 2019

CalSTRS went from 109% funded to 63%, was an article emailed by Chair Stein in early July.  I am Dan MacDonald, an STRS retiree with 38 years with the CH-UH City Schools District.  I am Executive Director of Local 279-R and am here representing over 1,000 279-R retirees. 

Stein commented:  

“A brief case study on why you want your pension system funded at least 100%.   

 “Most novice critics of STRS Ohio’s funding policies ignore how shifts in the economy, natural maturation of the plan, and ‘optimistic’ risk management can endanger pensions at funding levels that may have been acceptable in the past. 

“Notice that even increasing state contributions were not enough to save CalSTRS from cyclical economic downturns and a lower ratio of active teachers to retirees (plan maturity).  I estimate that CalSTRS went from a 2% probability of a catastrophic funding event in 2000 to a 60% probability in 2017.  Without the high funding going into 2001, CalSTRS risk of failure would have been near 100% after the 2008 downturn – base pensions would certainly have been reduced or possibly eliminated.  CalSTRS educators also have no Social Security.”

After reading the article I proceeded to Cal’s webpage and explored. In 2018-19 Cal had a 6.8% ROR.  Looking at benefits, an active is vested in 5 years. The final pension benefit is determined by service credit times an age factor times a benefit percentage.  An active can retire after 30 years but an age factor enters.  Teaching to age 60 [and under a new formula 62], is set at 2% but will go up to 2.4 percent if one stays to age 65.  A FA is determined by the best 36 months; our plan is 60 months.  Added to their benefit is Inflation Protection.  Your retirement benefit is protected against rising prices in two ways: 1 starting September 1 after the first anniversary of your retirement date, your benefit increases automatically each year by 2 percent of your initial benefit. 2  If inflation erodes the purchasing power of your retirement benefit to less than 85 percent of your initial monthly benefit, you’ll receive an additional quarterly payment, subject to the availability of funds set aside for purchasing power protection.  After January 1, 2014 the California legislature guaranteed the COLA of 2%; those retiring before that date are not guaranteed a COLA but it has been paid for 43 consecutive years.

My point?  CalSTRS has a 2046 projection of being fully funded and is still functioning and taking care of its actives and retirees. 

Ohio actives deserve purchasing power protection, as do retirees.  We want our COLA back and a better benefits determination for actives. 


Susan Brannan, STRS Ohio Retirement Board, August 15, 2019

Board Members, Retirees, Active Teachers:

My name is Susan Brannan. I retired in 1995 with 30 years of service. Receiving a COLA has had a positive impact on my financial well-being. The future is indeed bleak!

So, what do we do when there has been no COLA for the 3rd straight year & no prospect of receiving one for the next 6 – 7 years? We CUT EXPENSES. This Board should CUT EXPENSES.

Let's review STRS expenses as reported in the Fiscal 2018 Comprehensive Financial Report.

The 3 categories are: Administrative Expenses of $65.7 million, Internal Investment Expenses of $42 million, & External Asset Management Fees totaling $218.3 million. (Schedules are attached)

The Board patted themselves on the back in the July Newsletter for ranking 4th in a peer group of the 17 largest U.S. Public Pension Funds for having the 4th lowest investment costs. Perhaps these costs are too high in ALL Public Pension Funds. It was reported by STRS that this 4th place ranking was due to using internal investment managers for about 70% of the assets. Internal expenses are 1/5th of the External Fees of 218.3 million. Internal expenses include: Personnel salaries, Professional & Technical Services, printing & supplies, Staff Education, Memberships, etc. Looking specifically at the asset class Alternative Investments (only 15.5% of all assets) external management fees of $152.2 million were paid to 116 different companies. The external fee figure, $218.3 million is double the amount spent on all Administrative & all Internal Investment Expenses.

Perhaps the following suggested changes can be implemented in order to pay a COLA & also meet future inflationary pressures:

Cut all expenses by 5-10%. Decrease the 57 Stock Brokerage Companies now used, as well as the 116 Alternative Investment Groups. Negotiate lower external management fee schedules. Show “good faith” to retirees & actives by not increasing employee wages or paying bonuses. Review the operational costs of this facility. Does this building meet STRS needs going forward for the next 2-3 decades?