Friday, September 20, 2019
Mike Mulcahy, STRS Ohio Retirement Board, September 19, 2019
The Ten-Year Total Investment Return Average is 10.44%. The 2019 STRS Fiscal Year is Over.
This 10-year average return exceeds our current "Earnings Assumption Rate" of 7.45% by a ridiculous safety margin of 40%, yet no COLA can be paid to our retirees?
In 2017 the STRS Board, pressured by Management and Callan Associates lowered the STRS Earnings Assumption Rate for a second time in recent years, reducing it to 7.45%. The two reductions added over $25 Billion dollars to our projected debt. The explanation for doing this was because Callan projected that STRS would earn only between 6.85% and 7.45% for the next 10 years. THEY WERE WRONG.
Over the past three years since the rate reduction STRS has earned an average 10.25%. That's a ridiculous 40% safety cushion.
Don't tell us that our COLA is unaffordable when it is your actions that are unaffordable. The Board approved high salaries and extreme bonuses for the Investment Department, this Excessively Expensive Building and its garage with its Expensive Paver brick floor, the Heated Sidewalks, the expensive Art Work and Furnishings, That's what's unaffordable!
All of this has been accomplished even though STRS actions were taken to prevent such stock market successes going forward. Those Board policy actions have drastically lowered our potential stock market returns by reducing our Stock investment exposure from the 72% range to only 53%. The majority of this difference has been placed in Alternative Investments, which Callan reported to have returned less than 5% for the past six or seven years!
As an example, for the first month of FY 2019-20, STRS earned 3% while the Dow earned 5%. That's 66% more than STRS earned.
YOU CAN'T WIN THE GAME IF YOU DON'T PLAY IN THE GAME!
Getting out of the game when the Stock Market has extreme losses is exactly the wrong thing to do. This is a well-known Truism in the investment world. You would not think that a 100 year-old pension plan like STRS would make such a blunder, but they have.
These STRS mistakes have cost our members dearly! We need the COLA we were promised! STRS present Management is pathetic!