RH Jones re: his speech to STRS Board January 18, 2007; how pickups are HURTING, not helping us

From RH Jones, January 25, 2007
Subject: R. H. Jones' speech at STRS Bd 01/18/07

To all:

This speech is regarding: In lieu of pay raises, some school employers are approving the paying for a percentage of the employee's contribution into our STRS.

Surging forward, my thanks to our STRS Executive Director, Damon Asbury, for his prompt reply to my inquiry into this matter: however, after reading his letter, additional observations came to mind: As with Ex-President Clinton's question as to the definition of the word "is", what is the definition of a pay raise? To me, awarding money in the form of "picking-up" part of the present 10% portion of the employee STRS contribution is in fact a pay raise. Had the employer not paid the STRS, the employee would have paid the STRS at that time as part of his/her base pay. Sounds simple, yes? But, let me try to explain this further: We all know that the IRS allows the educator to pay no income tax on the money he/she draws out of the STRS, until all the employees contributions into the STRS is used up. Then the retired educator pays taxes on all retirement checks from there on. However, the employer, "picking up" an employee's contribution percentage is not employee STRS money; fittingly, it is technically employer money and should, instead, go into increased base pay in a timely fashion with any taxes paid "up front." Employee compensation should always be done in this straightforward manner.

It is right that the employer pays the STRS 14%, and the employee pays 10%. Any employer/employee contribution above this combined 24% in the base is both fine and good for the system. Change has been long overdue in coming. Rightly, a employer/employee 2.5% combined together to a 5% increase is currently what we are asking of the legislature. Nothing should put this increased contribution in jeopardy.

Additionally, and most importantly, common sense tells me that the employee "pick-up" is not cost neutral for the STRS. The key point is: By not paying this "pick-up", into the many regular consecutive yearly income gains in employee base salary increases, the STRS obviously loses a chance to grow investment income. Clearly, then, without the compounding in a "pick-up" award would therefore, yield the STRS less. And, the STRS collateral growth would be hurt even more if the "pick-up" percentage awarded to the employee is only in the final 3-year average years. When it comes at the expense of the long term health of the system, is not our STRS studying ways to grow the base funding by stopping members from inflating the final 3-yr. average? If not, the STRS should be.

And, finally, even though all professional employees may currently be eligible for the so called "pick-up," it is never right at any given time in a school district to award it to just one, or a few, if it is not given to all educators. After all, we STRS members are all equal after retirement. As one of my teaching assignments was the teaching of mathematics, I cannot see how "pick-ups" adds up. It just does not compute. By whom, where, and how did it ever get started in the first place? Whatever, for the common good of all Buckeyes, we need an end to "pick-ups" now. (END)

The above document takes 5-minutes to read. I then compacted it to 3-minutes so the board heard a simplified version. This is a complicated issue to explain. After my speech Dr. Asbury's assistant explained that "pick-ups" are "cost neutral" for our STRS. I respectfully disagree. He went on to say that there are 72-school districts that have used "pick-ups;" most are for superintendents. Some colleges use it as well. And that this has been going on for 25-years.

RHJones, SummitCRTA legislative CMTE member & CORE