Putnam County RTA workshop, Ottoville

Report on Putnam County RTA workshop
July 9, 2009, Ottoville, OH
By Mary Ellen Angeletti and Kathie Bracy

Following announcements pertaining to Putnam, Paulding, Van Wert, Defiance, and Henry Counties, introductions, and lunch, the first speaker at the Ottoville Teacher Workshop was State Representative Lynn Wachtmann representing the 75th House District and as a 10 year member of the Ohio Retirement Study Council. He praised this committee, which oversees STRS and provides governance that fosters the five pension systems. He shared that House Bill 177 (which prohibits bonuses to investment staffs when their respective fund loses money) will NOT be adopted since it takes away the STRS Board's responsibility for handling their system.
He said the HB 177 is "too restrictive". He bragged that STRS saves big bucks by having in-house investment managers. He reminded us that the ORSC has consultants that they hire to check on the five pension systems. His view is that it is in the best interests of the system to allow the Board to offer bonuses to the investment people; that the investment world lives and dies for bonuses. Wachtmann said that overseeing the pension systems is a real passion for him. (Rep. Goodwin later reinforced this and complimented him for his commitment to watching our pension system.)

Then Rep. Wachtmann switched from STRS to the status of the current state budget which he described as a very unpleasant environment at the Ohio Statehouse. He warned that House Resolution # 2 would put the poultry farmers out of business. He reminded us that the voters had turned down gambling and yet the Governor wants slots at the racetracks. He feels that it is the Governor's intention to grow welfare and warned that there would be a train wreck ahead and a doubling of the income tax in the next few years. He insisted that Republican tax cuts must continue and then warned of President Obama's recommended Cap and Trade bill which he said would increase our electric rates drastically ($4600/year for the average family) and would be detrimental to all of the midwest states. Our economy can't sustain doubling or tripling the electric rate, and that businesses would move to China. He reminded us that Senator Sherrod Brown is in favor of the Cap and Trade bill and strongly urged us to contact him to oppose it.

Representative Bruce Goodwin, representing Defiance, Williams, and Fulton Counties, spoke next. He also had no good words for the state budget under consideration at the present. He said there were NO answers for what was included and what was not included in the
4,000-5,000 page budget (the most poorly done budget he's ever seen). State government gave FEW ANSWERS -- why this but not that; how much something will cost down the road; how we would fund this, etc. The budget would cover 10 years and 5 general assemblies with each new assembly making changes. He said the budget has gone to the Senate, and they have made some reasonable changes so it is now close to a settlement. Casino gambling is now the big hold-up. Four times Auglaize County voted against gambling; how can legislators tell them "we're going to put in casinos"? On bonuses: "I don't like the idea of paying people to lose money."

Rep. Goodwin then explained that he had an education background with 36 years in the field. His only reference to STRS was "Vote out the STRS Board members if you do not like how they vote." Before concluding, he added that he thought the PERS move by Governor Strickland was dead for now (this news was released today). The library funding issue and the bed tax for hospitals and nursing homes which Gov. Strickland wants to include in the budget have sparked a great deal of voter interest and controversy.

Tim Myers, STRS Board member, spoke next and shared that he had just returned from NEA meetings in San Diego, where many states (Calif., Texas, & New Jersey) were having similar financial problems regarding their pension systems as was the case at STRS. The next thing out of his mouth was that only 79 out of 109 pension systems give COLAs (cost of living adjustment), that most COLAs were in the 1.5 - 2% range, and that the 3% COLA was virtually unheard of. We got the impression this was at the top of his list of considerations for cuts. He also added that State Treasurers do the investing for some pension systems.

He announced that our current pension fund's unfunded ratio now is at infinity, but also stressing "YOUR PENSIONS ARE SAFE." The unfunded liability must be brought to within 30 years by law, so STRS has started long term contingency planning (as we all know was suggested many months ago by Dennis Leone, STRS Board member). He said we're one of the first pension systems too start long term contingency planning and that "everything is safe now," but in the long term there may be a shortfall if we don't make changes. He said that two goals would be of utmost importance as this planning proceeds: preserving the defined benefit plan (as opposed to the defined contribution plan) and continuing STRS' contribution to our health care, currently 1%.

Myers reminded us that any changes that the STRS Board proposes must go to the ORSC for approval and then back to STRS. At this point, he suggests that we teachers get involved and share our suggestions with the STRS Board (It seems that this would be after approval and much too late). It then goes to the Legislature and any start time for putting most changes into effect would be 2015. He also reminded us that there might well be a public option for health care (Obama's) on down the road and that STRS would be looking at this federal plan as well as Governor Strickland's state health care plan.

He ended by sharing that the STRS employee number was now 605, as cuts had been made, and that the STRS budget was 11 million dollars less than last year's budget. He said if STRS cut every staff member and all of their benefits, it would save only 85 cents for every $1,000. He then shared the total monies sent from STRS to each of the seven counties whose residents were represented at the meeting today.

Laura Ecklar, STRS Communications Director, reminded the audience that there were other problems in addition to the down market which have affected the STRS pension system. Retired teachers are living longer and better benefit formulas are being given (certainly the 35 year 88% enhanced benefit is one). Both of these factors have strained the system she said. She said that 75% of STRS money comes from investments. Changes under consideration at STRS are:

1. increasing contributions (which are currently 10% from active teachers and 14% from employers)
2. establishing a minimum retirement age
3. changing the final average salary from the three highest years to the five highest years
4. changing a benefit formula (the enhanced 35 year 88% benefit)
5. changing the COLA, which she described as the most expensive lever

She reminded us that we are the object of "asset envy." Many Americans have lost their retirement and their health care. She said STRS is 89 years old and that the Health Care Advocates have recently changed their names to Health Pension Advocates. A STRS newsletter will be arriving in one week which will explain all of the new health care plans for 2010. We are living longer and STRS is paying out more than it had planned for. A higher minimum retirement age is needed. Final average salary (FAS) currently 3 years; proposal to change it to five. Proposal to change the formula for benefit calculation to 2.2% for the first 30 years, 2.5% for each year over 30. (Unspoken: get rid of the 35 year/88% rule.) She also mentioned that in STRS' 89 year history, this is the first time there's ever been any talk about losing benefits. The Board is trying different scenarios to preserve the pension. There have been many meetings around the state in the past; they plan to do it again.

Edna Hansen, ORTA President, shared that her organization has 36,000 members out of the 100,000 retired teachers in Ohio. She said that ORTA has been working behind the scenes regarding STRS issues. Quote: "ORTA IS working for you." In response to a question about why ORTA isn't more vocal at STRS Board meetings regarding retiree issues, she said she is obligated as state president not to speak on behalf of everyone if she doesn't have all the facts. (The impression was that this is true for ORTA officials in general, causing us to wonder when WILL ORTA get "all the facts"?) Hansen said "your elected ORTA officials are working for you and are working as hard as they can." We were told ORTA communicates with the members via the ORTA Quarterly and another publication which goes only to the RTA presidents and the legislative chairs.

Laura Ecklar added that in the eleven years she's been in her job that the communication between the retirees and STRS has never been stronger, citing ORTA and chapter presidents for this. Back then, the executive director wasn't going to RTA meetings (but he did speak periodically at Franklin County RTA meetings), that he wasn't invited and didn't ask to be invited. Laura complimented all the ORTA organizations for helping STRS to understand where they were coming from.

Karen Butt, ORTA Vice President, said that "ORTA IS working for you" and that "Ann Hanning works very hard for us every day". She mentioned the quarterly newsletter which ORTA sends out as well as a Leadership Bulletin which is sent only to ORTA leaders.

Written questions from the audience were then read and assigned to one of the speakers. Laura Ecklar was asked if the mortgage on the STRS building in Columbus was paid off, and she answered that it was. Tim Myers was asked if the STRS Board was looking into any other suppliers for prescription drugs, and he answered that the Board members are always looking for new suppliers. He volunteered that the two biggest considerations are formulary concerns and ___?.

Representative Goodwin was asked what percentage of the lottery has actually been received by schools. He said whatever amount the lottery gives to a school is then taken away by the state funding. The question was how are STRS funds affected by the rehired retired teachers? Laura Ecklar's answer was that 70% of rehired teachers are substitute teachers who pay 10% to STRS and their employers pay 14%. Thus, they do not affect STRS funding. (However, until this occurred in 2009, rehired retired teachers did drain STRS health care. Thanks to Dennis Leone, STRS Bd. member, this practice was changed and rehired retirees must now get their health care from the school system for which they teach.)

Another question was read and directed to Rep. Wachtmann but he had left early and was not able to answer it. The question was whether he was in favor of the 35 year/88% enhancement. Tim Myers answered for him saying that he was in favor of the enhancement. Tim said he himself is neither in favor of nor opposed to it. In other words, he is sitting on the fence of this most important benefit formula change.

Addendum: One of the Lima area retirees reported this evening (7/9/09) that she saw Tim Myers on Lima TV tonight (we're guessing he may have been interviewed after today's meeting) and that he told the interviewer that the active teachers were taking the brunt of the cuts at STRS!! This was NOT mentioned at the meeting today!