Let's see.....just where is STRS on this comparison?

From John Curry, September 1, 2009
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Columbus Dispatch, September 1, 2009
Pension pain

When the economy sank, so did Ohio's five public pension funds. Now, to make up lost ground, the state's public workers might have to contribute more, and retirees could see benefits cut.

Tuesday, September 1, 2009

By Steve Wartenberg
THE COLUMBUS DISPATCH

Ohio's five public pension systems have lost billions since the end of 2007, forcing them to consider painful changes, such as cutting the benefits of retirees and requiring those still working to pay more. These changes, if implemented, aren't expected to go over well with the state's 1.7 million working and retired public employees and their beneficiaries.

"Nobody wants to have less tomorrow than they have today," said William Estabrook, executive director of the Ohio Police & Fire Pension Fund.

"But we're not going to invest our way out of this, and the two key components are contributions and benefits."

The State Teachers Retirement System lost $24.1 billion from the end of its 2007 fiscal year through June 30, while the Ohio Public Employees Retirement System's assets declined $19.4 billion from the end of 2007 through July 31.

As a result, the five public pension funds will appear before the Ohio Retirement Study Council on Sept. 9 to discuss the changes proposed by their boards.

"We have requested they come to us with a plan for how they will deal with their 30-year funding liability," said Aristotle Hutras, executive director of the council, which helps state officials oversee the pension funds.

"We're taking a pre-emptive measure," he said. "Everybody knows it's not going to be any better in the next evaluation, and this is the prudent thing to do."

Under Ohio law, public pensions must balance their income and expenditures so that they can pay current liabilities for pension benefits within a 30-year period. Hutras calls it the equivalent of paying off a mortgage.

For example, the State Teachers Retirement System reported on July 1, 2008, that this would take 41.2 years, well over the required length of time. Its estimate on July 1 of this year was "infinity."

Changes the pension funds could recommend to the Ohio Retirement Study Council include:

• Increase employee and employer contributions.
• Increase the minimum retirement age.
• Increase the number of years used to calculate the final average salary from three to five.
• Eliminate, reduce or delay annual cost-of-living adjustments.
• Eliminate the lump-sum death benefit.

Spreading out the losses between contributors and beneficiaries is the fairest thing to do, said Andrew Karolyi, a former professor at Ohio State University's Fisher College of Business, now at Cornell University.

"It makes everyone mad, but not as mad as if one of the groups was singled out and had to take the brunt of it," he said.

The problem with the pension funds' 30-year liability is connected to their total assets, which dropped sharply because of major declines in the stock market.

The Dow Jones industrial average plunged 33.8 percent in 2008 and even further during the first few months of this year before the recovery began.

The State Teachers Retirement System's assets were $52.7 billion on June 30, the end of its fiscal year -- a 31.4 percent drop from the

$76.8 billion total at the end of its fiscal year 2007.

"Our board is looking at plans to strengthen the plan," said spokeswoman Laura Ecklar. "But there are only certain levers you can look at: investment returns, contributions, then the pension-plan design."

In a recent letter to members, the pension system said it is considering raising the contribution of current teachers from 10 percent to 14 percent and instituting a minimum retirement age of 60.

The State Teachers Retirement Board will hold a special meeting this morning to discuss its "long-term fiduciary and financial contingency planning."

Another way to measure the strength of a pension fund is its funded ratio, which are assets relative to actuarial liabilities.

The State Teachers Retirement System's funded ratio dropped to 57.9 percent on July 1, down from 79.1 percent a year earlier.

"I would start to worry when it gets down into the 70s and 60s," Karolyi said.

The rising cost of health care is another problem for the systems, Hutras said.

"They're all trying to sustain a post-retirement health-care component and without that, they wouldn't be in the situation they are in now," he said, calling this the "elephant in the room" nobody wants to talk about.

Any contribution or benefit changes recommended by the five pension funds' boards must be approved by the legislature, Hutras said.

"The only thing they have the authority to do themselves is change the eligibility for health care" or their premiums, he said.

In recent weeks, a surging stock market has helped the funds regain some losses.

The Highway Patrol Retirement System's assets dropped 31 percent in 2008 to $576 million, but were up by 8.5 percent to $625 million on July 1.

This is still well below the fund's $834 million total at the end of 2007.

"Yes, there is some concern," said Richard Curtis, executive director of the Highway Patrol Retirement System. "We had a significantly negative year in 2008, as every other public pension fund in the country did."

He called it a once-in-a-lifetime event that will take years to overcome.

"Our system is designed to operate in perpetuity at an 8 percent return," he said, "and when you have a negative year like we had, you can't estimate how long it will take to recover."

swartenberg@dispatch.com

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