Molly Janczyk: Questions for Steve Mitchell

From Molly Janczyk, October 23, 2009
Subject: Steve Mitchell: QUES: Investments:: STRS

Dear Steve,

I know we are all throwing out scenarios and are not expert investors. Truth is, we are scared! Can you please comment on the following:

1. Craig Brooks said we are paying out more than we are earning (I believe: Please correct me if I am wrong) resulting in negative figures and that this has happened at other times historically (Again, correct me if I am wrong). Please tell me how this is being remedied to preserve STRS from becoming insolvent.

2. In view of the extreme catastrophic losses in the past 10 yrs. reversing large gains, how is STRS planning to protect assets from such future downturns wrecking gains earned?

3. Former OFT Pres. Mooney stated in his letter of late '02/early'03 that STRS did not plan long term and relied too heavily on the market. This seems to have credence as we did rely heavily on the market for the upswing before this recent downturn extreme. To continue to follow this thinking is folly by any opinion. We must have safeguards as any of us know that markets do go up and then go down and at times collapse. I see that a bit safer plan is being thought through but how protected are we for another severe downturn which will occur at some point?

* I am sure the 'wish' is to hit a good time to restore but not knowing how long or when that time will come, it seems better to plan long term and short term for those alive NOW? Some of us will not be here in 10 yrs and it is unfair for those of us staggered by 2 downturns to be totally out of it for our retirements. I realize those fighting hardest are those who have not retired yet and will benefit by long term only. This current generation of retirees has been the scapegoats and robbed of their retirements, however, having the cost of saving HC to this point purely on their backs to the tune of hundreds of percents with no ability to pay other than return to work.

Actives have thus far endured a .9% increase only paid for from raises and step increases compared to retirees who have no such abilities to pay. Retiring on old salaries and yet incurring untenable increases, retirees have gone from paying 0 (which was ridiculous) to $231 for self and from $33 for spouse to $924 for spouse in 2010 : Plus Plan. This is of course, only for premiums. We have gone from 100% down to 80% coverage and deduc. have gone from $100 or 200 to $1000 each with RX from $5 and $10 (also ridiculous) to $9 (great) to $75 and $200 for some specific drugs. This all endured by retirees.

STRS knew as stated many times that this HC crisis was coming. Herb Dyer wanted out of the HC business by his own statement and I believe allowed this to occur to run out funds and simply say, we are no longer providing HC. Joe Endry, former ORTA Exec Direc who then became a retiree member of the STRS Board warned of the impending HC crisis in the early 90's and told OEA and STRS that without change THEN, we would not be able to provide HC. Their was also legislation being considered to mandate HC and both OEA and STRS stated it was not necessary. This further proves to me that Dyer wanted to let it run out.

Problem: The former OEA laden Board members who have been convicted of ethics violations along with Dyer and who have been forced to step down, ALL approved everything STRS wanted and never forced change for upcoming retirees. What did they do? Used excess money for the 35 yr rule legislation to help themselves, and some took salaries (allowed) as teachers while also putting themselves into other paid positions to bump their retirements. As Chapman said: "We rode the wave!" (Market of the late 90's). Making 88% of FAS gives one the ability to search for other HC plans. Retirees did benefit as well from the legislation but nothing can compare to 88% at FAS we could never have dreamed having.

So, the question is:
4. WHAT IS STRS GOING TO DO AND WHAT SYSTEM OR PLAN ARE THEY GOING TO MODEL TO ENSURE THAT CURRENT RETIREES REALIZE SOME PROTECTION TODAY: NOW!!! When is STRS going to finally recognize US: CURRENT RETIREES ???

5. It seems that the advice that we pay consultants for has not proven very solid for US (TODAY's retirees). What can STRS do better to fund a secure protected against losses system? That can not occur with heavy reliance on risk as has been proven. I have read that this is the way of pension systems. But, can we not find innovation ways to achieve better security?

6. All answers from the Board are: 'We believe what the consultants tell us is the way to go.' IS there no one with ideas for protections for TODAY's retiree? Are there NO systems out there doing better? Can we not model off other organizations doing better?

Simple one liners saying this is the best way or we cannot do it that way do not suffice. WHY and WHY NOT, specifically and WHAT is the answer based on: STRS Consultants or a wide base of research of companies perhaps realizing better returns.

In short: I ask you how I am being considered as a member of STRS? I have a right to specific answers to my concerns as does every member. I understand it is time consuming and not pleasant for Board members to reply to concerns but they need to understand they took on this job solely on behalf of membership and treating us responsively and responsibly is their duty.

7. Please try to put yourself in our position facing our dilemma and forget for a bit your salary and bonus amounts. BE US and please put out a statement answering these questions. STRS is not error free and what attention are you paying to systems and companies weathering this storm better on behalf of their membership? STRS' job is to protect us-ALL of us; not just tomorrow's retiree. Something Bill L., VP OEA, might consider is his discourse of fair share burdens. Actives have not come close to their fair share. Changes such as later retirements, finding ways to equalize burdens have LONG been suggested by Leone, Lazares and some of US. Since 2003, actually but smirked at and dismissed. Had some of this occurred then, we might not be in such crisis. Bill doesn't want to give an inch. He is in that batch of actives looking to retiree just as the former convicted OEA Board members were in the late 90's/early 2000's acting in self serving ways.

Steve, I have found you responsive and I hope you can help alleviate fears.

Thank you,
Molly J.