Tom Curtis to ORSC: Scrap the 88.5% rule now

From Tom Curtis, October 25, 2009
Subject: 102509 Curtis To ORSC Board Members, 35 Year Rule, SB190

Hello ORSC Board Members,

To help reduce the unfunded liability of the STRS, it is my recommendation that one of the first considerations be the elimination of the STRS 35-year rule (SB190), at the end of this 2009-2010 school year. This rule, according to SB190, offers a person with 35 years service, an 88-1/2% pension benefit for life. This is not sustainable.

It would appear that this rule should never have been legislated, for numerous reasons, here are two.

(1) It created a two-tier retirement system. Those having 35 years of service prior to 1999 were not permitted the 88-1/2% benefit and his/her multiplier is 2.1%, not 2.2%, as it is for those after 1999.

(2) The cost of SB190 has never been cost neutral, as has always been advocated by the STRS board and management. STRS CFO Robert Slater recently reported to the board that the cost of this program has to date cost the STRS $1 billion dollars.

Because the 35-year rule is not cost neutral, the cost to the fund and the unfunded liability will both continue to increase the longer this rule remains in place. Please stop it now and not in 2015 as recommended by the board, many of which will personally benefit from the extension. No other pension system has the 88-1/2% rule and it is overly excessive, especially in the eyes of the taxpayer or anyone else.

Any 30+-year educator would need to retire at the end of this school year to qualify for the increased percentage in benefits according to SB190. Everyone with 30+ years will still benefit.

Beginning 2010, a flat 2.2 per year multiplier should be used. A consistent 2.2 multiplier would seem to permit for a far more accurate actuarial determination of the unfunded liability.

A great added benefit of ending it this year would be that the number of educators at the top of the pay scale would diminish greatly for the next school year, thus freeing up much needed funds for each and every school district.

The 88-1/2% rule should NOT be extended, period!

Thomas Curtis
STRS retiree
North Canton, OH

P.S. I have been actively involved in the attempted reform of the STRS since 2003. I would be more then willing to talk with each and/or everyone of you concerning the many issues that have caused this collapse in value of the STRS retirement system.