Message to CORE members from Dave Parshall

From Dave Parshall, January 18, 2010
To CORE members

Dear CORE members,

Please find below a letter for you to use to send to the media or any interested group you wish. This letter was board approved and is the product of the CORE Media Committee. You can use it as whole or any part you wish. It is time to start to get our side of the pension issues to the public. Also, we need to be politically smart. There are groups out there that wish to do us harm for a host of reasons. While the legislature is deciding what to do with Ohio Public pensions, we need to stop the public attacks on STRS. CORE will still bring up some of the STRS issues we have with Mr. Nehf in February. All educators need to stand together during these difficult times. We can’t afford to hurt our own cause.

Yours truly,
Dave Parshall, President of CORE

You Asked the Wrong Question!

Recent attacks by the media on public employees and their pensions were asking the wrong question. The real question the private sector should demand an answer for is, “What has happened to my pension?” Retirement was meant to be a three-legged stool: Social Security, an employer provided pension, and personal savings. 401k plans were never intended to be the foundation of anyone’s retirement, yet they have become so today. Corporations have been allowed to undermine pensions and depress salaries to increase their bottom lines, enrich investors, and inflate CEO’s golden parachutes at the expense of workers. It is simply the product of corporate and Wall Street greed that has taken pensions and helped drive this country into the ditch.

Recent research published by the National Institute on Retirement Security, www.nirsonline.org entitled “More Bang for the Buck,” points out that a defined benefit pension is the best retirement plan for all Americans. U.S. News and World Report, August 2008, states “401k plans save employers money because workers fund a portion of the plan. But a new analysis says 401ks are an inefficient way to finance a secure retirement.” The Financial News, August 2009, points out that “defined contribution schemes such as 401k plans are more expensive for employers to implement even as companies shift toward them and away from defined benefit schemes.” Time Magazine, Oct 2009, tells us, “Why it is Time to Retire the 401k...the ugly truth is that the 401k is a lousy idea, a financial flop, and a rotten repository for our retirement reserves.” And that is the real problem.

Public employees have a “defined benefit pension”--more accurately a deferred contribution pension--and so should you. However, there are some truths about public pensions and State Teacher’s Retirement System (STRS) in particular that the corporate-dominated press will never tell you.

In the first place, by state law teachers fund their own pensions. Their pensions are deferred compensation acquired through negotiations. The moment teachers sign a contract to teach, their contributions to STRS become part of their salary. The school board’s contribution to STRS is part of that contract. The school board’s 14% contribution to STRS has not changed since 1984. Over the same time period, an individual teachers’ contribution rate has increased 42.9 % to the current 10% of salary. The truth is teachers fund their own retirements. Switching public pensions to defined contribution plans is just a bad idea and will cost the state more.

Ohio teachers’ pension system was designed to replace Social Security and provide a decent retirement. To this day, teachers don’t pay into or receive Social Security. (Those teachers who worked enough quarters in the private sector get a greatly reduced payment. Social Security has a true compounded COLA, cost of living adjustment, based on the Consumer Price Index.) The STRS COLA is not compounded and is based on final salary average and never increases during a retiree’s life time. Teachers’ salaries are still low compared to similar degreed professionals. The media loves to quote the salaries of large urban school districts like many in Franklin County. What they don’t tell you is that about half of the teaching force works in rural districts and are paid far less. In many districts in southern Ohio, after a 35 year career a teacher is lucky to earn $40,000. Currently, 37,000 30-year retirees have pensions of $30,000 or less, and 62,000 retirees receive a pension less than $39,000. With Social Security, a company pension, and a 401 K or IRA plan, professionals in the private sector still fare much better during their career and into their retirement.

Until recently active teachers did not have the option of paying into Medicare. Consequently, about 10,000 retired teachers do not get Medicare Part A. STRS retirees have no spousal subsidy for health care. A retiree couple pays well over $1000 a month for health care. This is a big hit to a small monthly pension. STRS retirees fund 95 % of their health care and yet the fund is running dry. It will be the crisis for Ohio’s taxpayers if nearly 170,000 older retirees are added to the state’s Medicaid and Welfare roles.

Teachers and their leaders continue to work to find ways to solve the shortfall generated by the current market drop. Some changes have already been made. It is understandable that the public is upset with their own lot, and the feeling that they have lost control of their own retirement, but public pensions are not the problem.

The question needs to be redirected. The real revolt will come when those 30 or 40 year old workers finally realize that with a 401k foundation they will never be able to retire. Perhaps the media attack on public pensions was an attempt to redirect attention away from what has happened to private pensions and the unconstitutional funding of Ohio schools. It is time to finally ask the right questions so we all will be on the same side. Corporations and Wall Street will be on the other side where they have always been.

A proud member of CORE: Concerned Ohio Retired Educators.