THE REAL STRS PROBLEM!

From Mario Iacone, January 19, 2011

Many reasons are being bandied about in the recent discussions on the STRS situation, but, in my opinion, all are a drop in the bucket, by comparison to investment losses.

INVESTMENT LOSSES are the largest factor causing the STRS problem. Examine the chart below and you will see STRS had great Funding Periods before severe losses occured during 2001-2002 and 2007-2008 time periods.

The repeat of the 2001-2002 losses were avoidable as at least two Board Members, especially Dr. Leone, wanted a contigency fund which would soften another severe market downturn.

Dennis Leone urged in MARCH, 2007 " I am hopeful my fellow board members will be agreeable to approving a contingency plan to minimize the negative impact of a significant stock market downturn………………………

Right now, we have approximately 20 Billion less in assets that we had in 2007. To make matters even worse, we have already lost the return on an average of 25 Billion Dollars for FOUR YEARS and the way things look for MANY MORE YEARS.

I hear nothing from ORSC, the Legislature, or the Governor which indicates that the issue of a more stable Investment Policy is even being addressed.

Yet, it is obvious that the pension systems have a Serious Systemic Problem, SEVERE LOSSES during market downturns. And, those severe losses significantly impact retiree benefits.
Click image to enlarge.