Ralph Roshong: A report on the August 11, 2011 STRS board meeting

From Ralph Roshong, August 18, 2011

Here are my observations and comments at STRS Board August meeting last Thursday, Aug. 11, 2011:

I have attached the 2011 Fiscal Year end financial report and the 2012 Fiscal Year July 31, 2011 month end report. I hope you can open them.

Ralph

GASB rule and test case

Mr. Nehf informed the Board about a new GASB auditing regulation for which STRS will be a test location. This brilliant concept goes this way. STRS must account for their underfunding of the pension fund, which is currently in the $30B range as I believe I heard. The spectacular results of this new process devised by GASB standards will prorate the underfunding of the pension fund back against the participating school districts and universities, 1100 plus of them. I responded to the STRS Board last Thursday that this was the most incredibly illogical regulation I have heard of yet. None of these 1100 participating employers has one iota of input concerning the operation of STRS other than sending in their 14% and the employee’s 10%. The STRS Board and staff along with the Legislature are 100% in charge of the spending and investing of the pension funds. How in the world can an accounting board (GASB), all of a sudden say that these employers are responsible for the faults of the operating groups, STRS Board and the Legislature, who make and implement the rules.

Investments

Mr. Mitchel reported that the 2011 fiscal year was a good year with our investments making 22%. However, so far in 2012, July was down 1% and all of you know where August is going.

A note of interest:

For the previous six months, the STRS investment department has voted proxies, following STRS Board guidelines on 5000 ballots, which included 31,000 proposals. They vote 80% of the time with the recommendations of the company’s board of directors.

ORSC

Mr. Nehf reported on the ORSC (Ohio Retirement Study Council) meeting that was held last Tuesday, August 9. This is a body established by the Legislature to oversee the operations of Ohio’s five pensions funds. I told the Board on Thursday that I thought they have failed miserably in the last fifteen years after the hundreds and hundreds of thousands of dollars the five systems pay them to oversee their operations on behalf of the Legislators. Their oversight has seen the five funds get themselves in very poor financial condition. Six Legislators sit on the council for "oversight" of the staff. The council has now virtually stalled the entire two and a half year process of pension fund revision recommendations that have been presented to them by the five pension fund’s staff. It appears from my perspective that there will not be any implementation of any improvement measures to help stabilize the pension funds until into 2013. Meanwhile, the pension funds continue to operate in their same manner and the financial underfunding of the pension funds will continue and/or grow.

Healthcare

Remember, each of us has the opportunity to review our healthcare coverages and make changes if we desire in October and November. No matter what our choices, the rates for the various coverages will change, most likely increase. I highly recommend your locating one of the informational meetings this fall nearest you and attend to gain clarifications and ask questions. You can find them on the STRS website. There are usually vendors present also, so you can ask specific questions of them.

[Charts posted below; click to enlarge.]