STRS and.....bet you didn't see this one from a few months ago!
From John Curry, August 3, 2013
Losing billions, Ohio pension system pays millions in
bonuses
By Jon
Cassidy
March 19, 2013
You have the wrong job.
The Cincinnati Enquirer reported yesterday that the State Teachers
Retirement System has “paid out $38.6 million in bonuses to its roughly
80-member investment staff” since 2005.
By comparison, the larger Ohio Public Employees Retirement System has paid
$10.7 million, not including 2012.
“Millions of dollars went to employees even when the system’s portfolio did
poorly,” the newspaper reported, but the Enquirer didn’t explain just how poorly
the fund has been performing.
Between July 1, 2007 and July 1, 2012, STRS lost almost $7.2 billion, going
from $66.7 billion to $59.5 billion.
That’s a five-year return of negative 10.7 percent. Most of that was due to
the market collapse of 2008, but even the four-year bull run since then hasn’t
been enough to restore the losses. As bad as the market has performed, STRS has
been worse – a full seven points below the Dow Jones Industrial Average for the
five years.
Worse, STRS’ liabilities have been increasing relentlessly in the meantime,
going from $81.1 billion to $106.3 billion. That means that an unfunded debt of
$14.5 billion has metastasized into a $46.8 billion cancer.
And that’s using STRS’ own numbers. The debt would be nine figures if it
were calculated with the same rules that companies use.
STRS’ funding ratio has slipped to a nearly hopeless 56 percent. It’s
legally required to get on a 30-year path to full solvency, but hasn’t met that
requirement since 2009. Last year, the Legislature cut benefits over the next 30
years by 36 percent, while increasing teacher contributions from 10 to 14
percent, and even that wasn’t enough to get the fund back on the 30-year
track.
In the last fiscal year, the assets under STRS’ management grew by just
$1.3 billion, while liabilities increased by $7.5 billion. That’s the situation
fund managers will be in year after year, as they try to hit targeted returns of
$8 billion, $9 billion, or $10 billion a year, with capital of just $60 billion.
The only way to do that is by taking on dangerous levels of risk.
Or, the fund managers could turn from that temptation and embrace their own
mediocrity (as in, 2.2 percent returns in FY2012). The Enquirer found that fund
managers “received bonuses in fiscal 2012 as high as 77.6 percent of their
salaries. In other years, employees earned as much as 125 percent of their
salaries. Assistant Director of Investment Mary Ellen Grant, for example,
received $512,842 in salary and bonus in 2011 as the top earner in the
department.”
— Jon Cassidy
Response from STRS:
posted by Kathie Bracy at 11:18 PM
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