Mike Mulcahy to STRS Board June 21, 2018: STRS is forcing employers to rob taxpayers

Mike Mulcahy’s speech to STRS Board June 21, 2018

STRS is forcing Employers to Rob Taxpayers

1. Previous Retirement Rules (66% of FAS @ 30 years/any age) – Teacher earns $400,000 in the last years before retiring. Qualifies for a $52,800 pension.

2. New Retirement Rules (77% of FAS @ 35 years/if also age 60, teacher who began teaching at age 25) earns $400,000 in last 5 years and $400,000 additional lifetime career earnings over teacher #1, because they must work 5 years longer. Qualifies for a $61,600 pension.

3. New Retirement Rules (85.8% of FAS @ 39 years/if also age 60, teacher who began teaching at age 21) earns $400,000 in last 5 years and a total of $720,000 (9 extra years times $80,000) in lifetime career earnings over teacher #1.Qualifies for a $68,640 pension.

Result:

a) The Ohio Taxpayer additional burden for 5,000 teachers at the top of the salary scale working extra years to reach retirement as compared to a new teacher is $40,000 times 5,000 = $200,000,000 per year.

b) STRS saves Billions in pension funding as all future retirees are guaranteed to receive 5 to 9 fewer years of pension income.

Now let’s look at the teachers with each of the 3 scenarios mentioned.

Teacher #1 lives to be 85 and receives 25 years of pension of $52,800, totaling $1,584,000 with no COLA. Also has 5 more years in retirement than teacher #2 and 9 more years than teacher #3.

Teacher #2 lives to be age 85 and receives 25 years of pension of $61,600, totaling $1,540,000 with no COLA. This means $44,000 less pension income compared to teacher 1 and, had to work 5 more years, which of course means 5 less years in retirement. This teacher also will pay an additional $56,000 to STRS in pension contributions so they have lost $44,000 + $56,000 + $100,000 and 5 years of retirement!

Teacher #3 lives to be age 85 and receives 25 years of pension of $68,640 totaling $1,716,000 with no COLA. Works 9 more years for $132,000 more income. Teacher #3 also paid an additional $78,400 to STRS in pension contributions so they are ahead by only $53,000, but they also lost 9 years of retirement.