Friday, October 19, 2018

Dean Dennis' speech to STRS Board October 18, 2018

STRS October 18, 2018 

My name is Dean Dennis, STRS Chair for the CFT-Retirees Chapter, spokesperson for the Ohio STRS Member Only Forum. I retired with 35 years from the Cincinnati Public Schools.

Today I want to make some points:
First and foremost, the adopted STRS investment return assumption, or earning assumption, of 7.45%  is significantly too low. While it might serve STRS employee's with their investment goals;  it does not serve STRS members regarding their pension. This too low of an earnings assumption is the primary reason our retired members are going without a COLA and our active teachers will not have a COLA for 5 years upon retirement. 

STRS trustees know STRS is earning 8.6% over the 30 year funding period, this is far above 7.45%. Trustees know that STRS has always earned above 8% for every 30 year funding period.  Yet, you are assuming 115 basis points less than you are earning.  This isn't okay.

Subtract 7.45 from 8.60 and the difference is 115.  Since we have a 115 basis point difference, we can easily add 25 basis points to the earnings assumption and add back  $5 1/2 billion to the 30 year period.  We can easily add back 50 basis points and add back $11billion. This would still allow for a 65 basis point cushion.   

Trustees will only gain credibility with members, when members see them take into account what they actually earn, and then adopt an earning assumption more in line with reality. 

Adopt an earning assumption 40 ,50, or 60 basis points lower as a safety margin.  Credibility is lost when trustees adopt an earning assumption 115  basis points below actual earnings. This only punishes those you are supposed to be serving.  Are we really to believe you can't provide a COLA?

Review the handouts,  I passed out to you. The stock market's 30 year rolling periods average is nearly 10%. The stock market even earned 9.99%  during the 30 year period which included: Black Monday, Desert Storm, the Savings and Loan crisis, wars in Iraq and Afghanistan and three recessions. 

Trustees  should easily be comfortable in adjusting the earnings assumption upwards from 7.45%.

Other suggests:

Revisit the recent adopted mortality tables. This "new actuarial best practice," adversely penalizes retirees. Today's 75 year old should not be assigned the same mortality rate as a 21 year old entering the system.  This accounting falsely skews actual liabilities. It also harms retirees from receiving their rightful COLA.

I know that being only granted 3 minutes I run out of time, so I can't go into any depth on:  Avoiding alternative investments,  changing the payroll growth assumption rate,  seeking legislation to change our 30 year funding period to 35 years,  seeking legislation to increase in the employer contribution or increasing the time to present to the Board from 3 minutes to 5 minutes. 

So I'll switch gears and close with one last thought,  having 5 elected STRS board members for active teachers, yet only 2 elected STRS board members for retired teachers deserves attention.  This is a disproportionate ratio which does not reflect the number of active teachers compared to retired teachers. 

Since there are 7 elected board members, the ratio should be a 4 /3 split and both retired teachers and active teachers should be allowed to vote for all  elected  STRS Board members. I hope you give this some thought as well.

Thank you.
Larry KehresMount Union Collge
Division III
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