Strong advice to STRS Board from Dan MacDonald: No pay raises at STRS till the COLA returns!

Dan MacDonald's speech to STRS Board

March 21, 2019 

Good morning. I am Dan MacDonald, a Cleveland Heights – University Heights 38 year STRS retiree. I am here representing myself and as recently elected Executive Director of Local 279-R, NEO Ohio AFT retirees, 1000 plus dues paying strong. 

Last month my colleague Rob Walters spoke during public participation regarding a letter that was sent from our 279-R president, Teresa Green, to the Board which reminded the Board of their fiduciary responsibilities, that STRS Ohio itself is looking out only for itself, and the proposal that there should be no more raises allowed at STRS until the COLA is returned. 

This month, today and tomorrow, is the yearly investment seminar. Again considering fiduciary responsibilities and a reminder of the November 2018 Board’s Educational & Planning Meeting and quoting from tab “Ethics Refresher for Ohio Public Pension Officials, slide 8, titled Duty of Loyalty,” it reads “…solely in the interest of the participants and beneficiaries; for the exclusive purpose of providing benefits to [them] and defraying reasonable expenses of administering the system.” 

ORC 3307.15(A), it is time to put on the STRS Board agenda a serious look at the Performance-Based Incentive Compensation Policy and restructuring and/or renegotiation the policy over the coming year. In the policy if the Investment Department does not earn a positive Absolute (actual) Return in a fiscal year there is a reduction of the incentive. But if that return is 10% or lower the reduction in incentive is still only 50%. 

Think of that. The fund drops significantly 10,%, 20%, 30%, 50% but the Investment Department still gets at least 50% of their incentives. Reminder Board, this isn’t Wall Street. 

There is also a five year period smoothing clause in the document which I admit I don’t quite understand either. According to the policy, 73 positions are eligible for the incentive compensation ranging from 125% of salary to 20% of salary. 85 employees were paid according to documents I’ve seen. It should be noted that 58 of the 73 positions listed, receive an incentive that is 50% or higher of their salary; only 2 positions are at 20%. So what does that look like? 

Click image to enlarge

If I’m off on any of this, please share correct information at an upcoming Board meeting. Let’s not forget that in addition to the payout of these bonuses, it is necessary to send OPERS money to satisfy their pension system’s retirement contribution requirement. STRS staff belong to OPERS. We in North East Ohio are well aware that we need excellent investment personnel, but if the fund goes into the tank bonuses should not be a reward. 

In conclusion, no STRS OH pay raise until the COLA returns. Thanks to Jim Stoll for chart and figures. 

Dan MacDonald, 279-R Executive Director