Bob Buerkle to STRS Board: It's time to own up to your actions

Bob Buerkle's Speech to STRS
April 18, 2019

Cost Of Living Adjustments Must Be Restored

In the Spring of 2009 Mr. Nehf addressed this Board and said that "without changes, the STRS would not be able to fund pension benefits sometime in the future." That seemed reasonable at the time since STRS investment experts had lost 48% of our money, from peak-to-trough, over the 18 month period between October 2007 and March 2009. Actuaries and STRS Staff scrambled their brains for months and months with "LEVERS,

DISCUSSIONS and PROJECTIONS." I don't disagree with the fact that an action plan had to be developed and some things needed to be changed. I do disagree with the path taken, when better alternatives, with successful track records, were available but not considered.

I was not alone in the approach that many reasonable people would have selected, since 29 other State Pension Plans did so and developed "NEW PLANS (TIERS) FOR NEW HIRES." Nearly all of these systems grandfathered their pension promises to retirees and active members. Even the nation's two worst funded pension systems, Kentucky and Illinois, protected their retirees and current teachers. Their future pension changes will only apply to new hires.

I would also like to point out that New York has utilized this "TIERED" approach 6 times since the very large 1974 financial crisis. New York protected all of their retirees and actives in each of their plans for life. I might add that today New York is considered one of the strongest pension plans in the country. You know from 45 years of past-practice, what the rules are from the day you are hired and what your benefits will be at retirement. This is what STRS Ohio Members also used to think about our Pension Plan, but no more!

New "Tiers" may change the age, service, formula and contribution requirements for new hires but the teachers hired under these "new tiers" know the pension plan that they are being offered will not change and that their retirement rules are permanent. This allows members to plan for their retirement throughout their careers, knowing exactly what they will receive after their teaching careers are over. It also provides them with the opportunity to compare the New York Pension offer to other states. Knowing what STRS Ohio has done to their retirees and actives, why should anybody trust this system in the future?

In retrospect, how could Mr. Nehf or anybody have known that STRS investments would earn 36.13% by June 30th, 2011? They could not. But they also did not take action to help us after these facts were known! STRS had 15 months of time before Governor Kasich signed the Pension Bill that went into effect in 2013, during which a less punitive path could have been explored. This did not happen. In fact STRS took actions which created an additional 15 Billion dollars of debt by reducing their future "earnings assumption rate" from 8% to 7.75%, even though they had just made 13.54% and 22.59% in the previous two fiscal years. STRS later made things worse again, reducing the EAR to 7.45% which caused another 12 Billion of debt. It's time to own up to your actions.