Dean Dennis on STRS: The Slippery Slope Our Trustees are Traveling Down

Dean Dennis' speech to the STRS Board

June 20, 2019:

My name is Dean Dennis. I retired after 35 years service. I am the STRS Chair for Cincinnati's Local 1520-R, the Spokesperson for the Facebook, Ohio STRS Member Only Forum.

Let's look at some past history. In the 1990's, during the dot-com-bloom-era, many state pension funds were becoming flush to the point that an article appeared in Fortune Magazine (January 13, 1992) titled The Great Pension Robbery. Here's an excerpt, "In the past two years, more than a third of the states have cut or delayed contributions to their pension funds, seized money outright from pension accounts, or begun to debate similar measures."

During this era, STRS had a Director of Governmental Relations named Jim Miller, who shared with people I know in OFT, that he was concerned that our pension might be viewed as a source of money by Ohio's legislators. At this time, STRS had reached a funding ratio slightly over 90%. Apparently, he wasn't alone because in the year fiscal 2000, our STRS Trustees went to the Ohio Legislature and had the teacher benefit formula increased from 2.1% to 2.2%. Retirees' pensions were also increased to bring them up to a level of at least 85% of the purchase power of their original pension benefit. In the year 2000, our Trustees intentionally increased the amortization period for the unfunded liability from 16 years to 23 years because they wanted to make sure they maximized our benefits. They saw a danger in being fully funded.

Is there still a risk of being fully funded? STRS subscribes to the National Conference on Public Employee Retirement Systems. In May of 2019, an article was featured by Tom Sgouros titled, The Case For New Pension Accounting Standards; it was peer reviewed by 13 practitioners, Cheiron, our outside actuarial firm, being one. Here is an excerpt, "The risk of a fully funded, or overfunded pension plan, is not only the political risk, of increased benefits and reduced contributions, but also the risk that policy makers will perceive an opportunity to close the plan entirely." The author argues that, "Waste of a dollar on a pension, means a dollar not spent on education, roads, or public safety, not to mention the desires of the person who paid the dollar in tax. As with any other government expense, it is important to meet public obligations at the lowest feasible public cost."

Ohio intended for their tax dollars to go towards our pension. When you withhold and divert our COLA towards an unnecessary 100% funding goal, you negatively impact Ohio's economy. To date, Ohio's retirees could have contributed approximately another 2 billion dollars back into Ohio's economy, if we had received our COLA.

When you tell Ohioans you cannot provide retirees a COLA, you draw attention to your spending practices. Try explaining to the public how their tax dollars are able to pay quarter-million-dollar staff bonuses, but their tax dollars cannot pay an 80-year-old his, or her, modest $800 cost-of-living adjustment.

Since there has never been a public pension plan that has remained 100% funded, when you sought your 100% goal, did you consider the unintended consequence that you might be paving the way for the Legislature to eliminate the Defined Benefit Plan for our active teachers? Once you reach your 100% funded goal they could easily replace it with a Defined Contribution Plan. I encourage you to reconsider the road you're traveling.

Thank you.