Dan MacDonald to STRS Board: Active and retired teachers deserve purchasing power protection

Dan MacDonald's speech to STRS Board
August 15, 2019

CalSTRS went from 109% funded to 63% was an article emailed by Chair Stein in early July. I am Dan MacDonald, an STRS retiree with 38 years with the CH-UH City Schools District. I am Executive Director of Local 279-R and am here representing over 1,000 279-R retirees. 

Stein commented: 

“A brief case study on why you want your pension system funded at least 100%. 

“Most novice critics of STRS Ohio’s funding policies ignore how shifts in the economy, natural maturation of the plan, and ‘optimistic’ risk management can endanger pensions at funding levels that may have been acceptable in the past. 

“Notice that even increasing state contributions were not enough to save CalSTRS from cyclical economic downturns and a lower ratio of active teachers to retirees (plan maturity). I estimate that CalSTRS went from a ~2% probability of a catastrophic funding event in 2000 to a 60% probability in 2017. Without the high funding going into 2001, CalSTRS risk of failure would have been near 100% after the 2008 downturn – base pensions would certainly have been reduced or possibly eliminated. CalSTRS educators also have no Social Security.” 

After reading the article I proceeded to Cal’s webpage and explored. In 2018-19 Cal had a 6.8% ROR. Looking at benefits, an active is vested in 5 years. The final pension benefit is determined by service credit times an age factor times a benefit percentage. An active can retire after 30 years but an age factor enters. Teaching to age 60 [and under a new formula 62], is set at 2% but will go up to 2.4 percent if one stays to age 65. A FA is determined by the best 36 months; our plan is 60 months. Added to their benefit is Inflation Protection. Your retirement benefit is protected against rising prices in two ways: 1 starting September 1 after the first anniversary of your retirement date, your benefit increases automatically each year by 2 percent of your initial benefit. 2 If inflation erodes the purchasing power of your retirement benefit to less than 85 percent of your initial monthly benefit, you’ll receive an additional quarterly payment, subject to the availability of funds set aside for purchasing power protection. After January 1, 2014 the California legislature guaranteed the COLA of 2%; those retiring before that date are not guaranteed a COLA but it has been paid for 43 consecutive years. 

My point? CalSTRS has a 2046 projection of being fully funded and is still functioning and taking care of its actives and retirees. 

Ohio actives deserve purchasing power protection, as do retirees. We want our COLA back and a better benefits determination for actives.