Susan Brannan to STRS Board: You should be cutting expenses!

Susan Brannan's speech to STRS Board

August 15, 2019

Board Members, Retirees, Active Teachers: 

My name is Susan Brannan. I retired in 1995 with 30 years of service. Receiving a COLA has had a positive impact on my financial well-being. The future is indeed bleak! 

So, what do we do when there has been no COLA for the 3rd straight year & no prospect of receiving one for the next 6 – 7 years? We CUT EXPENSES. This Board should CUT EXPENSES. 

Let's review STRS expenses as reported in the Fiscal 2018 Comprehensive Financial Report. 

The 3 categories are: Administrative Expenses of $65.7 million, Internal Investment Expenses of $42 million, & External Asset Management Fees totaling $218.3 million. (Schedules are attached) The Board patted themselves on the back in the July Newsletter for ranking 4th in a peer group of the 17 largest U.S. Public Pension Funds for having the 4th lowest investment costs. Perhaps these costs are too high in ALL Public Pension Funds. It was reported by STRS that this 4th place ranking was due to using internal investment managers for about 70% of the assets. Internal expenses are 1/5th of the External Fees of 218.3 million. Internal expenses include: Personnel salaries, Professional & Technical Services, printing & supplies, Staff Education, Memberships, etc. Looking specifically at the asset class Alternative Investments (only 15.5% of all assets) external management fees of $152.2 million were paid to 116 different companies. The external fee figure, $218.3 million is double the amount spent on all Administrative & all Internal Investment Expenses. 

Perhaps the following suggested changes can be implemented in order to pay a COLA & also meet future inflationary pressures: 

Cut all expenses by 5-10%. Decrease the 57 Stock Brokerage Companies now used, as well as the 116 Alternative Investment Groups. Negotiate lower external management fee schedules. Show “good faith” to retirees & actives by not increasing employee wages or paying bonuses. Review the operational costs of this facility. Does this building meet STRS needs going forward for the next 2-3 decades?