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

Dean Dennis to STRS Board: You are not fulfilling your part of the agreement

Dean Dennis’ speech to STRS Board

March 21, 2019 

My name is Dean Dennis. I am the STRS Chair for the CFT-Retirees Chapter and spokesperson for the Ohio STRS Member Only Forum. 

Today, I want to address our elected trustees regarding the goal of being 100% fully funded. Was this initially your goal, or management's? 

Are you aware of the financial and emotional harm being done to your OFT and OEA union brothers and sisters? The goal of being 100% funded should have been a marathon, not a sprint. Those retired, or only a few years away from retirement, never should have been caught up in this sprint. 

Many teachers retired abruptly to avoid the financial harm of having to wait 5 years without a COLA. They got sucker punched. Many weren't in a position to avoid the 5 year wait, now retired, they're watching the years tick by. As individuals all of you are better than that, can you be better collectively? 

I've heard statements that maybe when STRS becomes 80% or 85% funded, STRS might consider a COLA again. 

STRS started paying a COLA in 1971, 42 years ago when STRS was 59% funded. In the 42 years since, STRS has only been funded above 79%, 7 times. If 80% funding were to become the COLA standard, retirees would only average about 4 COLA's in their lifetime. Does this sound fair after a lifetime of service and COLA promises? 

Here's a question; wouldn't being at 100% fully funded require having the monies set aside to cover the liabilities for the pensions of both retired and active teachers? How are you going to do that? The average active teacher in Ohio still has another 20 years of contributions to make. 

I hope you see it's normal for a public pension system to be around 70% to 75% funded being that active teachers are still paying in to their pensions. It's abnormal for a public pension system to be 100% funded.
To move towards being 100% funded requires:

            • Excellent investments, over decades.

 • Making incremental adjustments - STRS should try to make incremental adjustments only to those yet to enter the system. Adjustments made after people enter, erodes trust in the system. Abrupt changes should not be made to those close to retirement. Stealing promised monies away from those after they retired, should never happen. 

• Cutting internal costs - Awarding bonuses 5 times the average teacher's pension in times when you can't provide a COLA also erodes trust in the system and makes you appear disingenuous. 

In closing, moving towards being 100% funded must be done ethically. 

Remember who you serve. We are very much aware that becoming 100% funded is a goal of management. Only make it your goal if you can move towards it ethically. 

Lastly and importantly, remember the concept of a Collective Bargaining Agreement. When a teacher retires they have fulfilled their part of the agreement. However, STRS is not fulfilling their part. It's undeniable that in all the STRS literature a COLA was promised upon retirement. 

As Trustees, as individuals, what are you going to do?
Thank you.