Dean Dennis to Ohio legislators: Are you aware of what has been happening with STRS?

Ohio Legislators: Are you aware of what has been happening with STRS?

From Dean Dennis

March 15, 2021

Nearly a half-million retired, active and substitute teachers have paid into STRS Ohio. The vast majority of these contributors will need to depend upon STRS for their retirement since Ohio is a Non- Social Security State.

In September of 2012, the Ohio Legislature voted on legislation that deeply impacted Ohio's retired and active teachers. This legislation became law on January 7, 2013. As of July 1, 2013, active teachers have been required to work more years and contribute more of their salaries to STRS. Teachers retired prior to that date have not received a single COLA that was promised to them for the past 9 years. Retirees complain that, “even Social Security pays a COLA”. Research shows that in the average Non-Social Security State, the Employer's Contribution is 12% higher than that of the Employee Contribution towards their Pension Plan. But in Ohio this isn't the case; the Employer Contribution is exactly 0% higher. In essence, in Ohio, our teachers pay the most while our employers are allowed to pay the least. The maximum Employer's Contribution hasn't been raised in nearly 40 years.

The harsh legislation also turned over control of the teachers' COLA to the STRS Board. That was a mistake. The Ohio Legislature gave STRS the authority to "adjust" the COLA. The STRS Trustees completely eliminated it. STRS retirees have seen nearly 30,000 of their peers die without receiving their promised COLA. This wasn't lost on Representative Bill Seitz who, in a strongly worded letter to the STRS Board, expressed his "support of a growing coalition of STRS retirees to request relief from the harsh decision made by STRS to reduce to zero for at least 5 years the COLA adjustment for all existing and new retirees". Imagine if the OPERS Board had been granted the power to eliminate the COLA for their retirees.

As members of the Ohio Legislature, you need to step up. The Ohio Legislature needs to take back control of the COLA. There is no equity among Ohio's pension systems and no intergenerational equity within STRS Ohio. The trust level of STRS members is so low that recently they raised $75,000 within three short months for an outside forensic audit of STRS. The forensic audit is currently being conducted by Edward Siedle, a former SEC lawyer and Forbes Magazine contributor.

In Ohio, an outside fiduciary audit is supposed to be conducted every 10 years. STRS has gone over 14 years without such an audit. Meanwhile, retirees go without their promised COLA.

What will an outside forensic audit or outside fiduciary audit find? That remains to be determined. A recent news article has drawn attention to an STRS investment that went bankrupt (https://www.msn.com/en-us/money/savingandinvesting/damschroder-ohio-teachers-pension-mauled-by-panda/ar-BB1ebNBd ). The Panda International investment raises the question: has STRS Ohio lost hundreds of millions of dollars? Panda International is only 1 of over 130 Alternate Investments STRS Ohio is showing in their CAFRs report. It is interesting, because Panda filed for bankruptcy in 2017 but STRS is still holding them as an investment. (see the Open Letter to STRS Trustees on the STRS Ohio Watchdogs website for more detailed information)

Another article that raises concerns is a recent article regarding the Pennsylvania pension system. This article brought up the practice of hidden fees often referred to as "carry over interest" (https://www.inquirer.com/business/joe-torsella-treasurer-pa-pennsylvania-psers-pensions-teachers-lost-harrisburg-20210220.html). The Ohio Legislature needs to investigate and guarantee that this is not a practice of its five pension systems; in particular STRS.

Members of STRS are constantly told by STRS management how well the pension is run. Members are continually told that it is one of the top pension systems in the nation. If true, the STRS Ohio Watchdogs want to know why STRS cannot provide a simple COLA to their dedicated retirees while over 90 STRS investment staff members annually receive six-figure performance bonus incentives.

Ohio Legislators, are you aware of what has been happening with STRS?

Dean Dennis

March 15, 2021