Bob Buerkle's speech to STRS Board August 19, 2021

STRS Board Speech for 08/19/21 by Bob Buerkle

Nobody can be right all of the time, despite the STRS Management’s thinking that they are.  Due to STRS mistakes, intentional or not, you have failed our Retirees, the Active and Inactive teachers, the Money Purchase Retirees, the DC plan Participants and the ARP plan participants for University Professors, for whom you assess a 4.47% mitigating tax when they should be entitled to the 14% of employer contributions.  As former Director Nehf stated in a news article, the DC and ARP Plans create no liability to the system but we still charge participants 4.47% of their total income level, which provides them with no additional benefit.

Next, I call your attention to this Cheiron report from your June 17, 2021 Board Meeting.  The title on page 3 is “Why the discount rate is so critical to the Plan.”  The first bullet says “It’s the most important assumption in measuring a plan’s health.”  I agree with that!  The next bullet says “If your discount rate is unrealistic, you get a false reading of the plan’s health.”  Again, I agree with that.  However, Callan LLC., your Investment Advisor, is the one providing STRS with inaccurate projections.  This has crippled our retirees and over taxed our active teachers.  While Callan told you to assume lower earnings 10 years ago, suggesting you lower the discount rate from 8% to 7.75% and then 5 years ago to 7.45%.  STRS actually reported earnings of over 10% for the decade.  Now comes Callan again, spouting the same prediction for the next 10 years, assuming that STRS might only earn 7% and that would be at the high end of their earnings estimates.  The Board voted to accept this, despite earning over 29% last year.  This Board must remember that predictions like these, cut both ways.  Callan was wrong, you were wrong and retirees and actives have been paying the price for inaccurate projections.  STRS actually outperformed the Callan predictions by 25-30%.  If STRS had left the Discount Rate at 8%, which is what Ohio Police and Fire assume for their returns, we would likely be over 100% funded.

I believe STRS should dump Callan and seek more accurate advice from a firm that can better predict future earnings. Nobody can be right all of the time but Callan hasn’t been right anytime!

Finally, since STRS is now over 85% funded, we want to see this Board discussing the restoration of our COLA and not discussing some supplemental benefit that will not increase our pension base. Remember, the past supplemental benefits paid out in the 1980’s and 1990’s have hurt our current pension funding position, shortchanging today’s portfolio value by over $8 billion dollars. 

I’d like to end with a memorial tribute to the over 37,000 retirees who have passed away without ever receiving their promised COLA after 2013.  Many of my Union brother and sister colleagues from Cleveland have died in the last year, including their former president and wonderful leader, Rich DeColibus.  Every 2012 and earlier retiree deserved, but lost, their promised COLA’s and today they are 21% behind in the purchasing power that they were promised.  Management at STRS should have immediate pay cuts of 21% and Investment staff should receive no bonuses until the COLA is fully restored.