Kathie Bracy: Letter to State Auditor Keith Faber, June 2021

Looking back at this one, I can see one or two slight inaccuracies, but I think most of this still stands. I did borrow some wording from another source (a much greater mind than mine out there somewhere, though I don't remember where). I felt it was necessary in order to give a broader view about what has been going on at STRS. Today I would add even more. KBB

June 27, 2021

Mr. Keith Faber,

Auditor of State

88 East Broad Street, 5^th Floor

Columbus, OH 43215

Re: Problems at STRS

Dear Mr. Faber,

I wish to call your attention to “the elephant in the room”; specifically, the elephant that has taken up residence at STRS Ohio. The pension system is in deep trouble; a fact that is well known at STRS, yet nearly everyone has been ignoring it. This may possibly include many who meet regularly at the Ohio Statehouse.

Here’s what’s going on that you need to know:

1. STRS is required by the state to be audited every ten years, yet the last audit took place fifteen years ago, in 2006. Where has the ORSC (Ohio Retirement Study Council) been all these years? They should have put the brakes on STRS at least five years ago, if not before. And where was our State Auditor while all this has been (and still is) going on?

Earlier this month a forensic audit was completed by Edward Siedle, foremost pension expert in this country. He revealed that STRS is not being transparent to the stakeholders, even to its own Board, and that STRS has continued to withhold critical public documents necessary for a complete audit. By now you should have received a copy of Siedle’s report, The High Cost of Secrecy, which came out June 7, 2021. If you do not have a copy, you can find it at: https://82781d1e-9774-4c42-8beb-47ead2a438eb.filesusr.com/ugd/ed1884_cb39f322009c4c8aa4189e

45f15402e7.pdf 

or simply at http://www.orta.org. 

2. Over the years STRS has steadily cut benefits to members while using its own performance as a benchmark for paying increasingly exorbitant salaries and bonuses to its own staff.

3. Active teachers are currently paying 14% into the pension with a matching 14% from employers. What’s to stop them now from investing their money in low cost passively managed funds instead of sinking it into STRS? Active Ohio teachers are the only group in the country that is paying more into their pension system than it’s worth.

4. STRS puts money into high-risk alternative investments with the reasoning that this will lead to increased returns. Instead, the higher costs, management fees, transaction fees and lack of transparency have led to significant underperformance, compared to a simple total market index fund. Some investments have gone to zero and lost half a billion dollars, something STRS never even disclosed to its stakeholders for almost four years!

5. Right now I am extremely concerned that the STRS pension fund will not be sustainable for the long term. When the fund fails, it will not be the fault of teachers. Since Ohio’s teachers do not pay into Social Security, most will not receive SS when this happens. Either the taxpayers of Ohio will have to foot the bill or teachers are going to be screwed. Which will it be?

If it is within your power, I ask you to call for a state audit immediately. Please bring pressure and light to this situation. And last, but not least, please work to reinstate legislative oversight of STRS, as was the case before SB5 was defeated and the legislature cut off its oversight, essentially leaving our livelihood to the whim of STRS. That was a huge mistake that has since cost the STRS stakeholders billions and flatlined our pensions, rendering us no longer able to keep up with the rising cost of living without the badly needed COLA that was taken away from us. That oversight needs to be reinstated before it’s too late.

Thank you for whatever help you can give to the current and future retired teachers of Ohio. If you can’t help us, please tell us who can. We are counting on you.

Sincerely,

Katherine B. Bracy

STRS Beneficiary