Dan MacDonald reports on the November 18, 2021 STRS Board meeting

From Dan MacDonald

November 22, 2021 

This is my personal summary of the STRS November Educational & Planning meeting. STRS’s E-UPDATE has yet to appear. November’s STRS Board meeting is called the Educational & Planning meeting and it is not your typical Board meeting. It is to be a little like a workshop. Information shared. Discussion. Self-evaluation. No Public Participation. This year’s was quite special.

Wow, what can be said about the November Education & Planning Meeting other than debate, tension, accusations, and a split on the Board. The status quo, and other ways to do things, all under attack. Consultants for Cliffwater, Callan, and Cheiron were present. David Mustine, another consultant and new to Board meetings, was the quiet facilitator for this Educational & Planning Meeting. He opened with three key observations: the Board is highly professional and has a heavy lift; there are recent relationships and process issues on the Board, and COLA. [No reactions by anyone, move on. It is more than COLA.] The STRS staff or Cheiron presented on the “Scope and Timing of Current and Upcoming Studies,” “An Actuarial Audit,” a “Fiduciary Performance Audit,” an “Asset-Liability Study,” and a “Five-year Actuarial Experience Review.” The next presentation was “Ethics Provisions Applicable to Ohio Public Pension Officials.” This was a timely presentation with information used later to attack former Board member Robert Stein, and current Board members Wade Steen and Rudy Fichtenbaum. To be accurate, this is a yearly presentation but its timeliness with a later-in-the-day presentation was useful to status quo members to threaten, and we will probably see if Ohio Revised Code was violated. [My thought, the threat was there both from Board and Staff to the future 3 presenters.] The ensuing presentation was “Plan Governance and Fiduciary Duties.” Again, this is a yearly presentation, but this year there was push back. Steen questioned if any of STRS’s consultants, the “expert advisors,” had ever been held accountable for bad/poor advice. No one could remember a time of that happening or even being brought up. Under Board policies – Governance Process, was when contentiousness began and continued. “One voice” was raised, actually “one unified voice.” Trust was brought into discussion. A Board member social media post was brought up, even though the Board member was not yet on the Board. Diversity of opinion was challenged once a Board vote was made. Board member Fichtenbaum pointed out that he thinks there is an erosion of trust to members and Board more than to Board and staff. [Basically, most of the Board members think that once a vote has taken placed, shut up and fall in line; defend the decision to the public, actives and retirees.]

The succeeding presentation was an “Investment Proposal” by Board members Steen and Fichtenbaum plus former Board member Robert Stein. The presenters requested that the presentation be made with questions at the end. That never happened. Fireworks started immediately. Cliffwater challenged the use of its slides as “work product” and their use. Board members pointed to plagiarism and what would happen in their classrooms. Attacks of who knew whom, how, what, when. Were the presenters’ part of the proposal? What were the presenters getting of value for making the proposal? [Apparently two investment start-up individuals had previously made an Executive Session presentation to the Board. I surmise that at an Executive Session the Board requested Cliffwater vet the individuals and the Board followed Cliffwater’s recommendation.] Strategy or proposal accusations, allegations of unauthorized taping of conversations, transparency, honesty, finger pointing, he said; she said, and much more turned this one-hour allotted presentation into a 3 plus hours fiasco with slides having sources removed and a let’s move on to lunch request ending this portion of the meeting at 2:20 p.m. [It was difficult to keep up. You should sign into STRS and listen to this portion of the meeting. I will personally say that the 65 billion needed to fully fund the strategy/proposal for a return of 4 billion in fees, was a little much for me, but 250 million was another figure out there. The figure used depended on the side being argue, or thrusted in your face. From the strategy/proposal, my understanding banks make a plethora of money by charging fees, the same concept would somehow use/lend STRS general fund moneys for far less risks than the stock market. Wish I could be clearer, but all of us, actives and retirees, should print the presentation slides and listen to this portion of the meeting. Go to www.strsoh.org under “About Us”]

When the meeting resumed, Routine Matters were voted. Under new business, Board member Fichtenbaum made a motion, seconded by Steen, providing a 2% COLA for two years and a reduction of contribution of 1-2% for two years. A motion to table indefinitely was made and passed therefore the first motion was not voted. The last presentation was by a Keith Brainard, Research Director, National Association of State Retirement Administrators, on the “Current State of Pensions in the United States.” Basically, pension funds are struggling with an aggregate funding level of about 73%. The meeting quickly ended after the presentation with closing comments by Board leadership and adjournment. The next Board meeting will be Thursday, December 16, 2021. YOU should try to attend virtually or in person.