Dean Dennis's speech to STRS Board 2/17/22

From Dean Dennis

February 17, 2022

I am Dean Dennis, retiree, STRS Chair for Cincinnati Local 1520-R. I'm one of the Ohio STRS Members Only Forum Moderators, Founder of the Ohio STRS Watchdogs and Member of ORTA's Legislative Committee.

Since last September, I've been asking that our Board Chair have STRS explain the breakdown of the 2021 STRS total investment costs (difference between gross and net returns). They are stated as 12 basis points. The August 2021 STRS Board News shows annual investment costs over a 30 year period are 10 basis points. Problematic is that STRS investment costs differ drastically from other public pension plans.

For instance, investment expert Richard Ennis thinks public pensions investment costs are as high as 110 bps.  The National Conference on Public Employees Retirement Systems states they are around 54 bps. These are significantly higher than what STRS reports. That said, in 2018  STRS's paid consultant, CEM, did report STRS annual investment costs as 36.9 bps in the  STRS Response to Benchmark Financial Services report that was disputing Edward Siedle's claim that the 2018 STRS annual investment costs were probably closer to 60 bps. This is an important conversation because when monitoring a pension system with $95 billion, a 25 bps discrepancy amounts to nearly $28 billion over a 30 year period.

Regarding the COLA, retirees need to be able to plan, making them go year-to-year wondering if there will be a COLA isn't right. Retirees too need to be able to deter plan if they can buy a car or replace a roof. After we retire, our life span is only 18 years so going without a COLA is significant. Over 35,000 retirees have died without receiving the COLA that was promised to them.

Lastly, roadblock statements about the COLA aren't productive. The STRS Communications Director told the press that "a 2% cost of living increase would require doubling the employer contribution rate to about 28% of payroll" recently, the OEA Secretary Treasurer repeated this statement.  Restoring the COLA will cost $13 billion. Amortized over 18 years (life expectancy)  an additional $.76 billion is needed annually.  An 1% increase to the Employer Contribution brings in $121.4 million annually, it seems to me a 6.25% increase will cover the needed $.76 billion.  It's reasonable to raise the Employer Contribution to 20%, it has been set at 14% for 38 years.

Additionally, 20% is still 2-3% below the other non-Social-Security states. OFT has stated support of raising the employer contribution, recently OEA went on record agreeing that the employer contribution needed to be raised. Perhaps the STRS Board can draft a resolution of support and we can all work together and improve the lives of Ohio's teachers by taking this important step to shore up our pension.