Some straight talk about STRS from ORTA Director Robin Rayfield: 'Perhaps the special audit currently under way from the office of the Auditor of State will force STRS to share its dirty secrets with the people making contributions'

From ORTA Newsletter

September 2022  

Message from the Executive Director  

STRS News

The STRS board will meet on September 15 this month. Please note this will be the first meeting for the ORTA-endorsed candidates who won seats in May of this year. We hope that the new makeup of the board will bring about change at our retirement system. Obviously, the changes will be incremental. The new board members will have to earn the respect of any open-minded board members before their full impact will be materialized.

It is good to know that Wade Steen and Rudy Fichtenbaum will not be ‘lone voices’ in the wilderness! Some things that I hope will be discussed in greater detail:

•  Increased transparency

•  Shared sacrifice

•  Moving away from high cost, risky investments to safer investments that produce better results

•  Focus on eliminating lavish expenditures (health club, day care center, bonus payments that no one understands, employee perks that exceed anything educators could imagine

Recent Emphasis on Letters to the Editor

ORTA has been asking that members reach out to STRS board members and media members to help spread the word that our system is in dire need of a cultural change. This effort has been successful as evidenced by several news paper outlets around the state publishing letters from ORTA members (and other STRS retirees) offering a picture of a system that works in the best interests of its employees at the expense of its contributors. It is important to note that there are ORTA members and other retirees that do not support our efforts to reform STRS. For their own reasons, they are satisfied with the status quo and feel ORTA’s efforts are not well intended. That is what makes our country and society so great. We can disagree and not be disagreeable. I have received many contacts by phone and email for a response to the opinion piece in the Akron paper from an ORTA member that does not think our efforts are justified. I am working on a formal response, however, here are my initial thoughts.

What is important to note here is that everyone is entitled to his/her opinion about how well STRS is managing our pension. I receive information from a variety of sources including STRS, Edward Siedle, Chris Tobe, and others. While I agree that the rhetoric has become ‘hot’ I remain convinced that the criticism of STRS is warranted. I think a couple of points are critical to this discussion:

STRS did promise a COLA. The Ohio Revised Code (3307.16) from 2014 states clearly in the first sentence that the retirement board shall increase the benefit by 3 percent…. This is not permissive language. This is a promise to all retirees of STRS. To simply change the law after people retired is breaking a promise and that is why people do not trust the leadership at STRS.

Educators are working longer. The requirement to receive full retirement was increased to 35 years from 30 years. Can the STRS board retroactively reduce our retirement to something less because we didn’t work the new minimum of 35 years? I think not.

The individual contribution rate is now 14%. Can retirees have pensions reduced because we did not pay 14%? Again, this is a foolish argument. We paid what we were required to pay at the time we worked.

STRS has paid outrageous bonus payments regardless of whether our investment staff earned money or lost money. Or whether they beat a benchmark or lost to a benchmark. A review of the investments over the last 10 years indicates that we would have been better off if we had simply invested our money passively in an indexed fund and not paid 125 people to try to beat the market.

Regarding the ‘worst deal in America’ comment. I stand by that statement today. Pension systems use a calculation referred to as ‘normal cost’. STRS publishes their ‘normal cost’ figure each year. In 2020’s data the normal cost was listed as 11.7%. That reflects the value a contributor receives for his/her contribution for that year. Normal cost can go or down each time it is calculated. The statement was true using the most recent data (2020). New estimates of normal cost (2021) show a normal cost of less than 13%. Using the most recent data the normal cost remains lower than the 14% contribution rate resulting in less value earned than the contribution. STRS is the only public pension system in the U.S. that has a normal cost that is less than their individual contribution rate. STRS is the only system with this issue. Therefore, as the only system where people making contributions receive a benefit value less than their contribution, we do have the worst deal in America.

Many of the criticisms of STRS that ORTA has made are listed in the Edward Siedle report that was funded by a grassroots effort of ORTA, the STRS Members Only Facebook Forum, and the STRS Watchdogs Facebook Forum. Most notable is the lack of transparency from STRS. STRS has not shared the financial records asked for by Mr. Siedle. Perhaps the special audit currently under way from the office of the Auditor of State will force STRS to share its dirty secrets with the people making contributions.

Dr. Robin Rayfield is Executive Director of the Ohio Retired Teachers Association and a staunch advocate at STRS and around the state for ALL teachers, retired and active.