Friday, August 19, 2022

Toledo Blade: Teachers’ pension fund gives bonuses; action follows investment losses

Toledo Blade

August 19, 2022
Teachers’ pension fund gives bonuses
Action follows investment losses
BY JIM PROVANCE BLADE COLUMBUS BUREAU CHIEF
COLUMBUS — The Ohio pension fund for teachers on Thursday [August 18] overwhelmingly approved nearly $9.7 million in performance bonuses for its investment team in the face of $3 billion in losses and protests from some retirees.
In all, the State Teachers Retirement System saw the size of its total asset portfolio shrink by $7.2 billion over the last fiscal year to $87.6 billion.
That’s down from just under $95 billion, where the fund began the fiscal year after an unusually robust performance the previous year.
About $4 billion of the loss came directly from operating losses as employee and employer contributions into the fund fell well short of the $7 billion paid out in benefits. The rest was due to investment losses.
The bonuses angered some retirees who had gone a number of years without cost-of-living increases. They have argued that the fund has routinely overpaid in bonuses and fees, even in good years.
“Our [bonus] plan is an incentive for our investors to outperform the benchmark...,” said the board’s chairman, Ron McFee. “It saves our fund money, and it mitigates losses in a downturn. Our report from our consultants this afternoon...reiterated that even in a down year, our managers outperformed the index to save this fund $1.8 billion in losses, so $9 million versus $1.8 billion in losses is why that [incentive] program exists.”
Board member Rudy Fichtenbaum, a retiree, was one of two “no” votes.
“The teacher members feel the same way about the promises made to them, and those promises have been broken,” he said. “If STRS is supposed to be a partner with members to provide retirement security, if that’s our mission, that promise has been broken.
“When inflation has gone up 20 or 22 percent since 2017, and the best that we can do is a one-time COLA which most members will not receive until 2023, that’s not keeping the promise...,” he said. ”The members have made a lot of sacrifices. I think it’s time that investment staff has to make some sacrifices.”
Investment losses for pension funds were inevitable given the stock market’s dive early this calendar year, at roughly the halfway point of the fiscal year. As of December, investments were up 7.1 percent, but the year finished down by 3.6 percent. That compares to five and 10-year average gains of 8.6 percent and 9.3 percent, respectively.
Previously strong performance had at one point boosted the investment portfolio to a peak of $98 billion, playing a role in the board’s decision this year to approve a one-time 3 percent COLA for retirees. That will play out despite the recent losses. The COLA will cost the system about $150 million more a year.
The system counts on a reliable investment return to bridge the gap between what active teachers and employers pay into the system and what is paid out.
The fund has noted that its investment team still did a better job than its benchmark peers, which lost an average of 5.6 percent. The fund has generally assumed a 7 percent annual return.
One brighter spot was a positive return on the fund’s real estate and private equity investments.
The stock market has since made somewhat of a comeback. As of the end of July, one month beyond the end of the fiscal year, the total value of the fund hand had rebounded to $90.6 billion, ”a very good month,” said Matt Worley, STRS chief investment officer.
Nick Treneff, STRS spokesman, said investment staff bonus decisions are based on one-year and five-year performance with the formula more weighted toward the five-year statistics.
Cathy Steinhauser, a retiree after 35 years with Circleville City Schools, urged the board to reject the bonuses or at least postpone the vote.
“You keep adding more debt to our pension system when you can’t even pay a regular COLA yearly for retirees.,” she said. “A one-time [COLA] isn’t good enough. The investment staff just lost $3 billion. Wow, you’re going to reward them after they’ve lost $3 billion?”
STRS board member Dale Price, an active Toledo Public Schools teacher, supported the incentives. He pointed to decisions made to improve the fund’s long-term solvency.
“We voted to cut our health care,” he said. “We voted to make ourselves work longer. We voted to eliminate a COLA opportunity we might have, all for the purpose of preserving the pension fund. [We are] a fiduciary not only for the 70-year-old retiree, the 52-year-olds very closing to retiring, but more importantly the 22-year-old college graduates that are just starting their teaching career.”
Read the full article here.

Press Release from the Ohio Retired Teachers Association August 18, 2022

STRS BOARD IGNORES WIDESPREAD OUTRAGE; VOTES TO PAY ITS EMPLOYEES NEARLY $10 MILLION IN BONUSES

State Teachers Retirement System voted 9-2 on Thursday to award $9.66 million in bonuses after losing $3 billion in fiscal year 2022
August 18, 2022
COLUMBUS, OH – Today the State Teachers Retirement System of Ohio (STRS) voted 9-2 to approve $9,660,000.00 in employee bonuses, the highest ever for the fund. The vote came even after retired teachers and others raised significant concerns to the board during the public comment period of the meeting.
“Today, nine members of the STRS board told everyone that they don’t care about retired teachers,” Robin Rayfield, Executive Director of the Ohio Retired Teachers Association said. “Approving $10 million in bonuses while retired teachers dealing with record inflation struggle to make ends meet leaves no doubt— it’s time for a complete turnover at the top. ORTA is thankful for the valiant effort of Dr. Rudy Fichtenbaum and Mr. Wade Steen for standing up for teachers and voting against the bonuses.”
Today’s STRS board meeting was the last meeting before three newly elected, ORTA-endorsed STRS Board members take office. Those newly elected members— Liz Jones, Julie Sellers and Steve Foreman—overwhelmingly defeated incumbents in May by advocating for reform.
“As disappointing as today’s vote was for retired teachers, we’re excited that new Board members who care about retired teachers will be in place at the next meeting,” Rayfield continued. “Teachers across Ohio are optimistic that STRS will once again soon be looking out for the best interests of Ohio teachers.”

Robin Rayfield to STRS Board 8.18.2022: A culture of change at STRS is coming. You can be on the right side of this change or on the wrong side of this inevitable change.



Dean Dennis to STRS Board 8.18.2022: I hope our Board defers the "Bonus Vote" to the incoming Board as a simple matter of courtesy. If a vote is taken, only a "no" vote or an abstention is appropriate. I hope our elected members don't turn their backs on their people.

 

Cathy Steinhauser to STRS Board 8.18.2022: Being a fiduciary requires being bound both LEGALLY AND ETHICALLY to act in others' best interests'

 

Dan MacDonald to STRS Board 8.18.2022: I am sure AETNA's approval ratings are as high as STRS's award-winning honors that are constantly touted. Both need to look at how they are really serving their clients.

 


Marvin Stotz to STRS Board 8.18.2022: Remember, this is YOUR legacy, and as the Bible says, "You will be judged in one way only, how you treat the least of these" and "Vengeance is mine, says the Lord!"

 



Wednesday, August 17, 2022

And WHO comes to the rescue of the 'poor' STRS investment staff? Who else but a member of the OEA Board of Directors (Dan Greenburg) - no surprise there!

Station WTOL11 (Toledo)

August 17, 2022
System employees up for multi-million dollar bonuses after $3B loss
STRS said their financial employees deserve bonuses after mitigating the economic damage, but teachers come out with only losses.
Rudy Fichtenbaum said he doesn't understand why the State Teachers Retirement System of Ohio is celebrating after teachers statewide suffered a major loss.
"Giving record-high $10 million dollar bonuses for only losing $3 billion dollars last year would really be an insult to every retired teacher who's struggling with inflation," Fichtenbaum, an STRS board member, said.
In June of 2021, the Ohio pension fund was valued at about $95 billion, but by March of 2022, it has shrunk to nearly $92 billion.
Fichtenbaum said this loss could mean teachers' pensions might not be able to meet the cost of living in the future.
"They're going to be hurting, and I think it's going to be a problem going forward because teachers are going to see that the pension made a promise to them and didn't keep it," he said.
Dan Greenburg, a teacher at Sylvania Southview High School said he's an outsider trying to look in and is unsure how he feels about the bonuses.
"I'm trying to give the benefit of the doubt and trying to understand both sides of it," he said.
While Greenburg, the president of the Sylvania Teachers' Association, said he understands the frustration that current and retired teachers might feel, STRS has stated the loss of revenue was an inevitable side effect of the spiraling economy and the bonuses are a reward for staff who helped prevent the losses from being even more severe.
Greenburg said if the people investing their money are making smart decisions, he wants to help keep them around.
"I don't want us to get into a space where we're losing quality employees who are investing 90-plus billion dollars for all of us," he said. "I don't want us to compromise quality for the sake of cutting salaries."
Fichtenbaum said he can't say for certain how Thursday's vote will go, but knowing the members of the board, he expects the bonuses to pass.
No matter what, teaching is a thankless, low-paying job, he said. But he will continue fighting to make their retirement worthwhile.
Read the full article with the accompanying video clip here.

A special message from the Ohio Retired Teachers Association 8/17/2022

From ORTA

August 17, 2022

Did You See the News?

The Columbus Dispatch: 

After losing $3B, STRS pension staff due to get $9.6M bonuses. Retirees say no way.

August 16, 2022

The Columbus Dispatch

A group of retirees is asking the State Teachers Retirement System of Ohio to reject a plan to pay $9.66 million in performance bonuses to investment staff.

“In the face of the worst inflation in 40 years, there’s nothing more tone deaf and wrong than STRS paying nearly $10 million in as a reward for losing $3 billion last year. The STRS board should vote no on these bonuses," said Ohio Retired Teachers Association Director Robin Rayfield in a written statement.

The state's second largest public pension system is expected to consider the bonus pay at its meeting Thursday.

Read Full Story on Columbus Dispatch

Ohio’s teachers pension lost an estimated $3 billion in the last year. On Thursday, its employees are expected to get nearly $10M in bonuses.

August 16, 2022

The Cleveland Plain Dealer

COLUMBUS, Ohio - The board governing the Ohio’s teacher pension fund will consider a proposal on Thursday that could award $9.7 million in performance-based incentives to its investment associates, despite having lost $3 billion in the first 11 months of the year.

The fund for the State Teachers Retirement System of Ohio, or STRS, was valued at $94.8 billion June 30, 2021 and $91.8 billion on May 30 of this year, according to the most recent asset mix and portfolio performance report, posted online in mid-June. That’s a $3 billion loss.

...

If the board ultimately awards the fully proposed amount of $9.7 million, the bonuses would be the highest incentives STRS has given, Rayfield said.

“They lost money this year, and now they’re going to pat themselves on the back with their biggest bonus,” he said.

Read Full Story on Cleveland.com

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ORTA is Fighting for our Pensions!

The Vote will take place tomorrow, Thursday, August 18th.

ORTA provides a livestream video on our Facebook page so you can watch.

Follow Us Here

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We need teachers all across the State to understand what is happening.

Please send this to your friends, family and former colleagues.

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Colleen Marshall continues to investigate the mess at STRS

From NBC 4

Columbus, OH

August 17, 2022
Ohio teachers’ pension fund investors set for bonuses
By Colleen Marshall
COLUMBUS, Ohio (WCMH) – Retired teachers in Ohio have not received a cost of living increase in their pensions for years, even though they were promised an annual increase.
The group managing the State Teachers Retirement System (STRS) will vote Thursday on huge performance bonuses for the investment staff.
Retirees are furious that they are going without while bonuses are planned for pension fund managers who lost $3 billion in the last year. 
“I feel like I’ve been cheated out of the last six years of the income that I should have had,” said retired teacher Bee Lehner. “I’ve been taken advantage of and maybe lied to.”
“If the STRS board votes to give this record high $10 million in bonuses to its employees for only losing $3 billion last year, I feel like they’re going to be spitting in the face of every retired teacher who’s struggling with out-of-control inflation,” said Steven Foreman, a newly elected member to the STRS board. 
Foreman is an active teacher who joins the board next month, which is too late to try to block the bonuses.
“Since 2017, STRS has cut benefits to teachers while giving themselves these lavish pay raises and tens of millions of dollars in bonuses,” he said. “They’ve done all of that while breaking their promises to teachers and allowing a multi-billion shortfall to grow out of control.”
STRS spokesperson Nick Treneff seems to look at the investment numbers differently.
“We have about 70 percent of our assets internally managed,” Treneff said when asked about paying bonuses in the face of such a financial loss. “And we know that internal management saves us more than $100 million a year.”
Treneff said the investors outperformed the investment benchmarks set by the board.
“So investment managers that STRS, by and large, provided $1.8 billion, that that wouldn’t be in the coffers today without their outperformance,” he said, adding that in the fiscal year 2021, STRS had its best return on investment in 38 years.
According to the asset mix and portfolio report, the fund was valued at $94.8 billion on June 30, 2021; on May 31, 2022, it was down to $91.8 billion – a $3 billion loss.
For a massive number of retirees who went years without their promised annual increase, that’s a massive number.
“That promise is not being kept to membership and I feel like that’s wage theft,” Foreman said.
“I agree with you 100 percent because I’ve heard people talk about they had plans to retire and maybe move into another kind of housing or purchase something, and now that’s off the books,” Lehner said.
As far as what’s to be on the books for Thursday’s vote? Losses totaling $3 billion and $10 million in board-approved bonuses.
“That’s probably the worst part of it,” Lehner said. “It seems like a train that won’t stop.”
The current STRS board did approve a one-time 3 percent cost-of-living adjustment for retirees. Treneff said bonuses to the 100-member investment staff are based on a five-year performance model.
A spokesperson for the Ohio Retired Teachers Association said over the last 10 years, STRS investments underperformed the S&P 500 by $8 billion.
View the article and video clip here.

Diane Ravitch: What part of the fund’s performance deserves a bonus?

From Diane Ravitch's blog 

August 17, 2022
Ohio: Teachers’ Pension Fund Loses $3 Billion, Fund Employees Will Get Bonuses
This is bad news for retired teachers in Ohio. Their pension fund lost $3 billion in the market, but the fund is set to award $9 million in bonuses to its employees.
Sure, the market’s down, and everyone is losing money. But this doesn’t seem like the right time to hand out performance bonuses.
COLUMBUS, Ohio – The board governing the Ohio’s teacher pension fund will consider a proposal on Thursday that could award $9.7 million in performance-based incentives to its investment associates, despite having lost $3 billion in the first 11 months of the year.
The fund for the State Teachers Retirement System of Ohio, or STRS, was valued at $94.8 billion June 30, 2021 and $91.8 billion on May 30 of this year, according to the most recent asset mix and portfolio performance report, posted online in mid-June. That’s a $3 billion loss.
What part of the fund’s performance deserves a bonus?
Read the article here.

An STRS retiree writes to the STRS Board about the upcoming bonus vote for STRS staff members

August 17, 2022

 You are not listening to us!

1.   McFee, Rhodes and Walters: We voted you OUT!

2.   The other board members who are not listening, we will vote you out.

3.   We hired an expert consultant to look at the available data.  He says STRS is overpaying fees on investments.

4.   STRS MANAGEMENT AND STAFF DO NOT DESERVE BONUSES UNTIL RETIREES GET COLAS.

5.   Don’t you understand?  We come down every month to tell you that we have no confidence in the STRS Board, management, and investment strategy.

6.   Do not vote for the bonuses.  It will show some backbone and that you understand the need to reform.

Tuesday, August 16, 2022

Rudy Fichtenbaum on why he will be voting NO on bonuses for STRS staff at the 08/18/2022 STRS Board meeting

Why I Will Be Voting No 

By Rudy Fichtenbaum 

"In any partnership, whether it is a business partnership or a marriage, the partners rise together or sink together. Have you ever heard of a successful partnership where one partner gets rich, and the other goes broke? No! But the STRS senior staff sees things differently. They rise while the members sink. The STRS propaganda machine just keeps on putting out 'good news' while ignoring the suffering of many retirees and the concerns of active members."

August 16, 2022 

A pension is a promise! It is deferred income. That means a pension is part of the compensation that is promised to teachers along with the salaries they receive when they become teachers. When you promise to pay someone for doing a job and then renege on that promise after the job is done, it is wage theft! "The mission of STRS Ohio is to partner with our members in helping to build retirement security.” If that is the mission, then STRS is failing, since it has not provided "retirement security”. 

In a cynical attempt to aid incumbent Board members win re-election, the Board recently voted for a one-time 3% increase that most members will not see until 2023. Members saw through this sham and voted for change. 

STRS members who have retired in 2013 have seen their purchasing power decline by 27.2% according to the Bureau of Labor Statistics (BLS) inflation calculator. Similarly, those who retired before 2013 have seen their purchasing power decline by 20.9%. Given the existing language in Ohio Revised Code and the losses experienced by STRS over the last six-months, it is a folly to think that a permanent COLA will be restored anytime soon without some major changes. 

In any partnership, whether it is a business partnership or a marriage, the partners rise together or sink together. Have you ever heard of a successful partnership where one partner gets rich, and the other goes broke? No! But the STRS senior staff sees things differently. They rise while the members sink. The STRS propaganda machine just keeps on putting out “good news” while ignoring the suffering of many retirees and the concerns of active members.

It is easy to look back and say that if there are problems, they were caused by bad decisions in the past and the people who made those decisions are gone. But many of the senior staff have been at STRS for years. Moreover, today’s teachers and retirees had no real say in the decisions that were made but they have been left holding the bag. If we are partners and there is a problem, then there needs to be shared sacrifice until the problem is solved. The members have given, but the senior staff just keeps taking. If the staff want to be partners, then they need to 1) acknowledge that we have problems and 2) come up with some solutions to fix them. At the end of the day, the pension needs more money and needs to take less risk and it is up to the senior staff and all their well-paid consultants to come up with ideas as to how the pension can come up with the money to meet its promises. 

If staff want bonuses, then they need to demonstrate to members that they can fix the problems of the pension, not just beat some made-up benchmarks, which reward them even when the pension loses money and while the pension fails to meet the promises made to members. 

That is why I will be voting against the bonuses.

Dr. Rudy Fichtenbaum is Professor Emeritus of Economics at Wright State University. He is an elected member of the STRS Ohio Board, filling a retiree seat since September 2021. He and Wade Steen have been outspoken Board members pushing for reform on behalf of both active and retired teachers, especially in their opposition to Board members who have followed the dictates of OEA instead of advocating solely for the STRS stakeholders.

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