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.

Cathy Steinhauser defines "fiduciary" for the STRS Board

From Cathy Steinhauser

September 15, 2022

Cathy Steinhauser, 35 yrs., a satellite teacher w/Pickaway-Ross CTC in the Circleville City School District - Family & Consumer Sciences.

First I would like to welcome our new board members. The membership has high expectations from you. We are confident that you can fill these positions because we voted you in back in May. We have a mess here at STRS that needs to be cleaned up. The leaders of STRS don't think anything is wrong with the system but we know better. We are not stupid as many are now awakened again to the mismanagement, overpayment of salaries and bonuses and outrageous perks that have been taking place more recently in the past 12 yrs. STRS got greedy and spend thrifty during this time and forgot and/or didn't care about their main purpose and job. This actually had been going on for a while and investigations were done and the mess was somewhat fixed. But management got greedy again and things got worse.  The narcissistic, entitlement, status quo attitude needs to end. As a Board, your duty as fiduciaries is extremely important because everything you do affects the teachers you have vowed to protect.  Let me remind you…

A Fiduciary is:

" A person who acts on behalf of another person or persons, putting their client's interests ahead of their own, with a duty to preserve good faith and trust.  Being a fiduciary requires being bound both LEGALLY AND ETHICALLY to act in others best interests." This happens to be the 4th time I've stressed the importance of your position on this Board and I'm getting annoyed at some of you because you shouldn't be on this Board if you keep voting against us teachers!!

We have several board members who think the teacher's contributions, from both active and retired, is theirs to do whatever they want. Voting against the best interests of the teachers took away a COLA that many relied upon because you lied to us when the brochure claimed we would get it yearly. In our present state of economy, many are suffering from your poor decisions. I haven't received a COLA at all since I retired in 2015, even though I was told at my retirement meeting that I would get my first one in 2017. I have to wait another year to get my first one and that is shameful. Giving the STRS staff a 6% raise along with a 5.5% bonus back in June is another example of not being a fiduciary.  And then the Board allowed the investment staff to receive almost 10 million in bonuses is absolutely disgusting! Not to mention, investment staff lost, as was reported, a "mere" 3 billion when it actually was 12 billion!! Meanwhile, teachers have to work longer, have to wait longer before getting their first COLA in years and be at the mercy of the Board when they decide if we will be granted another COLA next year!! This has to stop NOW because it is legally, ethically and morally wrong. Like an abused child, we will continue fighting for OUR institution because you've been caught with your hand in the cookie jar too many times! 

James Carr's FB message for the complicit STRS Board members: If you you're not on the Board to help us, you need to find an exit and leave.

From James Carr

September 15, 2022

To the complicit Board members who still sit on the STRS Board:

If you want to claim that your job is to oversee policy that benefits retired teachers, there are some things you cannot do. More specifically, there are some things you've already done that have to be undone.

You cannot take away a promised annual COLA that tens of thousands of retired teachers already had. A COLA that they have already used as a key determining factor in deciding that they could afford to retire.

You cannot tell active teachers, who are paying an outrageously high 14% of their gross salaries into STRS, that they need to rely on other sources of income to supplement their retirement. It's hard to find other sources when they aren't eligible for Social Security and STRS is bleeding their paychecks dry.

You can't ask teachers, active and retired, to make sacrifices that your own employees and staff refuse to make. When STRS is losing billions of dollars, how in the name of God can you justify 6% salary increases and 10 million dollars in bonuses?

Finally, you can't keep calling STRS an elite public pension fund when thousands of your oldest and most vulnerable members are literally being driven into poverty during the twilight of their lives. Your callous decisions have left them defenseless against inflation that is eating them alive.

You need to listen to Wade and Rudy. You need to listen to the 3 new members. You need to get your priorities straight. If you you're not on the Board to help us, you need to find an exit and leave. Don't wait to be voted out; if you can't help us then please stop hurting us: Resign.

Suzanne Laird to STRS Board: The status quo has got to go

From Suzanne Laird

September 15, 2022

Good Morning, Members of MY Board:

Today, we are here to welcome the sorely-needed new members of this Board.

Finally, our few, honest and trustworthy Board members will have some support!

Your job as new members will not be easy: you may have noticed how current truthtellers have been treated. They've actually been admonished and attacked for calling out the scams, spin, propaganda, gaslighting and downright lies.

Some of our Board appointees have shown themselves to be responsible stewards of the stakeholders' money, but some have simply maintained the status quo. The status quo has got to go.

Those bonuses, awarded last month, must be the very last ones ever granted.

Why? Well, not just because they were a travesty, but because I believe we have a perfect storm coming this winter. A terrible, perfect storm:

The COVID government stimulus checks, which sustained both active and retired teachers through the past two years, are gone.

Inflation is skyrocketing. The stock market is incredibly volatile.

And many retirees, such as myself, will not see our one-time COLA until May or June of next year, while the STRS employees relax and enjoy their raises and bonuses.

A terrible winter of discontent is brewing.

Teachers of Ohio cannot tolerate any more. Those still in the profession (God love 'em), are too financially strapped to retire; those who are retired are financially strapped and may be too frail to go back to work. We need relief and reassurance.

Action items for this new Board:

Condemn the lies.

Curtail all raises and bonuses.

Cut the wasteful spending.

Reduce investment fees.

Freeze hiring any new employees.

The status quo has got to go.

Robin Rayfield to STRS Board: You will be remembered as failures or heroes based upon what you do next.

From Robin Rayfield

September 15, 2022

My name is Robin Rayfield and I serve as the Executive Director of the Ohio Retired Teachers Association.

There has been significant media attention over last month’s granting of nearly $10 million in staff bonuses. STRS staff have repeatedly claimed that last year they added $1.8 billion in net value over their benchmark. I find this claim to be inaccurate.

The majority of this fake outperformance stems from an accounting gimmick which pushed illiquid alternative investment performance from Fiscal 2021, when the alternatives benchmark was their actual performance, into Fiscal 2022.

I encourage Board members to confirm this accounting gimmick by comparing the Alternatives Investments valuation in the 2021 GIPS Report with the Alternatives Investments valuation in the 2021 Annual Comprehensive Financial Report.

This accounting gimmick is separate and distinct from yet another accounting gimmick in Fiscal 2022 which likely delayed the valuation of private equity investments until after bonuses were paid. We will be able to calculate the magnitude of this second accounting gimmick once Crowe completes their annual financial statement audit in the coming months.

Lastly, I would like to provide the new board some clarity around the complex issues facing our pension. STRS has three problems. The first problem is STRS does not have enough money. The second problem is STRS currently bleeds $15 million per day in cash outflow as benefits paid are roughly twice the size of current contributions. The third and most disturbing problem is, the current staff have no plan to fix problem #1 or problem #2. Hope is not a strategy, and the staff’s behavior suggests they don’t think any problems exist except retirees like me drawing attention to these cold brutal facts.

Double digit inflation is ruining retired members’ lives. Being on this Board is not a social activity and these people sitting in front of the glass are employees, not your friends or colleagues. I trust that the board will listen to the membership that voted for change in the election last May.

There is no other room of people coming to solve STRS’s problems. The members expressed You eleven (11) board members will be remembered as failures or heroes based upon what you do next.

Thank you for your time.

James Carr: What were those Board members thinking?

From James Carr

September 13, 2022

I wonder what the complicit STRS Board members were thinking when they unilaterally suspended our promised COLA. I wonder if they even bothered to think about the impact their decision would have on many of our oldest and most vulnerable members, those who are now in their late 80s and into their 90s. Those who retired with comparatively menial salaries. Many of them retired with final average salaries of less than $20,000 a year. The only defense they had against inflation was a 3% annual COLA of $400 or less. These were my peers and their careers were winding down when I first stepped into the classroom back in the mid-1970s.

Many of them are now too old or too infirm to work part time, even if they wanted to.

Did the complicit STRS Board members stop to consider what their decision was going to do to these people's lives? I doubt it. They were too busy trying to figure out ways to spend our money on more important priorities.
Priorities like: How can we find more money to enhance our investment staff's bonuses? What can we do to improve our staff's day care center? How can we improve the security of our parking garage? What fancy new piece of art can we buy to hang on the palace wall?

They should have been asking this question: What can we do to make the lives of these elderly teachers more comfortable as they enter their twilight years? The Board's indifference simply turned this vulnerable group of retired teachers into unnecessary casualties. In military lingo, they have become collateral damage.

Robin Rayfield: “With three new board members coming to the STRS board, retired teachers across Ohio are hopeful” Rayfield continued. “We’re hopeful that STRS will take the drastic steps needed to rebuild trust, bring needed transparency and deliver on the promise to provide a safe and secure retirement.”

From ORTA

Press Release

August 30, 2022

PUBLIC RECORDS SHOW RECENT STRS EMPLOYEE BONUSES AVERAGED

$105,000 PER EMPLOYEE

 State Teachers Retirement System awarded one employee a nearly $375,000 bonus while five other employees were awarded more than a quarter million dollars in bonuses

COLUMBUS, OH – After the State Teachers Retirement System of Ohio (STRS) approved nearly $10 million in employee bonuses after losing $3 billion last year, public records obtained from STRS show that the average employee received a $105,000.00 bonus and six employees received bonuses of more than a quarter million dollars.

“The average high school teacher in Ohio only makes about $60,000,” Robin Rayfield, Executive Director of the Ohio Retired Teachers Association said. “To know that there are STRS employees who are getting bonuses five or six times more than an Ohio teacher makes in a year is insulting.”

The highest STRS bonus paid was $372,578.45 paid to the director of the western region. That employee also received a salary of $308,260 meaning that a single STRS employee was paid $680,838.45 or more than ten times what an average Ohio teacher makes.

Next month, ORTA-endorsed STRS board members who won election to the board in May will take office. Those newly elected members— Liz Jones, Julie Sellers and Steve Foreman—overwhelmingly defeated incumbents in May by advocating for serious reform at STRS.

“With three new board members coming to the STRS board, retired teachers across Ohio are hopeful” Rayfield continued. “We’re hopeful that STRS will take the drastic steps needed to rebuild trust, bring needed transparency and deliver on the promise to provide a safe and secure retirement.”

Robin Rayfield's rebuttal to Bill Siegferth's published criticism of the Ohio Retired Teachers Association

https://www.beaconjournal.com/story/opinion/columns/2022/09/11/ohio-strs-failing-retired-teachers-with-broken-promises/66685023007/

Ohio's retired teachers deserve much more from STRS

Akron Beacon Journal

September 11, 2022

Robin Rayfield,Guest Columnist

I was sad, but not surprised, to read Bill Siegferth’s column last week criticizing the Ohio Retired Teachers Association’s efforts to fight for real reform and change at the State Teachers Retirement System.

I was sad, because the poor management and failing investments strategies at STRS is a real issue hurting thousands of retired teachers in Ohio who are struggling with record inflation.

I was not surprised, because the author has an unfortunate history of defending the status quo to protect his cronies’ power and influence.

Teachers were promised and expect a dignified retirement — any denial is gaslighting. The issue at hand is how STRS has broken this promise of a safe and secure retirement for our educators.

Faced with massive unfunded liabilities resulting from gross mismanagement and failed investment strategies, STRS has chosen to cut teacher benefits, make riskier investments and pay astronomical fees to Wall Street.

Years ago, teachers were forced to pay more and work longer for a smaller pension benefit than what was promised. Specifically, their individual contributions increased from 10% to 14% and the minimum years of service to retire rose from 30 to 35 years.

And then in 2017, STRS stopped cost-of-living (COLA) increases. With inflation reaching upward of 9% today, retired teachers living on fixed incomes are struggling even more. It’s a double-whammy that’s punched a gigantic hole in their budgets.

But in that same time, STRS has awarded its employees more than $50 million in performance bonuses.  With inflation at a 40-year high, awarding these bonuses is a slap in teachers’ faces.

How big of a slap you ask? Well let’s assume an Akron City teacher retired in 2017 with an expected pension benefit of $56,000. With the loss of their COLA in 2017, our teacher has cumulatively lost around $25,200 in benefits to date. In 20 years, that number balloons to $352,800 in lost benefits. Mr. Siegferth may be okay with teachers losing out on hundreds of thousands of dollars, but I assure you most teachers are not. Just ask the more than 40,000 STRS members who are engaging in Facebook groups advocating for reform.

And these calculations can be done for every retired teacher. In fact, you can click here to visit our website to see for yourself how STRS mismanagement of fund resources is affecting all retirees.

But the good news is that teachers are speaking up and making their voices heard. Three newly elected ORTA-endorsed STRS board members take their board seats in just a few weeks. Those newly elected members — Liz Jones, Julie Sellers and Steve Foreman — overwhelmingly defeated anti-reform incumbents in May by advocating for change and accountability.

Teachers can be excited that these new board members who care about retired and active teachers will be in place at the next meeting. Teachers can be hopeful that STRS will once again soon be looking out for the best interests of Ohio teachers.

The new board must take the drastic steps needed to rebuild trust, bring needed transparency and deliver on the promise to provide a safe and secure retirement.

Robin Rayfield is the executive director of the Ohio Retired Teachers Association.

James Carr's advice to active teachers: Base your retirement on the premise that STRS does not honor long term commitments.

From James Carr

September 12, 2022

Just a thought I'd like to relay to active teachers.  I am not a financial planner and I'm not qualified to offer advice about how you should plan for your future retirement. I do, however, have this piece of advice about what not to do.

Do not plan your future based on promises and commitments made by STRS. Not even if they are spelled out in writing. There are thousands of retired teachers right now who regret retiring when they did based on the false promises that were made by STRS. When you are promised an annual COLA and it's taken away after you retire, it's impossible to mitigate the damage that's done.

Base your retirement on the premise that STRS does not honor long term commitments. When it comes to priorities, teachers are nowhere near the top of the STRS checklist. Not even close. I hope the new Board members are able to change those priorities because what we have had for too many years is an organization that operates without a conscience. They couldn't care less about the havoc their decisions have caused in our lives.