The Mess at STRS: Why we need Pat Davidson on the STRS Board

The following information was compiled from two Facebook Groups, Ohio STRS Member Only Forum and STRS Ohio Watchdogs, to educate ACTIVE TEACHERS regarding:

THE MESS AT STRS

ARE YOU AWARE?

• STRS claims to be “one of the nation’s premier pension systems,” yet all retirees have gone at least five years without a COLA (Cost of Living Adjustment). For those who retired prior to 2013, the majority have gone without their contractually agreed 3% COLA for nearly 10 years.

• Active teachers receive the least for their employee contribution upon retirement when compared to other educators in the US. Actives must pay 14% and work additional years, only to receive a reduced retirement benefit based upon five years Final Average Salary.

• STRS Investment staff are paid millions of dollars annually in bonuses, while our benefits are cut. STRS’s Chief Investment Officer, Matt Worley, earned a $446,481 performance- based incentive (PBI) last year in addition to his $373,000 salary = $819,481 annual income.

• Ohio law requires a fiduciary audit of STRS every ten years; however, it took 16 years before the last state audit was completed. Ohio State Auditor Keith Faber found that STRS missed out on $90 billion in gains from 2009-2021 due to poor investment strategies by STRS’s investment staff.

• STRS failed to implement key findings from this 2006 fiduciary audit (requiring more auditors, etc.).

• STRS retired members were so upset with the lack of transparency by STRS and the loss of COLA that they crowd-funded $75,000 of their own money for a forensic audit. OFT contributed $10,000. Hamilton County Retirees contributed $15,000. OEA was asked to donate, but they DECLINED.

• The 2021 forensic audit found that STRS overstates performance and understates expenses.

• It also found that STRS in-house investment strategies costs members $400 million annually.

• It revealed that STRS doesn’t know, or won’t tell, the value of its “alternate investments,” which have hidden fee structures. Warren Buffet repeatedly warns against these alternate investments, preferring simple index fund investing (which would have earned STRS $90 billion from 2009-2021).

• This forensic audit also determined that STRS is not transparent in its overall investments.

• In one alternate investment alone, Panda Power, STRS lost $525 million in 2018.

• The Panda Power loss was not publicly reported to the Board until three years after Panda Power’s bankruptcy, and only came to light due to the retirees’ crowd-funded forensic audit.

CONCERNS EXPRESSED TO GOVERNOR DEWINE BY RETIREE M. KAY TAYLOR AND OTHERS:

• STRS investment practices: Exorbitant expenses including consulting fees and hidden fund fees, high risk investment practices, losses (e.g., Panda Power, Infinity Q, etc.), and lack of transparency.

• STRS staff salary increases and bonuses: This includes the 6% raise to STRS employees and more than $10 million in performance-based incentives (PBIs) to investment staffers in 2022.

• STRS 2006 fiduciary audit findings: STRS ignored directives from the Ohio Retirement Study Council whose job is to provide oversight to the five state pension systems.

• STRS Board and staff member travel: This includes “international and alternative investment due diligence trips to England, Turkey, China and Japan” (September 2019 STRS Expense Notes) and trips to Japan and India (November 2019 STRS Expense Notes).

• Denying access to records: Wade Steen, STRS Board member/appointee of the Governor’s office, has been denied access to records by STRS that would allow him to meet his fiduciary obligation. He requested a special meeting of the Board in past years to discuss restoration of the COLA and reduction in active teacher contributions. The requested meeting still has not taken place.

• Benchmark Financial Services forensic auditor Ed Siedle and attorney Marc Dann have been denied access to STRS public files. STRS refuses to allow them to review our fund management for us.

• STRS has regional real estate offices in San Francisco, Atlanta, Chicago, and New York, staffed with numerous STRS employees. How well are these investors doing for us? Here is an example: STRS paid the highest amount per square footage ever recorded in Dallas history ($700 per sq. ft.) in 2019 for a downtown high-rise, at $180 million; in 2018, that same building had been sold for $46 million.

PLEASE NOTE:

• STRS active members contribute 14% of their salary to the pension fund, among the highest contribution rate for teachers in the nation. The combined 14% from active teachers and matching 14% from schools is the third highest rate in the nation. (FYI: Missouri and Nevada are slightly higher).

• Active teachers are faced with increased years of service to become eligible for unreduced retirement benefits (35 years of service at any age or 5 years of service at 65 years of age).

• Newly retired Ohio teachers must wait five years to receive a COLA. Former retirees’ lifetime 3% COLA was frozen in 2013, reduced to 2% in 2014-2016 and eliminated in 2017. In 2022, they were provided a one-year only 3% COLA with no promise to them or to actives for any future COLA. Actives have no guarantee that they will ever receive a COLA in their retirement years.

• STRS has a fiduciary responsibility to over 500,000 members who provide years of service to Ohio schools and who may be entirely financially dependent on their STRS pension and COLA.

• THE STATE OF OHIO AUDITOR, in a December, 2022 special audit, recognized that STRS did not keep up with the S&P 500 from 2009-2021, which could have generated $90 billion for the fund.

A SIMPLE COLA CHART PRIMER FOR BEGINNERS: Losses due to the loss of a 2% COLA; Ohio state law lowered the COLA from 3% to 2% for 2014-2016, then eliminated it.)

BRING ABOUT CHANGE BY VOTING FOR BETTER REPRESENTATION ON THE STRS BOARD!

The next STRS Board election is this coming spring, 2023, and incumbent Board member Arthur Lard (active teacher member) needs to be shown the door. He has voted for huge, annual, multi-million dollar bonuses for STRS staff, continued pay increases for employees (6% in 2022) and NO COLA for retired teachers. He has not imposed even ONE SACRIFICE for STRS. If you do not vote, we will all continue to suffer. The spring 2023 election is for active teachers only.

VOTE FOR PATRICK DAVIDSON, REFORM CANDIDATE, FOR THE STRS BOARD!

Join the Ohio STRS Member Only Forum and STRS Ohio Watchdogs on Facebook (website: https://www.strsohiowatchdogs.com/). Join ORTA (Ohio Retirement for Teachers Association; active teachers can join for a mere $10). These groups will provide information and help you keep apprised of this situation.