Dan MacDonald to STRS Board 5/18/2023: Do not have a fiasco like last year causing the final loss to be substantially bigger than what was first reported.

From Dan MacDonald

May 20, 2023

Public Participation at STRS:  Beware, Government Default, Use Common Sense

Good morning, STRS Board. I am Dan MacDonald, an STRS retiree with 38 plus years of service. I am also the Executive Director of Local 279R, North East Ohio AFT retirees.  

Let’s start with the Budget’s compensation line which shows a 1% decrease in compensation.  I am sure it is correct. I need to point out, and remind the Board, that compensation line for STRS staff is actually up. Last year’s Budget had a one-time $2.1 million added for compensation because of a 27th check. So, the decrease of $618,100 had only a little to do with reduction of 17 staff and lots to do with not having a $2.1 million dollars in the compensation line this year. I would hope that my idea of transparency might some day match yours. There should be no merit-based raise. 

The Sustainable Benefit Enhancement Plan, SBEP 

Three fiscal integrity tests were developed by Cheiron to determine moneys available in the proposed ’24 budget. Outcome: Test one, budget amount available, zero dollars. Test two, budget amount available, zero dollars. Test three, budget amount available, $300 million dollars. Fail one, fail all, budget amount available, zero dollars. Cheiron then proposed that if the SBEP is zero, a de minimis enhancement would not materially impair the fiscal integrity of the system. Huh? This year, budget dollars available: $830,000,000. During last month's board meeting, the investment department reported the General Fund was $500,000 above where the General Fund was July 1, 2022. 

STRS Board Policies, under Funding, states that “Funding Objectives shall include 100% funding” with a sub paragraph – “At 85% or greater, the Board may consider changes that in the determination of the Board’s actuary do not materially impair the fiscal integrity of the system.”

In my mind, $830 million is taking the general fund in the wrong direction. You are the stewards of the pension, I would hope that a de minimis enhancement is taken off the table by your established Board Policies and common sense and your votes, and that we all pray that the federal government does not default, and that the markets improve, so that next year, at this time, some replacement of lost benefits to actives and retirees can happen, and, that the overall life of the fund has substantially improved and not further soured.  To me, this makes more sense.

In conclusion, with the PBI policy, change the date of awards to when the final closure of FY24 is finalized. Do not have a fiasco like last year causing the final loss to be substantially bigger than what was first reported. [We will see how this worked out next month; Board had voted BEFORE my speech.]