ORTA's Executive Director, Robin Rayfield, nails it on the STRS bonus setup with just three words: "What a scam!" (Bill Neville, are you listening?)
From Robin Rayfield
August 28, 2023
Update to ORTA members on the August 17, 2023 STRS Board meeting
STRS Meeting Takeaways
Greetings ORTA Faithful!
As you already know, the STRS board met last week (August 17th). I thought it would be important to offer my takeaways from the meeting on August 17, 2023.
STRS made PBI (bonus) payments to staff AGAIN. This year the bonus payments total $8.5 million. What is so problematic with these payments is that STRS investment staff failed to meet the benchmark for earning these bonuses. At the risk of getting too technical, STRS stated that their total return for the 2023 fiscal year was 7.68%. This return number, however, is a gross number and does not include the fees, costs, and expenses for the largest part of our portfolio. STRS staff claim that this gross number exceeds the total fund benchmark of 7.62%. However, the NET return for 2023 was 7.55%. 7.55% is LESS than the benchmark of 7.62%. This information (provided by STRS) states very clearly that our investment staff did not meet the benchmark.2. It is abundantly clear that the STRS board has four members that see the need for reform. Fichtenbaum, Sellers, Foreman, and Jones voted against paying the bonuses. The other seven members did not vote against the payments despite Dr. Fichtenbaum’s comments that the performance of the investment staff did not meet the benchmark net of fees and costs. In fact, Dr. Hunt (appointed by the superintendent of schools in Ohio, i.e., Gov DeWine), Mr. Price (active STRS member), and Mr. Bishop (appointed by Gov. DeWine) all took time to speak about the greatness of the investment staff. Appointed members Herrington, Lanza-Falls, and elected members Correthers, and Lard all voted for paying bonuses despite not beating the benchmark net of costs.
3. The current makeup of the board (as of September 2023) will have five reform minded members and six members that ignore facts and simply go along with whatever STRS staff recommend. Remember that DeWine’s firing of Wade Steen and replacement by a pro-STRS staff board member Bishop is being challenged in court by Mr. Steen. ORTA has established the Pension Defense Fund to support STRS members’ interests. Mr. Bishop was clearly appointed to keep a majority of board members on the side of paying bonuses that are unearned and maintaining the status quo on the retirement board.
4. The STRS board is clearly divided between two groups. The current majority of members support whatever STRS executive director Neville recommends. These people know it is not acceptable to pay bonus on numbers that are ‘gross of fees and costs.’ The other group are reform minded people and challenge STRS leadership when necessary.
5. The PBI policy was amended at the September 2023 meeting, but not in a meaningful way. The board adopted staff-suggested changes to the PBI policy that will ensure that the bonus train will continue for investment staff through 2024. Once interesting fact is that this marks 35 years of the PBI program - no person could recall a time when STRS investment staff have not received bonus payments. I guess when you set your own benchmark, it is quite likely that you will beat that benchmark. And just in case the staff do not meet the benchmark (such as the most recent year), the PBI program protects staff bonuses by using gross returns to overstate their asset class performance. Remember, when gross numbers are used, the membership is paying a bonus on money the teachers will never see. If we made 10% but paid 3% in expenses, our net return is only 7%. STRS is paying bonuses on the “gross” return. We should only pay bonuses on the net return that the pension fund receives. What a scam!
6. Other notable events were a five-hour executive session that produced no obvious board action and public complaints concerning the pending closure of STRS daycare. The board briefly discussed Neville’s mismanagement of the in-house daycare center and his mishandling of its pending closure. This program has provided day care and preschool for STRS employees and public participants for decades.
The daycare had long been subsidized by teachers (lost money, especially during Neville’s tenure) and was a source of concern for many STRS members. Despite passionate testimony from parents who used the childcare services, Neville explained that he couldn’t find a way for it to be profitable, so he decided to shut it down without any input from the Board.
Lastly, the board did not provide Neville with the outrageous annual raise to which he is accustomed, which is usually done in the June board meeting. Maybe Neville has something special in store for himself in September.
Despite the challenges we face to achieve reforms at STRS, we are having an impact. If Wade Steen is successful in his legal challenge to DeWine’s political stunt to remove him from the STRS board and replace him with Bishop, people who want to see reform at STRS will have a majority. Perhaps at that point the corruption will come to an end.
_________
Ohio Retirement for Teachers Association
posted by Kathie Bracy at 2:56 PM
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