STRS claims to give us the Real Story, but Ohio teachers deserve the COMPLETE story; they also deserve a better retirement.

From Michelle Flanigan

September 15, 2023
On the STRS homepage, there is a button in the lower right corner that says “Misinformation has been shared about STRS lately. Get the real story".

Well, they give us a REAL story. What they don’t give us is the COMPLETE story. Let’s take a closer look.

Real Story: $91.1 billion in assets, approximately 500,000 educators, 11.4 years to 100% funding.

But what is the complete story?

The fact that they are only allowing 11.5 years to reach 100% funded is taking money away from paying COLAs or reducing years of service. This timeline could be increased without materially affecting the safety of the fund. In 2013 they set a 30 year timeline. PERS and OP&F did not adopt this policy. Taking until 2043 to reach full funding would free up money for teacher benefits. Teachers are suffering in order to make their ratios look good.

Real Story: Investments are distributed among equities, real estate, alternative investments, fixed income instruments and cash.

But what is the complete story?

The $18.7 billion alternative investments category contains about $11 billion in private equity investments. The fee structures of these investments are not transparent. The value of these investments is determined by the private equity firms themselves, not by the market. One of the most knowledgeable investors of our time, Warren Buffett, has repeatedly warned about the risk of these types of investments and has said that they do not belong in a public pension portfolio.
Much of the $8.8 billion in real estate is in commercial real estate, a segment of real estate that is generally thought to be inflated in the post Covid work from home world. What is the real market value of this real estate portfolio? STRS recently disclosed a Chicago commercial building that was purchased for $280 million in 1999 is now worth $92 million.

Real Story: The state special audit found no evidence of fraud, illegal acts or data manipulation. 

But what is the complete story?

Per the state special audit: “...despite the trade secrets law STRS relied on to classify these items (private equity investments) as trade secrets, STRS could elect to negotiate with their investment firms to allow more transparency." "Some PE firms have indicated that they would cease working with pension funds if they are required to disclose the fees they charge.” Special Audit report, p. 6. No surprise that Warren Buffett would advise against investments that refuse to disclose fees.

Real Story: Changes to the COLA were enacted in response to the great recession and to meet state requirements of obtaining 100% funding in 30 years.

But what is the complete story?

Changes to the COLA would not have been so drastic if not for investment losses like Panda Power ($525 million) and missing out on $90 billion in bull market gains for 2012 - 2021 (audit report p 28). For the period June 2022 - June 2023, the S&P 500 was up 16.1%. STRS’s investment portfolio was up 7.55%.

Real Story: The state auditor found that STRS Ohio’s diversified portfolio outperformed the S&P 500 index from 1999 - 2021 as noted on Page 27 of the state auditor’s report.

But what is the complete story?

The state auditor’s report also found that If you look at the years 2012 - 2021, STRS missed out on $90 billion in potential bull market gains (p. 28 auditor’s report) The time frame of reference makes a difference.

Real Story: The audit found STRS Ohio’s compensation to be consistent with peers and noted “the attraction and retention of talented staff is essential to the success of STRS’ internal investment management strategy.”

But what is the complete story?

In 2022, STRS staff was paid $10 million in bonuses on $5.2 billion in investment losses. Each year STRS staff earns bonuses while STRS members go without COLAS and work longer. Shouldn’t there be some “shared sacrifice” here? Ohio teachers deserve better.