Bob Buerkle to STRS Board: The Current STRS Board should reverse the 2015 policy called “Closed Funding.”

Bob Buerkle’s Speech to STRS Board

December 14, 2023

The Current STRS Board should reverse the 2015 policy called “Closed Funding.”

First of all, only two elected and no appointed Board members from 2015 are still on this Board. Nine of you were not. You need to forge your own policies, which reflect the actual known investment returns of the last 10 years, for the benefit of all current and future retirees. Perform your sworn “Fiduciary Duty” to them, not Callan, not Cliffwater and not STRS Management. You have no “Fiduciary Duty” to them. None of them will ever draw a pension from STRS. They are not our members. Look out for our members, not STRS Management or their hired help.

Look at what has happened over the last 10 years. Management had the Board vote to lower the “Discount Rate” three times, dropping it from 8% all the way down to 7%. Was that necessary? The STRS Investment Department report from October 19th, 2023 shows that we averaged over 8.6% for the last 10 years. That decision to move to a “Closed Funding” system has forced this new board, who had no input on that previous Board decision, to take on the $20 billion of projected debt with a self-imposed directive to reach 100% funded status, ASAP. By following this Closed Funding policy, it has been nearly impossible to restore any lost pension benefits. Also, in 2015 our unfunded liability period was at 29.5 years, which satisfied the 30-year Legislative funding mandate.

Now, eight years later, the STRS unfunded liability period is down to just over 11 years, by far the lowest of all five Ohio Public Pension Systems. Should we be proud of that, when this progress was made on the backs of our active and retired teachers? All four of the other Ohio Pension Plans are paying annual COLAs, and all but OP&F have not raised their contribution rates, unlike the 40% STRS increase, nor have they drastically changed their years of service requirements, or excessively punished those who cannot reach full service retirement; and they have not changed their 3-year FAS requirements to 5-years, like STRS has done.

The numbers game perpetuated by STRS Management and their hired mercenaries financially benefited them, not our members. “These Are The Plunderers,” which is also the title of Pulitzer Prize winner, Gretchen Morgenson’s latest best seller. They received annual raises to their base salaries every year. The investment staff also received bonuses every year, whether they were deserved or not! Did anybody responsible for losing a half-billion dollars on Panda and other real estate disasters ever lose their bonuses, or their jobs? In fact, according to the Ohio Treasurer’s checkbook, it looks like STRS Real Estate Employees receive most of the largest bonuses.

Finally, Ohio Police and Fire continued to use an 8% discount rate until 2021, 10 years after STRS stopped using 8%. They had to do this to stay under the 30-year funding mandate. I’m not saying STRS should have done that, but did it harm OP&F? No. In fact, they earned less than STRS for the decade but they still beat their 8% assumption rate, so they are OK and their members continued to receive their COLA every year. Today, OP&F uses a Discount Rate of 7.5%, while STRS uses 7%. Maybe there is some room between these two figures that could be used to safely restore some of the lost benefits to our members, without taking undue risk.