Dean Dennis to STRS Board: We are asking for a public response to a legal opinion regarding STRS Alternative Investments and possibly STRS Real Estate investments

From Dean Dennis

September 21, 2023 

Dean Dennis, Retired, 35 years with Cincinnati Public Schools. Today, I'm going to address you as ORTA President.

I'm going to read some excerpts from the 2023 David Sirota article in The Guardian titled, US pension funds are on the brink of implosion – and Wall Street is ignoring it.

In general, private equity firms use pension money to buy up and restructure companies to then sell them at a higher price than they were purchased. In between buying and selling, there are no transparent metrics for valuing the purchased asset - private equity firms can manufacture an alleged value to tell pension investors (and there’s evidence they inflate valuations when seeking new investments).

Another excerpt, "valuation and fee terms in contracts between private equity firms and public pensions are kept secret, exempt from open records laws. With that in mind, the new warnings are simple: private equity firms may have told their pension officials that their assets were worth much more than they actually are, all while the firms were skimming billions of dollars of fees off retirees’ money."

Last excerpt, "Ohio’s state auditor, Keith Faber, just issued a report sounding an alarm about state pension officials keeping private equity contracts secret – a practice replicated in states across the country." Why am I bring this to your attention?

Last month, I passed out Ohio Revised Code 3307.15. It is titled, Investment and fiduciary duties of the board. Once again, the code states, "any statement of financial position distributed by the board shall include the fair value, as the statement date, of all investments held by the board under this section." Last month when I presented, I expressed that when you are unable to audit over 20% of our investments and when the General Partner has to tells you (the Limited Partner) the value of your investment, and when you don't have access to the non-disclosure agreements of your investments; I believe these become illegal investments and holding them in our portfolio is actionable.

So, Board members, what is your threshold for complying with ORC 3307.15? Does management share the non-disclosure agreements with you (ask them)? Can you verify the fair value of these investments? Remember Panda and how and when you found out.

In the 30 days since I brought this to your attention, ORTA has sought and received a legal opinion. This legal opinion supports our beliefs that STRS Alternative Investments and possibly STRS Real Estate investments are not in compliance with 3307.15. 

We are bringing this to the Board's attention in good faith. We are asking for a public response.

Suzanne Laird to STRS Board 9/21/2023: Mr. Steen understood his function. Do you understand yours?

From Suzanne Laird

September 21, 2023

Good Morning, Members of MY Board:

Why do you exist?
I'm not asking the existential question - I am only allowed three minutes here, after all…..
Why do you, as a Board, actually exist?

If you exist to line the pockets of the Wall Street managers, you're doing a great job!

If you exist to continually grant exorbitant bonuses to the investment team, who consistently lose our money, you're doing a great job!
If you exist to allow the Governor to circumvent our vote, denying the will of the members, you're doing a great job! If you exist to authorize one of the highest contribution rates for active teachers in the nation, you're doing a great job!
If you exist to permit older retirees to sink into poverty without a stable, reliable, permanent COLA, you're doing a great job!

You. Should. Be. Ashamed.

Now, some of you are fighting like hell; but some of you are so arrogant, incompetent, or just plain ignorant, you may not be capable of understanding your purpose here.
You're not here to cater to the extravagant whims of the employees here, you are the last gatekeeper, meant to restrain their greed.

Wade Steen said it best: "STRS exists to pay benefits."

Beyond that fundamental level, I would argue that you are here to safeguard and sustain the very profession of teaching in the state of Ohio. Without a secure retirement system, what future is there for our profession?

Mr. Steen understood his function.

Do you understand yours?

Retirees, want to see how much money STRS is cheating you out of? Read Bob Buerkle's speech to the STRS Board on 9/21/23.

Bob Buerkle's speech to STRS Board

September 21, 2023

Trina Kay Prufer: The Narcissism of STRS - we have the worst teacher retirement system in the nation because its values and goals are the worst in the nation.

From Trina Kay Prufer

September 21, 2023

The Narcissism of STRS - we have the worst teacher retirement system in the nation because its values and goals are the worst in the nation.

Yesterday, it was pointed out to me that the State of Missouri is very similar to ours; however, its teacher retirement system ( PSRS) manages to provide a fair cola to its members and is otherwise in good financial health. So, how do they do it, and what are its systemic goals? Turns out, their mission statement, goals and objectives are the polar opposite of those of STRS, and therein may lie the root of the problem.

Below I have posted the mission statements and goals of STRS and PSRS. Notice how PSRS puts teachers and the children of Missouri first. STRS puts the WANTS of the system ahead of the needs of teachers, students and the fiduciary responsibilities of the system. The casual reader might think these are empty words, however they are backed up by the ORSC which, in its recent report on the overspending at STRS, rationalizes the malfeasance by stating STRS needs to EMPLOY and RETAIN the best and the brightest for the STRS system, NOT, the children of Ohio.

So, why should Ohio’s teachers contribute 14% of their hard earned income to a financial entity that works AGAINST their best FINANCIAL interests? I believe that‘s a question that needs to be asked. STRS exists to pay teachers’ hard earned promised benefits. Just read the STRS goals and compare. We need Missouri’s mission and goals. They have it right.

STRS- unsafe, unsound, unjust.

Robin Rayfield's Letter to the Editor, Columbus Dispatch: Active teachers are now forced to pay more and work longer – only to get less when they retire

Letters to the Editor, Columbus Dispatch

August 29, 2023

Gov. Mike DeWine eliminated Ohio’s third grade reading guarantee last month but looked on this month as his hand-picked representative, mega-donor Brent Bishop, voted to continue a program that guarantees bonuses to pension staff at the State Teachers Retirement System.

DeWine has been ignoring years of outrage from teachers who have been removing pro-bonus members of their pension board over the last five elections.

The bonus program is a no-win for teachers. It calculates asset class bonuses on performance BEFORE subtracting expenses – a virtual guarantee that has reliably delivered bonuses to pension staff for the past 35 years.

To date, teacher money has been used to pay bonuses on at least $1.8 billion of overstated performance.

Such fiscal mismanagement has left Ohio teachers with the worst retirement deal in America.

Retired teachers have been crushed with record price increases. Unlike Social Security, Ohio teacher pensions do not reliably increase for inflation. Active teachers are now forced to pay more and work longer – only to get less when they retire.

It’s sad that DeWine’s best hope for his legacy is that today’s third graders won’t be able to read about his failed policies when they grow up.

Robin Rayfield,

Executive Director of the Ohio Retirement for Teachers Association (ORTA)

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.