Dan MacDonald's summary of the February, 2024 long, long STRS Board meeting

TWO LONG DAYS: STRS FEBRUARY BOARD MEETING

From Dan MacDonald

February 19, 2024

Rob Walters and Dan MacDonald attended the February 14 and 15 STRS Board meeting. The call to order 14th Board session was scheduled for 10:30 am but didn’t happen until 11:30 am. December’s minutes were approved, and the new Board member, governor-appointed Brian Perena, was introduced. [Where’s Steen?] 

There were to be two presentations, Disability Program Review and AON Fiduciary Services Practice. After Board chair Price seated outside consultant AON, Davidson made a motion, that was seconded, to which Price ruled out of order. Parliamentary issues then ruled the rest of the proposed agenda. Ultimately, Price postponed the presentations and attempted to go into executive session, but at the time did not have the votes. Herrington and Hunt were both missing from the meeting at this time, so voting was 5 to 4 in “reformers'” favor. [February’s minutes will be interesting to see how this session will be addressed. Motions were made and recorded. February's STRS e-Update never mentioned the issue. Neither of us were present after the all-afternoon executive session, although the e-Update addresses Acting Director Hoover and suspended Director Neville.] 

The meeting continued on the 15th with an 8 am start time. Chair Price once again introduced Brian Perera, and then had outside consultant Cheiron present on Economic Assumptions. [Herrington attended virtually; Hunt was not present in-person or virtually.] Discount rate, inflation, salary scale and payroll growth are part of economic assumptions. Further factors to consider are historical experience, industry trends, regulatory/professional standards, the Board's risk tolerance/preference, plan dynamics, and future expectations. There is still significant negative cash flow. Ultimately Cheiron’s recommendation was to maintain a discount rate of 7%; price inflation projected at 2.5%; and a payroll growth of 3%. Throughout the presentation there was significant discussion amongst the Board and the consultant. Later in the day, Davidson moved to raise the discount rate to 7.25%. His motion was defeated 9-1. The discount rate remains 7%. [The discount rate is important since it is projecting the growth of the general fund, and the actuary then uses that growth to determine pension contribution against pension costs.] 

In-house actuary Brian Grinnell then presented a pension system comparison using STRS Ohio, Missouri Teachers, Nevada pers, Texas Teachers, New York State Teachers, Georgia Teachers, Louisiana Teachers, CalSTRS, Kentucky Teachers and Illinois Teachers. Again, good discussion around tiering, eligibility, unreduced retirement, contribution rates, COLA provisions, returns, purchasing power and more. [Basically, no two plans are alike and at least in these plans all have made economic adjustments to stay afloat.] 

Public Participation followed. Twelve speakers. Two actives spoke. One from CTU Local 279 and one from CHTU, Local 795. Both should be retired by former eligibility. Both worried. Seven spoke about COLA and active future benefits. One worried about future investment changes and abolishing bonuses will not return COLA [true]. One on calendar year returns vs. STRS reported returns. One on Blackstone Real Estate in STRS’s portfolio and the harm the company is doing to humanity.

After the Executive session/lunch Cheiron presented the Sustainable Benefits Enhancement Plan. A long discussion on “does not materially impair the fiscal integrity of the system.” Again, the Board was thoroughly involved. 

About 4 pm the investment Department. A statement of objectives and policy wording changes were proposed. December’s fund return was plus 3%, finishing the first half of the fiscal year at plus 4.14% net of cost. The calendar year 2023 total fund return was 11.51% relative to an STRS benchmark return of 12.39%. [Remember that STRS is on a fiscal, not calendar, year.] January was a plus 0.35%; FY to date plus 4.50%. Total investment assets ended January approximately at $91.7 billion, high by $1.6 billion in FY 2024. [Almost back to where we were at the end of FY 2022]. The proxy voting policy, summary and derivatives exposure were shared along with December and January investment transactions. New outside plan fund consultant Meketa, six weeks under the contract that was held by Callen, greeted the Board and shared that STRS documentation was “.... amongst the best we’ve ever seen ....” When pushed by Board members on those words, the consultant stated “comprehensive,” “clear,” “concise” “Very rare for new client.”

The acting executive director then gave her report. She addressed 11 areas in her handout. A few: Your year-end tax statement should be in your possession. The webinar Retirees Series begins February 19. [STRSOH.org to register for webinars.] Sixteen hundred Defined Contribution and Combined Plan participants should have a postcard for a final retirement plan election. [Most retirees are on Defined Benefit. Not sure, 614-227-4090 STRS.] A legislative report followed for a bill to increase employer contribution which has been at 14% since 1984. 

Routine Matters and adjournment [6:08 pm] then followed. The next Board meeting will be March 20-22, 2024.