STRS Board candidate Michelle Flanigan makes an excellent comparison for STRS stakeholders

From John Curry

March 30, 2024

https://docs.google.com/document/d/1ErrES8wzMUqPy1obZQUIITiwr

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Active teachers: You need to vote for an STRS Board candidate who will fight for reforming YOUR pension system, STRS Ohio

You are already paying more into the pension system and working more years without the guarantee of a decent retirement. You are being HAD by STRS Ohio. Stop the bleeding NOW. Vote for Michelle Flanigan whose only aim is to bring long overdue reform to STRS and to rescind the Draconian rules that have been thrust upon you the last couple years (more years you must work; more of your money unnecessarily going to STRS). It's your future that's at stake. 

If you are an OEA member, like many of us retirees were once upon a time, remember, OEA is NOT your friend, having supported numerous non-reform STRS Board members for many years. You've had the wool pulled over your eyes long enough (as was done with us retirees), not to mention those humongous dues you have to pay. For what? Not a secure retirement, that's for sure. There are a lot of rich OEA and STRS officials walking around, thanks to YOUR generosity. 

Michelle Flanigan is one of you. She will fight for fairness for ALL teachers and a decent retirement worth working for. That's all she's interested in. OEA is NOT interested in reform. Just ask them. Every vote for reform counts! It's now or never. Encourage your active teacher friends to do the same. 

Kathie Bracy

Life member of OEA-Retired, but ABSOLUTELY NOT proud of it!

Click https://saveohiostrs.org/ to see more of this campaign flyer. Click within the flyer for further information. (The image above is not clickable in the same way.)

Toledo Blade: Ex-member asks court for override of removal

By Jim Provance

Blade Columbus Bureau Chief

Toledo Blade

March 27, 2024 

COLUMBUS — The attorney for ousted pension board member Wade Steen on Tuesday urged a three-judge state appeals panel to return him to the position from which Gov. Mike DeWine removed him nearly a year ago. 

The 10th District Court of Appeals will decide whether the governor had the authority to remove and replace his financial expert on the State Teachers Retirement System in mid-term. 

A court magistrate has already opined that the governor did not. 

“The colloquialism at play in this case is that power corrupts and absolute power corrupts absolutely,” Mr. Steen’s Toledo attorney, Norman Abood, told Judges Kristin Boggs, David Leland, and Carly Edelstein. 

“That is the truism that mandates protection of the teachers retirement system,” he said. “The legislature did not grant the governor such unbridled power to control the board. The constitution restrains it, and as the magistrate has so explicitly found, the court in this case has no basis to grant it.” 

At the time he was removed, Mr. Steen, a certified public accountant, had more than a year left in his four-year term. The clock is ticking for a court ruling because the latest term to which he’d been appointed expires on Sept. 27. 

Mr. Steen’s removal came amid a power struggle on the board in which he had allied himself with some retirees who have challenged the fund’s investment decisions, performance bonuses paid to in-house investment staff, and the suspension of annual cost-of-living adjustments in their benefits. 

Then Republican Gov. John Kasich first appointed Mr. Steen to the board in 2016, and Mr. DeWine reappointed him four years later. But he then removed him with more than a year left in his third term and replaced him with G. Brent Bishop, a Columbus business consultant and, at the time, a University of Toledo trustee. 

Mr. Bishop resigned his seat on the 11-member pension board and UT board on the same day last month. This occurred after 10th District Magistrate Thomas W. Scholl II recommended that Mr. Steen be returned to his pension board seat because there was no vacancy on the board at the time to which Mr. DeWine could name someone else. This time there was a vacancy, and the governor replaced Mr. Bishop with Brian Perera, an Upper Arlington consultant and former long-time legislative budget expert at the Ohio Statehouse. 

Columbus attorney Kevin Murch, representing Mr. Perera, argued that, under state law, Mr. Steen was never guaranteed a full four years and could be removed by the man who appointed him. His replacement, however, was entitled to complete what was left of that term. 

“The due process ... comes into play when somebody’s being deprived of a property right ...,” he said. “[Mr. Steen] has no property right to hold that office for four years.” 

While Mr. DeWine had questioned Mr. Steen’s board meeting attendance record, there was never a specific allegation of wrongdoing on the member’s part.

Judge Leland, a former state representative, noted that the law specifies a four-year term. 

“So the original appointee can have the governor looking over his shoulder, but the subsequent doesn’t?” he told Mr. Murch. “That’s what you’re arguing.” Mr. Murch replied, “What I’m arguing is under the language of the statute the initial appointee can be removed. ... What it does, judge, is it just allows for stability, because it’s just a four-year term. If a change is made, that next person shall hold so you don’t have this constant revolving door again of appointees to that position.” 

Mr. Abood said state legislators set out to protect the retirement benefits of teachers. 

“But instead of seeking to protect that system from the whims and caprices of ever-changing political systems, [the defendant’s attorney] would have the court grant the governor unbridled power to control the gatekeepers of the retirement system in a way not authorized by the legislature,” he said. 

STRS is one of the largest public employee pension funds in the nation. It had assets of about $91 billion as of June 30. 

Contact Jim Provance at:

jprovance@theblade.com

Read the article here.

Dan MacDonald to STRS Board: The fight seems to me to be de minimis moneys and not a game plan for the next 20 years.

Dan MacDonald's remarks to STRS Board

March 21, 2024

Mr. Chair and members of the Board, good morning.   I am Dan MacDonald, an STRS retiree with 38 plus years of service.  I am also the Executive Director of Local 279R, Northeast Ohio AFT retirees. 

      

It’s my birthday today.  Turn 78.  Gladly collecting my pension. My wife ticked that I am here for two days and not home to celebrate.  Actuarily. How many years do I have left? CH-UH and I paid into STRS for at least 40 years.  As March, April, and June pass, the core infrastructure of STRS, outside consultants, and this Board make momentous decisions that affect STRS staff, actives, retirees, and my own situation.   

So where are we all headed? I understand discount rates, treadwater, di minimis, plus performance-based incentives, merit-based raises, formularies, and COLAs. These are some components of a puzzle called a financial plan.  

 As I have asked before, is there a financial plan for actives and retirees at STRS Ohio or actually is the plan for actives and retirees, the de minimis plan? Treadwater, budget, and de minimis. These three months are working the now. Reactive. Squeezing the most, out of the least, to please actives and retirees while STRS itself flies along.  Well, we will see on the flying with the 2025 budget.  

With this divided Board and senior staff participation, what better time to air and then formulate a financial blueprint where actives retire at 30 years and have a decent retirement pension and retirees have cost-of-living on an annual basis. Also, there is a need to address those long-retired retirees who have lost the most in purchasing power. Sometime since 2014, a document was presented that addressed the buying power for each year of retirement. It needs to be prepared and seen again. Air what is desired for actives and retirees and see where Board members stand on the levers that affect treadwater and benefits. The fight seems to me to be de minimis moneys and not a game plan for the next 20 years.  

[Ran-out-of-time, so not stated]: Topic jumping, one more thought floating through my mind. STRS’s yearly merit-based pay raises compound. The raises are based on the amount of earnings now. COLAs, when they happen, are based on a static first year of retirement pension. Both affect treadwater. The plan is certainly STRS heavily weighted. 

As always, actives need enhancements.  Retirees need purchasing power.  STRS needs to look closely at itself. 

Colleen Marshall, NBC4: Battle over board seat for Ohio teachers’ pension could define a limit to the governor’s power

by: Colleen Marshall, Mark Feuerborn

March 26, 2024

COLUMBUS, Ohio (WCMH) — A power struggle in the State Teachers Retirement System had a full audience in Ohio’s Tenth District Court of Appeals Tuesday, as retired educators lined the room while an ousted board member fought for his chair back. 

The battle over Wade Steen’s seat on the State Teachers Retirement System board could have an added side-effect of defining Gov. Mike DeWine’s constitutional authority. After the governor appointed Steen to the board, he removed him from the position in May 2023. With no clear answer on why he was ousted, Steen quickly sued in the district court for usurpation of office.

The district court’s magistrate judge already issued an opinion that Steen should be reinstated to the board, and said DeWine lacked the authority to make such a move. However, the governor’s office was quick to note that the magistrate’s recommendation was not a final decision in the case, and needed approval from the district court’s panel of judges.

During the Tuesday battle in court, Steen focused on the teachers affected by the board’s decisions.

“They do the hard work. They sacrifice for our kids and this has never been about me,” Steen told NBC4. “It’s been about their pension fund. And I was removed without reason, without

cause, and so we are just trying to correct that error.”

Retired teachers have previously accused DeWine of trying to protect the investment staff on the board with Steen’s removal. As the group has denied cost of living increases in the retirees’ pensions for years, the managers of the $90 billion fund received $10 million in performance bonuses. In the same year, the team reported investment losses of over $5 billion.

Steen’s attorney, Norman Abood, recognized the potential effects on DeWine’s power.

“This is a due process state,” Abood said. “We are not here to discuss why the governor did what he did, the question is ‘does he have the power to do it?'”

The attorney for Brian Parera, who now holds Steen’s seat on the board, said nothing in the law protects the governor’s original appointee. Rather, it only protects his pick for a replacement.

One of the judges in the case called that argument absurd.

“That subsequent appointee, based on the language of the statute, says that subsequent appointee shall hold the seat for the remainder of the term. That’s what the statute says,” said Judge David J. Leland. “So the original appointee can have the governor looking over his shoulder but the subsequent appointee cannot. That’s what you are arguing.”

Retired teachers in attendance clapped in agreement, and accused DeWine of trying to block reform.

“We know that there is something fishy going on and we want to save our retirement,” a teacher told NBC4. “And I want to save it for the young teachers who are active out there who did what we did. I’m going to do this and put in the time, but by golly I hope I get a retirement out of it.”

The governor’s office declined to comment on Tuesday’s proceedings, but has said in the past that the law in this case is on the governor’s side.

See the article and the video here. 

Link to recording of Wade Steen's court hearing March 26, 2024

https://www.youtube.com/live/JFnuDzd5CvI?feature=shared

Judges: Kristin Boggs, Carly M.  Edelstein, David J. Leland

Norman Abood: "Follow the money!"

Attorney Norman Abood on the sudden removal of his client, Wade Steen, from the STRS Board by Gov. Mike DeWine in 2023 

Outside the Court Room, following the hearing on Wade Steen's removal from the STRS Board

March 26, 2024

A quote from Norman Abood (Wade Steen's attorney) when asked by NBC4 news anchor  Colleen Marshall, "What do you suspect the reason is?" [for Wade Steen's sudden removal from the STRS Board by Governor DeWine in 2023]: "Follow the money!"

See the NBC4 article and video here:

https://www.nbc4i.com/news/local-news/central-ohio-news/battle-over-board-seat-for-ohio-teachers-pension-could-define-a-limit-to-the-governors-power/

Rob Walters and Dan MacDonald's report on the March 21-22, 2024 STRS Board meeting

NO COLA FOR RETIREES; ACTIVES: PERMANENT 34 YEARS UNREDUCED RETIREMENT plus 29 years reduced

Rob Walters and Dan MacDonald attended the March 21 STRS Board meeting and the March 22 Annual Investment Seminar. [Once again thanks to all that attended via the STRS link. March, April, May and June’s meetings are critical. Critical decisions that affect the next fiscal year are voted.] A motion was immediately made by Chair Price regarding Acting Director Lynn Hoover's financial compensation for holding two positions at STRS from Thanksgiving until at least May 17, 2024. Vote 10-1. Herrington voted No. Board member Pat Davidson pointed out that threats to Hoover and her family should not be happening and that he was thankful for her willingness to be Acting Director and Chief Financial Officer over this period. It was not required. [Hoover does bring a different positive tone to Board meetings and the public that we see carries over to staff.] February’s minutes were then approved, and outside consultant AON presented on strategic planning and implementation of governance items. Committee assignments were presented and voted, 11-0.

Staff then presented on the STRS Disability Program. The Funston audit recommended the elimination of the Disability Review Panel, on which Board members sit, and appeals would be determined by staff and the Medical Review Board (MRB). Board members did push back on this idea based on the lack of diversity, age, and no term limits of the MRB members and the lack of understanding of today’s schools and stress within them. [STRS disability approval rating is 85%; OPERS 97%. Interesting. We were hoping that a Board member would request information on denials to approval through the appeal process.] The vote on elimination of Board members from appeals will happen in April.

The Investment Department reported a February preliminary total net return of positive 1.96% with a FY preliminary net total net return of positive 6.61% [Remember the Board’s goal is at least a total fund return of 7% by the end of June.] Total investment assets ended February approximately $93.1 billion, higher by $3 billion in FY 2024. [Right direction.] The Board also voted 11-0 on the amended stock proxy voting policy.

STRS actuary Grinnell did his annual update on enterprise risk management. The purpose of the presentation is to help the Board understand the current largest risks facing the system, what the board and staff are doing to manage and mitigate those risks, and the best estimates of the risks that remain despite those mitigations.

Chief Benefits Officer Christina Elliott introduced her benefit directors and reported on the Prescription Drug changeover to Caremark.

Hoover followed with the Executive Director’s report. Applications for retirement are up for this period, STRS’s efforts for additional transparency, the election of a contributing member seat by actives taking place April to May 6, 2024, the FY 2025 budget preparations and a couple of other items. 

Fifteen people spoke during public participation, two actives who took personal days. [One active spoke to his concern of retirees endorsing contributing members' seats and concern for balance on the Board. The other active addressed teacher shortages and that STRS was an enticement to join the profession, and with all the changes, teaching is no longer a career with a good ending. Two other retirees spoke of false claims by some retirees of promised COLAs and the need for STRS to continue as it has, looking out for the future retirees. One retiree addressed the 2 sections of Board members and their need to listen to one another and not be critics but problem solvers together. One person addressed the current de minimis financial plan and a need for an STRS financial plan looking to the future instead of the scraps that divide actives and retirees. The other 11 addressed the staff and board about lack of COLAs, PBIs, limited seating at STRS Town Hall meetings, legal threats for giving cookies out at Board meetings and the STRS’s Oscar Awards – listen to the video available under STRSOH.org, Resources, Board meetings.]

After lunch, Cheiron presented the Sustainable Benefits Enhancement Plan. After a lengthy presentation, $0.83 billion was available to enhance benefits. The Board chose to make permanent 34 years of service for unreduced retirement, currently 34 years extended only to 2028. Along with that comes an eligibility reduced retirement of 29 years or 60&5, currently it is 30 years or 60&5. Effective date June 1, 2024. Vote 11-0. There will be NO COLA this coming year for retirees. [Know that the Board could have voted a 1% COLA and extend unretirement at 34 years to 2036. Rob and I worry, not only because of today’s public participation, that an effort is being orchestrated to divide actives and retirees by outside forces.]

Member Benefits did a report on early 2025 cost indicators. There are headwinds in the health care area. Cost increases and subsidy reductions and changes made by the Inflation Reduction Act. Changing the years of service also affects the cost of medical plans. STRS is delaying until August to address plan design and premium decisions.

Routine Matters and Old Business/New Business ended the meeting. There was a short presentation on the elections for the contributing member seat and Davidson asked to explore absorbing/reducing/rebating premium costs because of June 1, 2024, pension changes.

Next Board meeting April 17, 18, 19, 2024.

Rob Walters and Dan MacDonald

STRS ANNUAL INVESTMENT SEMINAR – Making Our Fund Grow in Today’s Economy

On Friday, March 22, was the annual Investment Seminar that also ran until 5 p.m. Outside consultants Meketa and outside consultant Callan presented and led Board discussions.

The decisions the Board has to make in the area of investment determine what the investment department accomplishes. It is through investment that the 4-billion-dollar gap of benefit payments to income received collide. The investment department faces all the same issues that the world and we each face. This annual seminar is important because the Board sets the policy; the investment department implements their decisions. With all of that in mind, the world/national economy update was shared, and capital market assumptions were presented. A review of the asset-liability study process was presented. The Board will be reviewing and setting/resetting allocations for liquidity reserves, fixed income, domestic equity, international equity, real estate, and alternative investments. In the rebalancing of assets, the Board is determining the risks it is willing to take. The Board determines benchmarks for the investment department in these areas. The full day of presentations ended with an overview of alternative investments, and its quarterly performance. 

The dichotomy of the current approach to investments and a much more passive approach as presented in a paper by Dr. Fichtenbaum will be addressed in asset decisions and policy directives in the coming months/years. Bottom line, one can’t predict the market, but usually the better the market performs the better STRS general fund becomes healthier.

Rob Walters & Dan MacDonald

SO WHAT IS STRS’S FINANCIAL PLAN FOR ACTIVES & RETIREES?

[Added]: First, I want to acknowledge and give kudos to Director Elliott and the benefit department for assisting my member who was visiting in Georgia from Thanksgiving until March. The retiree did not have her new SilverScript card and had no idea how to get her medications. She had four days of insulin left. By calling STRS the next morning she was able with their help to register with SilverScript, get a script sent by her doctor to a drug store near where she was staying by Saturday morning. Thank you, Benefits Department.

Link to photos taken after Wade Steen's hearing March 26, 2024

 https://www.facebook.com/photo/?fbid=10230920298733892&set=pcb.2171548369875979 

Dean Dennis to STRS Board: Why are we allocating capital to risky investments burdened with high fees and subpar performance?

Dean Dennis' Comments to STRS Board

March 21, 2024  

March 21, 2024 - Dean Dennis 35 years Cincinnati Public, President of ORTA and member of the STRS Ohio Watchdog and Ohio STRS Members Only Forum. 

With minimal research, Board members should be able to conclude that investment managers lose to the market roughly 90% of the time. No investment staff can beat the market every year. Not even our investment staff, although every year they seem to beat their benchmarks, supposedly tied to the Market. Interestingly, our investing trend is to move away from transparent investments tied to the market, such as Domestic Equity investments, and move towards opaque Private Equity Investments. In 2005, 46% of our investments were in transparent Domestic Equities now only 26% of our investments are in Domestic Equities. In 2005 only 2.6% of our investments were in opaque Alternative Private Equity/Opportunistic investments, now over 20% are in such investments. 

Private Equity investments are fraught with non-disclosure agreements and hidden fees. Their performance is sheltered from being audited by pension Board members. This allows the General Partner of PE investments to mask its performance from their Limited Partners. This is a good deal for the General Partner because they essentially can grade themselves and inflate their performance. This can become a good deal for the Limited Partner because this inflated grade passed on to the Limited Partner, is then passed on to their Board members who approve bonuses. The million-dollar question however is, how do the members of the pension plan benefit from the General Partner and Limited Partner relationship? Spending money on the Benchmark Services lawsuit needs to be questioned. 

Trustees, with minimal research, you’ll learn Private Equity investments aren’t what they are advertised to be, they peaked nearly a decade ago. When you account for their high fee structure, actual performance, and risks, you’ll rethink their value to our portfolio. 

Let’s look at PE investment’s “2 and 20” fee structure. After we commit our capital to the investment, the General Partner charges us a 2% annual fee to manage our investment. When liquidating the investment, the General Partner is entitled to a 20% performance fee skimmed off the top. But, let’s look at just the 2% fee. 

In 2005, STRS had 2.6% of our monies, or, $1.5 billion, in PE’s investments. This added up to STRS sending about $30 million in investment fees to Wall Street. STRS has over 20% of our monies, or roughly $18 billion in PE investments. Today we send roughly $360 million in fees to Wall Street. Note, $360 million annually sent to Wall Street equates to nearly $3 billion over a 30-year-funding period, money we could have used towards restoring benefits. 

So, trustees, why are we allocating capital to these risky investments, burdened with high fees, and subpar performance? Incidentally, PE investments accounted for nearly 16% of all bankruptcies in the United States last year. I believe we hold nearly 130 such investments.

Dean Dennis is currently president of the Ohio Retirement for Teachers Association.