Thursday, September 20, 2018

Bob Buerkle to STRS Board 9.20.18: Why it is so important to get the COLA restored ASAP

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Bob Buerkle to ORSC 9.17.18: Eliminating the COLA is not adjusting the COLA

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Ohio Federation of Teachers President Melissa Cropper to STRS Board, 9/20/18: You are invited to the Toledo COLA forum at your convenience

From Dean Dennis: Below is OFT's President, Melissa Cropper's, address to the STRS Trustees on September 20, 2018. A little background is in order in order to appreciate the context. 
OFT was trying to meet members' needs by arranging a forum regarding our COLA. The forum would have taken place on September 26. I was in fact invited as one of the speakers, as were a couple of STRS Board Members. The forum was canceled because OFT could not find any board members to attend. When OFT learned why, President Cropper make it a point to drive to Columbus and address the STRS Trustees. What follows is her speech: 
Melissa Cropper's speech to the STRS Board, 9/20/18 
As an elected person, I understand that I have certain responsibilities to the people who elected me. I have a responsibility to be accessible. I have a responsibility to listen to concerns. I have a responsibility to be responsive. Sometimes I agree with the concerns that are brought to me, and sometimes I disagree. When I disagree, I have a responsibility to not only explain why but to also listen to the other side and try to come to some understanding or solution. I also take direction from my Board and not the other way around.
We have all seen what happens when people feel like their voices are not heard. We saw the Women’s March on Washington D.C. , the teacher walkouts across the nation, and more specifically, the teacher protests over pension issues in Kentucky. These protests all had two things in common. One – they happened because people felt like their concerns were being ignores. Two – they started with a Facebook page. 
Our members across the state have been increasingly interested in the decisions and actions of the STRS Board. In fact, their engagement over the time that I have been involved with OFT has increasingly grown. They understand that you all have a very difficult job to do, and they appreciate your work, but they are frustrated that they can’t watch a Board meeting unless they drive to Columbus, and if they do drive to Columbus, they only have three minutes to express a concern with no actual interaction with Board members, and they cannot even send an email directly to a Board member.
Our Toledo President decided to respond to those concerns by inviting elected board members to a meeting with our members about their concerns. You see, our members believe that we have a board that is both appointed and elected for a reason. Appointed members represent the concerns of those who appointed them, and elected members should represent the concerns of those who elected them. Both should listen to the concerns of those they represent, bring them back to the board, and ask the difficult questions on our behalf.
We were shocked when we heard that Board members will not attend that meeting because they have been advised by STRS to not attend any meetings where the COLA is being discussed.
I am sincerely hoping that this has been a misunderstanding or misinterpretation, and since I was not directly involved in those discussions, I want to extend an invitation to you today for our meeting on Sept. 26. If that date doesn’t work, let us know what date will work, and we will accommodate. 
Thank you.

Dean Dennis to STRS Board 9/20/18: LISTEN TO US. RESTORE OUR COLA

My name is Dean Dennis, I am the STRS Chair for the CFT-Retirees Chapter, and the spokesperson for the Ohio STRS Member Only Forum. I worked for Cincinnati Public Schools for 35 years. 
I want to discuss early 2017 when Segal made recommendations to the trustees. The recommendations included:
1) Lowering the STRS investment return assumption 
2) Adopting updated mortality tables
3) Reducing the payroll growth assumption and inflation projection 
These actions, which you adopted, increased STRS's liabilities nearly $11.5 billion. This in turn extended the funding period well beyond the 30 years. Prior to these adopted actions, STRS was well within the 30 year funding period. It also cost us our COLA. I want to discuss each of these actions, then offer suggestions. 
First, you lowered the investment return assumption to 7.45% from 7.75%. Prior to that, it was at 8%. Although Segal made this recommendation, if consideration was given to STRS's historical 30 year earning returns, why did you comply? Has STRS ever reported less than 8% for any 30 year funding period? 
Here are the last four reported 30 year period earning returns: Fiscal Y2015 - 9.09%, Fiscal Y2016 - 8.4%, Fiscal Y2017- 8.39%, Fiscal Y2018- 8.59%. 
Why are you assuming an earning assumption rate of 7.45% when your current 30 year return is 8.59%? This is more than a 100 basis point gap between actual data verses a guess into the future. When this discrepancy is applied over a 30 year funding period, it projects a significant, but not justifiable, liability. 
Incidentally, the current 30 year funding period, which earned 8.59%, takes into account the recession of the early 2000's and the 2008 - 9 financial collapse, the second largest financial disaster since the Great Depression.
Why not adopt a 30 year rolling average and simply subtract 50 basis points from the average, as a margin of safety, for our earnings assumption rate? A formula based on historical earnings makes more sense than guessing the future. If you were to do this, our earning assumption would be near 8% and we'd have our COLA. 
Second, the mortality tables. My understanding is, one of the newer "best practices" of actuaries is to adopt the age of the younger employees (the generational approach) and apply that mortality factor to liability assumptions. 
This stricter approach in essence skews the liability of older retirees. Withholding, retirees' COLA because of this accounting procedure seems unfair. However, equally unfair is making current teachers work until at least age 60 and have at least 35 years of service, and also withholding their COLA for 5 years. 
Third, you reduced the payroll growth assumption from 3.5% to 3%, yet it actually increased by 4.1%. Can you understand why many members feel your adopted assumptions benefits STRS administration's goals at the expense of STRS active and retired teachers? 
Before May of 2022, when you stated you will revisit the COLA, a teacher earning a $1,000 COLA will have lost $23,000. Even if the COLA is restored July 1, of 2022, they will lose an additional $6,000 a year for every year thereafter in addition to the $23,000 loss. 
One can see if they were to live only 10 years beyond 2022, their financial loss will be $83,000. As elected Board members are you aware of how your newly adopted assumptions are impacting us? 
Here are some suggestions:
1) Seek changing the 30 year funding period to 35 years to match the new career length requirement. This will decrease the liability period.
2) As already mentioned, look at what you actually are earning over the legislatively set 30 (or 35) year funding period and make the earning assumption rate 50 basis points less. Adopting an earning assumption rate that is 75 to 100 basis points below actual earnings severely punishes those who you are supposed to be looking out for.
3) Seek an increase in the employer contribution. By statute, ORC 3307.14 states that if STRS Ohio cannot meet its financial obligations, the burden falls on the employer, not the employee. While Ohio teachers contribution rates are now the highest in the United States for any teacher, for the past 35 years the employer contribution rate hasn't risen a penny. 
Were you aware that Ohio's employers have been receiving roughly a billion dollars annually from Worker Compensation surplus rebates. One prominent Republican legislator has suggested this revenue could be used to justify increasing the employer contribution and be an approach to helping restore our COLA. 
It's time is to start advocating for us. We're getting hammered. 
Lastly, we have two new board members, we hope this Board adopts a new culture; one that looks out for its members. We know by the Board's past actions that they listen to STRS management. We hope the Board can show us, through their actions that they will listen to us, and hear us. 
Please hear this, The Ohio General Assembly gave you the authority to adjust the COLA, not suspend or eliminate the COLA. Listen to us; restore our COLA.
Larry KehresMount Union Collge
Division III
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