Friday, June 21, 2019

Dean Dennis on STRS: The Slippery Slope Our Trustees are Traveling Down

Dean Dennis' speech to the STRS Board
June 20, 2019:
My name is Dean Dennis. I retired after 35 years service. I am the STRS Chair for Cincinnati's Local 1520-R, the Spokesperson for the Facebook, Ohio STRS Member Only Forum.
Let's look at some past history. In the 1990's, during the dot-com-bloom-era, many state pension funds were becoming flush to the point that an article appeared in Fortune Magazine (January 13, 1992) titled The Great Pension Robbery. Here's an excerpt, "In the past two years, more than a third of the states have cut or delayed contributions to their pension funds, seized money outright from pension accounts, or begun to debate similar measures."
During this era, STRS had a Director of Governmental Relations named Jim Miller, who shared with people I know in OFT, that he was concerned that our pension might be viewed as a source of money by Ohio's legislators. At this time, STRS had reached a funding ratio slightly over 90%. Apparently, he wasn't alone because in the year fiscal 2000, our STRS Trustees went to the Ohio Legislature and had the teacher benefit formula increased from 2.1% to 2.2%. Retirees' pensions were also increased to bring them up to a level of at least 85% of the purchase power of their original pension benefit. In the year 2000, our Trustees intentionally increased the amortization period for the unfunded liability from 16 years to 23 years because they wanted to make sure they maximized our benefits. They saw a danger in being fully funded.
Is there still a risk of being fully funded? STRS subscribes to the National Conference on Public Employee Retirement Systems. In May of 2019, an article was featured by Tom Sgouros titled, The Case For New Pension Accounting Standards; it was peer reviewed by 13 practitioners, Cheiron, our outside actuarial firm, being one. Here is an excerpt, "The risk of a fully funded, or overfunded pension plan, is not only the political risk, of increased benefits and reduced contributions, but also the risk that policy makers will perceive an opportunity to close the plan entirely." The author argues that, "Waste of a dollar on a pension, means a dollar not spent on education, roads, or public safety, not to mention the desires of the person who paid the dollar in tax. As with any other government expense, it is important to meet public obligations at the lowest feasible public cost."
Ohio intended for their tax dollars to go towards our pension. When you withhold and divert our COLA towards an unnecessary 100% funding goal, you negatively impact Ohio's economy. To date, Ohio's retirees could have contributed approximately another 2 billion dollars back into Ohio's economy, if we had received our COLA.
When you tell Ohioans you cannot provide retirees a COLA, you draw attention to your spending practices. Try explaining to the public how their tax dollars are able to pay quarter-million-dollar staff bonuses, but their tax dollars cannot pay an 80-year-old his, or her, modest $800 cost-of-living adjustment.
Since there has never been a public pension plan that has remained 100% funded, when you sought your 100% goal, did you consider the unintended consequence that you might be paving the way for the Legislature to eliminate the Defined Benefit Plan for our active teachers? Once you reach your 100% funded goal they could easily replace it with a Defined Contribution Plan. I encourage you to reconsider the road you're traveling.
Thank you.

Dan MacDonald to STRS Board: A wake-up call? Are you awake or like a teenager ignoring the evidence?

Dan MacDonald's speech to STRS Board
June 20, 2019
A wake-up call? Are you awake or like a teenager ignoring the evidence? Good morning, STRS Board. I am Dan MacDonald, an STRS retiree with 38 years of service, and Executive Director of Local 279-R NEO AFT retirees. 
First, I would like to recognize a passed CH-UH active, 54 years young, who died on May 20 with 32 years of Ohio teaching service. He didn't get to retirement. He would have retired at 30 years, but rules change. How many have our actuaries predicted will not make it to full retirement, 35 years? There is a number out there. How much money does STRS "save" by an active's death?
Moving on, a lawsuit has been filed for retirees and the recovery of the COLA. My organization sent a formal letter from our president and corresponding secretary to the Board regarding COLA, dated February 14, 2019, which has never been responded to by Board or staff. Rudeness or arrogance or one-voice silence? 
I have spoken monthly, as have others. Arguments about 85% and actuary oversight are not a response. Suddenly a lawsuit; is anyone really surprised? A wake-up call.
As long as this Board speaks in one voice and argues behind closed doors, the public is not going to trust the Board. As a matter of fact, the week of May 26, I was personally told by a retiree that Board members must pledge that each will vote publicly in union. I asked where this was heard, and did not receive a traceable answer; but I can tell you retirees are thinking and sharing this concept. 
It came up again at another meeting I attended last week. This time the source was alleged to be two former STRS Board members. Once again, Fiduciary Loyalty comes forth. I'd suggest each Board member respond to this allegation individually during the next meeting, or even this afternoon. 
Have you all succumbed to peer pressure? You now have a bigger problem at hand, an expensive problem, win or lose, than you would have if responses came during Board meetings.
A Pathway discussion should show the current thoughts of the Board as far as percentages funded. I've attended meetings where 125% or higher have been mentioned. What are the goals/outcomes for active and retirees once whatever percentage is reached? 
Addressing the 2020 Budget...shared pain or just plain STRS gluttony? Again the Board's silence in discussion is deafening; disemboweling actives and retirees is quite real.
Thank you.

Robin Rayfield to STRS Board: Overwhelmingly, ORTA members are concerned with the current lack of shared sacrifice on the part of STRS

Robin Rayfield's speech to STRS
June 20, 2019
Greetings, STRS Board of Trustees and Staff. My name is Robin Rayfield, and I represent the Ohio Retired Teachers Association. I am an STRS beneficiary, having retired in 2011 after 30+ years of service.
Greetings, STRS Board of Trustees and Meeting Attendees,
The action at the May 2019 STRS Board meeting to include language to the Funding Policy permitting plan changes at the 85% funding level is encouraging to the STRS beneficiaries. Although I recognize that reducing the funding level identified in the funding policy does not guarantee the restoration of COLA at the 85% funding level, this change in policy does indicate that the STRS Board recognizes the hardship placed upon retirees the loss of COLA has presented. I remain optimistic that this change in policy is at least one benchmark or road sign on a 'Pathway to COLA'. 
At this time ORTA would suggest that, while retirees wait for a return to promised benefit enhancements, the STRS Board begin the work of exploring ad hoc benefit enhancements for retirees. Although ad hoc benefit enhancements do not meet the level of what retirees were promised, such benefits could provide a lifeline to those retirees who are struggling the most.
ORTA's position continues to be that STRS can and should strengthen the overall financial position of the retirement system. ORTA is also convinced that this strengthening can be accomplished while providing some portion of what retirees were promised at the time of their retirement.
The most recent budget submitted by STRS staff for the operations at STRS includes both base pay raises and increases in incentive compensation. It must be stated that it is difficult for retirees to accept the notion that active contributors must pay more while receiving less, retirees are not receiving what they were promised, while the employees at STRS continually receive wage increases. Overwhelmingly, ORTA members are concerned with the current lack of shared sacrifice on the part of STRS. 

Thursday, June 20, 2019

Suzanne Laird to STRS Board: Perception is everything

Suzanne Laird's speech to STRS Board
June 20, 2019
Good morning Members of MY Board:
My name is Suzanne Laird. I retired in June, 2013 with 30 years experience and the promise of a Cost of Living Adjustment.
Ladies and Gentlemen,
Perception is everything.
Perception is everything.
I took the time to speak to this Board last month regarding the advice I was given by my STRS counselor to retire in 2013 in order to “save” my COLA.
Several others took the time (and courage) to speak as well.
20,000 have now signed the Restore our COLA petition.
Our perception was that we were not heard by this Board. Indeed, the budget being discussed today still includes excessive raises, exorbitant bonuses, and extravagant perks while our COLA remains frozen at zero.
The perception of the general public is that we teachers have been swindled by our own Board.
So now, we are all members of a lawsuit.
This lawsuit is not frivolous — quite the opposite! The facts are, this Board unlawfully and capriciously eliminated the COLA, while unjustly enriching various employees of STRS.
What will the perception be if STRS chooses to fight this lawsuit?
How much of our hard earned money will be squandered on a protracted trial?
A jury of our peers will be deciding this suit. I wonder what their perception will be when the facts are revealed in open court?
You have strayed far from your fiduciary duties: to prudently handle the assets in the best interest of the beneficiaries.
You now have the opportunity to right that wrong, expediently.
Freeze the budget.
Settle the lawsuit.
Restore the COLA.
Perception is everything.

Bob Buerkle to STRS Board: Offer STRS Retirees a new "Tax Free" Health Care Benefit

Bob Buerkle's speech to STRS 
June 20, 2019
The STRS HC Contingency Fund is now 178% funded, enough to take care of all retirees for the next 60-65 years. How could that be you ask, when less than a decade ago the fund was expected to run dry in 10-12 years? Well here's how! Members used to be able to retire after 30 years at any age, which was generally around 55 or so. This is no longer the case since HC obligations continue to shrink as we are getting closer and closer to the future requirement of an age 60 retirement. In the past STRS was on the hook for many more years of HC expenses before the average retiree reached Medicare age (about 50% more), when STRS begins to receive substantial government subsidies (between $9,000 and $10,000 per person).
Proof of this can be found in STRS documents such as the 2018 Annual Comprehensive Financial Report. In the last few years, even without any Employer contributions, the HC fund has grown from $3.2 billion to $3.7 billion. This $500 million dollar increase cannot be redirected back into the pension fund to pay for benefits like our COLA, even though it originated as an Employer Deferred Compensation Pension Contribution! $3.7 billion is 25 times as much as a 2% COLA would cost for just one year.
There are ways that our Health Care funds could be better used for the benefit of our retirees. STRS could issue a HC Debit Card that could be used to pay for HC supplies, co-pays, medications, etc. Also, unlike the Medicare Part B supplement of $29.90 a month ($358.80/year) which is taxable, the amounts issued on HC Debit cards would be TAX FREE. A number of Medicare Advantage Plans available to the general public already offer this TAX FREE benefit with their plans, and to my knowledge, they have never received one penny of our employer payroll contributions. A $500 HC Debit card would cost about $75 million dollars a year, or only about 2% of our HC reserves. The STRS HC reserves have been growing by over twice that amount annually over the past few years!
Is this something that STRS Retirees deserve? In this "ERA of Broken STRS Pension Promises", I think it is! Here, look at this STRS document. In this document and in the 1974 Annual Report and under the direction of a great former STRS Executive director named James Sublett, I found the following words. "In January, 1974, the System began paying premiums for retired members under the then existing medical insurance program. Coverages were improved quite significantly by the addition of what amounts to a major medical plan, including prescription drug coverages, with no deductible. Effective July 1, 1974, this new plan was put into force for all retirants, with premiums paid by the system. Ohio teachers now have a medical insurance program that is paid up at retirement."
Of course, as we now know, STRS provided free HC to retirees for the next 18 years. Do the right thing and have a Health Care Debit card ready to go in time for the fall Health Care open enrollment period.

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