Saturday, April 17, 2021

Dan MacDonald: Summary of April 16, 2021 STRS Board Meeting

STRS April 16, 2021 Board Meeting Summary

by Dan MacDonald

Being in no hurry, the April STRS Board meeting was called to order at 10 a.m. After approval of March’s board minutes, the investment department reported a preliminary total fund return for March as a positive 2.20%. The preliminary FY21 total fund return was estimated at 20.75%. Total investment assets ended March at $89.5 billion, higher by $12.0 billion in fiscal 2021. Interest rate ranges were revised and raised to 0% to 2.25% from 0% - 1.50%. The Asset-Liability Study timeline was shared. The initial review of the Performance Based Incentive program proposed changes for FY22 were shared. [No mention was made to last month reference of the bombshell loss of a half billion dollars in a bad alternate investment.]

The Finance Department presented a Proposed Fiscal 2022 Operating Budget which reflected an increase of $1.8 million or 1.7% increase from the fiscal 2021 budget. The budget does contain a 3% per department merit-based raise which was justified by CFO Lynn Hoover who stated that unlike teachers, STRS does not have annual salary increases for all. [Once again all elected Board members, active and retired, didn’t say a word. Governor appointed Wade Steen challenged Hoover on the statement and pointed out steps that are frozen, contracts that are concessions, and most teachers do not automatic raises. At STRS, raises must average 3% by department meaning a staff person could receive a merit-based 5 percent but then others less or nothing. CFO Hoover really implied merit-based raises go to the deserving while who STRS represent, the actives go to even the undeserving. Ms. Hoover didn’t address at all that retirees have no COLA. I was in shock with her statement. I am still in shock. I suggest when STRS posts the recording of the Finance Department report, around April 20, listen to the report. Hear what she had to say.]
William Neville gave the Executive Director report. STRS Ohio received 688 new retirement applications in March, which is typically the month in which most applications are received. It was the highest volume since 2015. When questioned, COVID seems to be influencing actives. Along with other highlights which all are available at under “About Us” and then “Retirement Board” and then “Most Recent Board materials,” Neville reported that STRS earned the Auditor of State’s Top Rating for Transparency. [Ironic is all that I can write.]
Retiring Investment & Chief Investment Officer John Morrow was honored for 30 plus years of service during a brief ceremony. When Morrow started in 1990 assets were $19 billion, now they are $89 billion.
After Executive Session/lunch Member Benefits gave a preliminary report on Health Care. It was proposed that the annual prescription drug deductible raise from $275 to $300 for 2022. After discussion it would appear that this will not happen. The health plan is projected to exceed 200% funding in FY2021 with investment returns exceeding the 7.45% funding and better than expected net health care costs. Another proposal is to move to Express Scripts’ National Preferred Formulary for non-Medicare enrollees and the Premier Performance Formulary for Medicare enrollees. Greater participation in these formularies amongst Express Scripts’ clients results in greater rebates due to large volume purchases. With a change in formularies come changes in coverages to STRS retirees. Stein asked about smoothing the changes. There should be some grandfathering. As to compounded drugs which are specifically mixed and prepared, there will be no changes to help. An additional proposal is to reduce the specialty copay to the lesser of 8% of cost or $450 from the lesser of 13% of cost or $450 per 31-day supply. An added proposal is to decrease the drug maximum out-of-pocket limit to $5,100 from $6,550 for the Medicare plans but to maintain the $5,100 out-of-pocket limit for non-Medicare enrollees, as they are not eligible for Pharma discounts. Finally, STRS is proposing the cost of providing comprehensive hospital coverage for Medicare Part B-only enrollees to be fully funded through the Health Care Fund. With these changes the Health Care Fund would still be projected to be funded at 188%. In May the Board will vote on proposed changes and premiums will be set June, 2021.
The meeting ended about 2 p.m. after Routine Matters and no New/Old Business.
The next STRS Board meeting is set for May 19, 20, 21. The meeting should take place on May 20. Registration to attend virtually is through WWW.STRSOH.ORG starting Friday, May 14, 2021.
Dan MacDonald

Wednesday, April 14, 2021

Message from Dan MacDonald: Public Participation

From Dan MacDonald

April 14, 2021

Tomorrow, April 15, is the STRS April Board meeting. Public Participation is acknowledged at each meeting. When meetings can be attended, I monthly have participated in the Public Participation. Now that meetings are being held virtually, is a way to allegedly tell the Board what I am thinking. Since letters to the Board for Public Participation aren’t shared even when Board meetings can be attended in Columbus, I want to share what I sent a couple of days ago. Here’s my Public Participation that you would not otherwise know was sent. Dan MacDonald 

April 13, 2021
Dear STRS Board Chair Rita J. Walters and Board members:
The loss of 524 million dollars is a pittance when compared to our total STRS fund. This is true, around 0.00597. Blend this loss with everything else happening and it should be a concern for the STRS Board and staff. Panda declared bankruptcy in 2017. Performance Based Incentives were issued for 2017, 2018, 2019, 2020. Did the loss effect anyone’s PBI? Do we have the right to know? Board member Steen brought up transparency recently when the Board Policy’s manual was being discussed. The STRS lawyer pooh-poohed the idea of adding the word “transparency” where Steen suggested with the comment that transparency is contained throughout the document. The Board hires Cliffwater, Callan, Cheiron and others to reassure itself and, I hope, actives and retirees, that all is going in the right direction. Yet nary a word from anyone about a half billion-dollar loss until the March Board meeting with a 90 second announcement. The investment department response, we will do better “Due Diligence.” What happened with the Panda due diligence? After the fiduciary presentation at the STRS March meeting, I, for one, question the presenter’s push for “loyalty” and “prudence.” To quote the Power Point slide – “Fiduciaries are held to the ‘highest standard of conduct’ known to law … A trustee is held to something stricter than the morals of the marketplace..” I would say the overall silence of the Board and staff over the past 4 years regarding Panda is exactly the morals of the marketplace. Steen continues to ask “who is accountable for these numbers;” the answer I continue to hear is that no one is. Steen moved to table for a month the pay for the PBI at the August STRS meeting to go over the numbers for PBI payout; the motion lost. What did the Board know and when did they know it? What did our consultants know, and when did they know it? At the December Board meeting CliftonLawsonAllen presented the audit report of STRS Ohio’s financial statements for the year ended June 30, 2020. CliftonLawsonAllen issued “a clean, unqualified report. The firm indicated there were no significant issues…” Common sense tells me the staff and Board are acting legally behind closed doors in executive sessions and sharing negative information and that our consultants are also acting legally not commenting on the investment department glitches, “oops” so to speak. What’s a half billion-dollar loss? It’s insignificant; the members don’t need to know. Is this transparency? Does the silence build trust?
The Board Chair should acknowledge the loss and share why it was not reported, or for that matter, why there is no need to share until March, and a then only a short comment, the loss to actives and retirees.
In closing, April’s Board meeting addresses the proposed STRS Budget for 2021-22, I would hope there would not be a proposed merit-based pay raise figure based on the lack of COLA, the harsh benefit markers for actives, AND the loss of a half billion dollars. As Jack Reacher would say, hope for the best but plan for the worst.
Dan MacDonald, STRS Retiree

Damschroder: Stand your ground to move pension policy 

John Damschroder, Columnist
Fremont News Messenger
April 14, 2021
The 100 percent loss of a $525 million direct investment in Panda Power by the State Teachers Retirement System is not the end of the story
Five STRS alternative investment funds; Ares Capital, Avenue Capital, GSO Capital, HIG Capital and Oaktree Capital, with a combined total of $1,140,969,501 from Ohio teachers retirement money also invested in the bankrupt merchant power generator Panda.
STRS says, “to our knowledge none of the funds in which we are invested with these managers have exposure in Panda.” But because these funds have been given trade secret protection by STRS, the teachers’ pension has no knowledge of what has been purchased with their dollars. It’s the way Ohio’s pensions structure their alternative investments.
The lack of detailed portfolio knowledge allows the pensions avoid headline risk like more losses in Panda, while both fund managers and pension staff can base bonuses off asset valuations that cannot be checked.
Beneficiaries have no idea to flex their muscles
With $234 billion in assets ultimately owned by 1.9 million Ohioans, the political power to force systemic change in the currently lackadaisical oversight is obvious. Ohio pension beneficiaries simply have no idea how to flex their muscles and force state officials to run the pensions for their benefit or be replaced by an office holder who will.
Single-issue gun rights voters, have established Ohio as a “stand your ground” state. If STRS members want the cost of living adjustment-COLA restored they have to stand their ground as single-issue pension voters. Elected officials can’t win if they ignore 500,000 people owed the money and the multitude of friends and family who agree.
Imagine Gov. Mike DeWine facing re-election in a year, with the knowledge nearly 2 million pensioners in the five Ohio systems and another 2 million of their family members blame him for clear violations of Ohio law in the years late fiduciary and actuarial audits of the funds by the Ohio Retirement Study Council. Article three; section six of the Ohio constitution says the governor “shall see that the laws are faithfully executed.”Your stories live here.
Moreover, the Ohio Revised Code makes the Attorney General the adviser to the Ohio Retirement Study Council, the pension oversight board with a history of ignoring the law. As Attorney General, Mike DeWine did nothing to prod ORSC into following the law.
DeWine lax in forcing execution of pension law
As governor, DeWine has done nothing to force faithful execution of pension law. If Ohio pension beneficiaries become single-issue voters Governor DeWine will have much to atone for or face certain defeat.
Attorney General Dave Yost is also vulnerable. As Auditor of State, his contracted work product on the pensions always noted investments were not audited so no opinion or assurance of management provided information was established by the audit.
Because the vast majority of the dollars counted upon to pay pensions are provided by the investments, an audit that does not validate the existence of assets, let alone the valuation of investments, fails the most important mission.
Auditor Keith Faber has the legal power, as did Yost, to force a full accounting of current assets and valuations without constraint from the trade secret contracts pensions have entered with alternative fund managers  Barring the Auditor of State access to records makes a state contract illegal and therefore void.
AG Yost, as the legal counsel for all Ohio pensions, has the power to require future alternative investment contracts provide granular detail on investment holdings so audits can go beyond reliance on information supplied by management. He can get also get a court order forcing pension boards to get that information in the secret contracts they now hold.
Treasurer Robert Sprague, as custodian of evidence the pensions own their investments, has the power to make the pensions specify what assets they hold in the funds they have given money.
Legislators have the power
Ohio legislators have the power to repeal laws that opened the door to pension fund alternative investments. They could require a full manifest of assets and valuations every six months.
Lawmakers could limit employee bonuses to benchmarks like the S&P 500. They could even strip the ability of the retirement fund boards to pay bonuses and make those payments a legislative issue.
If 1.9 million pension beneficiaries recruit just one friend or family member to join them as a single-issue voter, these proposals would be easily achieved. Ohio office holders will not stand their ground when confronted by political threat. Just ask the gun people.  
John Damschroder, a Fremont, Ohio native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.

Monday, April 12, 2021

STRS Board Email Addresses

Carol Correthers 

Rita Walters 

Arthur Lard Arthur 

Rob McFee 

Dale Price 

Jeff Rhodes 

Bob Stein 

Scott Hunt 

Yoel Mayerfeld 

Wade Steen 

Claudia Herrington 

Sunday, April 11, 2021

Rudy Fichtenbaum responds to Molly Janczyk and Milly Ganz re: COLA

From: Rudy Fichtenbaum 

Sent: Sunday, April 11, 2021 

To: Molly Ganz 

Cc: Molly Janczyk

Subject: Re: COLA
I agree with you that trimming parking, staff salaries and benefits will not provide STRS with the money to reinstate the COLA. One of the reasons we have a problem is because over the years a culture has developed that does not put member interests first. The bonuses and other benefits, along with the art work etc. are the symptoms.
To reinstate the COLA we are going to have more transparency. In addition, we need to cut investment expenses, starting with all of the money we pay for alternative investments. Half of all investment expenses are attributed to alternative investments, which have consistently underperformed. We also need to start looking for new investment strategies that can increase returns without taking on more risk. Finally, we need an increase in employer contributions. Active members saw their contributions go up by 40%. Employer contributions have not increased in over 35 years and are at the low end of employer contributions for non-social security pensions. The Board should support this effort but it will ultimately be up to members who should be working with the Board to convince our elected leaders that we need an increase in employer contributions.
Rudy Fichtenbaum
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From Molly Ganz
Apr 11, 2021
Subject: COLA
Hello there, How about we get these new people elected first? There has been a lot of our money wasted, as you are well aware. I hope they start there. $100? Not everyone is up that high! My net gain after a cola increase was $45, but it added up over the years we received it.
Molly Ganz
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From Molly Janczyk
Apr 11, 2021
Subject: COLA
I am a retired and want my pension maintained over all else.
Where is the money to reinstate COLA?
Figuring just $100 a month for just 150,000 retirees, the figure is
15,000,000 per month times 12 months is 180,000,000 a year.
Trimming salaries, benefits, parking, and all else does not generate that amount.
I want COLA as much as anyone finding increasing costs outweigh income.
We all want COLA but where is the funding?
What will happen with the next economical downturn like the Great Recession?
Molly Janczyk

STRS Board Meeting Thursday, April 15, 2021

From STRS April 8, 2021
The State Teachers Retirement Board and Committee meetings currently scheduled remotely and at the STRS Ohio offices, 275 East Broad Street, Columbus, Ohio 43215, are as follows:
Thursday, April 15, 2021
8:30 a.m. Disability Review Panel (Disability Reviews will be conducted in Executive Session)
Due to the COVID 19 pandemic, the public may only attend the meeting virtually. Those wishing to attend may register using the link below:

10:00 a.m. STRS Ohio Retirement Board Meeting 
Comments to the Retirement Board should be sent to 
The Retirement Board meeting will come to order on Thursday, April 15, 2021, and begin with a Report From the Investment Department, a Report From the Finance Department, Executive Director’s Report, a Report From Member Benefits – Health Care, routine matters, old business, new business and any other matters requiring attention.
Larry KehresMount Union Collge
Division III
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