The Mess at STRS
ARE YOU AWARE?
STRS claims to be “one of the nation’s premiere pension systems,” yet those who retired in 2012 or earlier have gone without their annual, lifetime-guaranteed 3% COLA (Cost of Living Adjustment) for over a decade. As of July 01, 2023, they are behind by 23% of the COLA payments promised to them. The 3% COLA was frozen in 2013, reduced to 2% in 2014-2016, and eliminated in 2017. A one-time-only 3% was provided in 2022, followed by a one-time-only 1% in 2023, with no guarantee of any future COLA. Newly retired Ohio teachers must wait five years to receive a COLA. Actives have no guarantee that they will ever receive a COLA throughout their retirement years.
Ohio’s active teachers receive far less for their employee contribution upon retirement when compared to other educators in the US. Actives are forced to contribute 14% for an actuarial benefit worth less than 11%. They must also work additional years (34 years of service at any age or five years of service at 65 years of age through 2028, rather than the original 30 years; then reverting back to 35 years unless the Board changes it again) to receive unreduced benefits; and their benefits are now based upon five years’ Final Average Salary (FAS), rather than the original three years. The combined active teachers 14% and matching 14% from schools is the 3rd highest rate in the US. (Missouri and Nevada are slightly higher).
While our benefits are cut, STRS Investment staff are paid huge bonuses. For example, STRS’s Chief Investment Officer Matt Worley received $446,481 Performance-based Incentive (PBI) last year on top of his $373,000 salary for a total $819,481 annual income, even though he was responsible for our 2018 $525 Million Panda Power loss and although he failed to report this loss to members.
A Spring 2021 forensic audit, crowd-funded by Ohio teachers, retirees, Hamilton County Retired Teachers Association, the Ohio Retirement for Teachers Association (ORTA), and the Ohio Federation of Teachers (OFT), uncovered this Panda Power loss. The Ohio Education Association (OEA) declined to donate to this audit. The forensic audit found that STRS overstates performance, understates expenses, costs members $400 million annually through failed in-house investment strategies, and lacks transparency in its overall investments. In fact, STRS doesn’t know or won’t tell the value of its “alternative investments,” which have hidden fee structures. Former SEC attorney and Benchmark Financial Services forensic auditor, Edward Siedle, advised that STRS pays Wall Street investors high fees on our monies that won’t even be invested for nearly a decade (“Money for Nothing”), according to the forensic audit findings.
Ohio law requires a fiduciary audit of STRS be conducted every ten years; however, 16 years passed between the 2006 and December 2022 audit. Not only did STRS fail to implement the corrective actions required in the 2006 audit (e.g., hiring more auditors), but Ohio State Auditor Keith Faber also found that STRS missed out on $90 billion in gains from 2009-2021, due to bad investment strategies, which included alternative investments. Berkshire Hathaway CEO Warren Buffet, the world’s 5th wealthiest person, repeatedly warns against alternative investment practices.
STRS health care changes have been drastic and very costly to members: From 1974-1992, all STRS health care was free for retirees and spouses; after this, spousal subsidy was cut in half and then it was eliminated in 2003.
PLEASE EXPRESS THESE CONCERNS TO GOVERNOR DEWINE AND YOUR LEGISLATIVE REPRESENTATIVES:
STRS investment practices: Exorbitant expenses include consulting fees and hidden fund fees, high risk alternative investment practices, billions of dollars in losses, and lack of transparency.
STRS staff salary increases and bonuses: This includes the 6% raise to STRS employees and nearly $10 million in Performance-based Incentives (PBIs) to Investment staffers in 2022, despite the investment staff losing $5.3 billion. Over $9 million in PBIs were awarded to the Investment staff in 2023.
STRS 2006 fiduciary audit findings: STRS ignored directives from the Ohio Retirement Study Council (ORSC). Also: Our STRS funds are forced to pay ORSC hundreds of thousands of dollars annually for oversight; yet ORSC has repeatedly canceled monthly meetings (“More Money for Nothing”).
STRS Board and staff member travel: This includes “International and alternative investment due diligence trips to England, Turkey, China, and Japan” and trips to “Japan and India”, as just some a few examples of blatant waste uncovered by FOIA requests in STRS Expense Notes.
Denying access to records: Wade Steen, Former STRS Board member/appointee by the Governor’s office, was denied access to records by STRS, thus disallowing him to meet his fiduciary obligation. His requested special Board meeting to discuss restoration of the COLA and reduction in active teacher contributions was denied. Additionally, forensic auditor Ed Siedle and attorney Marc Dann were denied access to STRS public files as well, so as not to view STRS fund management practices.
Governor DeWine removed Wade Steen from the STRS Board the day before the 2023 STRS election results were announced. If he had remained on the Board, the Reformers would have had the majority Board seats and could have enacted a complete overhaul of OUR pension fund!
STRS has regional real estate offices in San Francisco, Atlanta, Chicago, and New York, staffed with numerous STRS employees. How well are these investors doing for us? Here are two examples: 1) STRS paid the highest amount per square footage ever recorded in Dallas history ($700 per sq. ft.) in 2019 for a downtown high rise, at $180M (in 2018, that same building sold for $46M). 2) Our Wacker Drive (Chicago) high-rise, purchased in 1999 for $280M, is now valued at $92M (a loss of $188M) and has an occupancy rate of 62%; yet STRS recently paid off its $150M mortgage rather than invest that amount elsewhere.
STRS has a fiduciary responsibility to over 500,000 members who provide years of service to Ohio schools and who may be entirely financially dependent on their STRS pension and COLA, especially since Ohio is not a Social Security state for public workers (the WEP & GPO reduce/eliminate benefits).
THE STATE OF OHIO AUDITOR, Keith Faber, in a Dec. 2022 special audit, recognized that STRS did not keep up with the S&P 500 from 2009-2021, which could have generated $90 billion more dollars for the fund. BRING CHANGE BY VOTING FOR BETTER REPRESENTATION ON THE STRS BOARD! The next election is Spring, 2024 and incumbent Dale Price (active member) needs to be shown the door. He has voted for multi-million-dollar bonuses for STRS staff, continued pay increases for employees (6% in 2022) and no COLA. He has not imposed ONE SACRIFICE for STRS. If you do not vote, we will all continue to suffer. Spring 2024 election is for active teachers only; retirees and actives both vote in 2025. Join the Ohio STRS Member Only Forum and STRS Ohio Watchdogs on Facebook (STRS Ohio Watchdogs also has a website). Join ORTA – the Ohio Retirement for Teachers Association; active teachers can join for a mere $10). These groups will provide information and help you keep apprised of this situation.
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