Retirement
To be honest, this feels a lot like an “old retired person complaining”. But here it is. I was a public employee, a public school teacher before I retired. I worked for thirty-five and a half years (to be precise, I wasn’t going to leave in the middle of the year). The “retirement deal” I got sounded pretty good. I could retire at a high percentage of my best three years, and I would get additional cost of living adjustments (COLA’s) after I retired. That was the deal through my most years of my employment – no surprise “take it or leave it” offers at the end. And it was what I depended upon as I planned my future.
State Teacher Retirement (STRS) is different than most other forms of retirement. As a teacher, they didn’t even take Social Security or Medicare out of our paychecks. We were separate, and the “deal” was that our retirement system would provide a pension and health insurance, better than Medicare and Social Security. We wouldn’t “need” those services.
Promises Made
It was a “straight” pension program. We paid ten percent of our annual salary into the system, our employer added another eight percent. So STRS got thirty-five and a half years of eighteen percent of my salary to invest. There wasn’t any choice to make back “in the day”; it was sign up and start teaching. Thirty or more years down the road, STRS would “take care” of you, with your own money. The deal was to work for moderate wages and get a solid pension afterwards. But the deal is changing, long after the promises were made.
They started to change the rules in the last years right before I planned on retiring. All of a sudden, the Ohio State Legislature was worried that the public pension systems – STRS, SERS (school employees), OPERS (public employees), SHPS (Highway Patrol) and OP&F (police and fire) might not have enough money to cover their obligations. There were a lot of factors, but one was us “baby boomers”. There were a lot of us, and we were retiring and living longer, and that was putting pressure on the system. For forty years, the “baby boomers” carried the systems, with more of us working and fewer retired people. Now, that ratio started to reverse.
Too Much to Ignore
But you’d think if the systems got thirty or more years of eighteen percent of our income, that would be enough. And add to that sum, all of the money they could make by investing that money “for us”, and it should cover everything. If the phrase, “it takes money to make money” makes sense, then they had plenty.
If they just stuck the money in the stock market, using the Dow Jones Industrials, they’d averaged ten percent per year. Standard and Poor’s Index, would have been eleven percent over the past forty years. But the vagaries of the stock markets were too dangerous, they thought, so they diversified the funds. That made sense, originally.
But, particularly after the Wall Street crash of 2008, the pressure was on the “funds” to make more profit. And, no one, the state leaders thought, could make profit than private investment folks (just like the ones that crashed Wall Street in the first place). It didn’t hurt that Ohio’s Governor, John Kasich, had made his “fortune” at Lehman Brothers. So STRS began to pay millions of dollars to have private investment firms control some of their “nest egg”. And how big is the “egg”: over ninety billion dollars.
Life in the Taj Mahal
And in the meantime, you had all of those “public” employees at STRS (they actually retire in OPERS) controlling the investments from STRS Headquarters in downtown Columbus: 275 East Broad Street. It’s a beautiful building, reminiscent of a high class Hyatt Hotel. And of course, there’s the heated sidewalks, the brick floored covered garage, the in-house child care and the expensive art and sculptures. They definitely had money to spend, and they spent it. And that’s all good, as long as they covered all of their retirees costs.
There were some early signs. For two decades STRS issued retirees a “Thirteenth Check” each year. But in 2000 that stopped. And retirees looked at increasing costs of health insurance, particularly for dependents.
And in 2015 STRS suspended Cost of Living Adjustments. At first it was for five years, but now six years later they are still suspended, with little hope of returning. Meanwhile, the investment staff lost half a billion dollars investing in Panda Energy in Texas, and more in high end real estate with little hope of recouping the costs. But the staff still managed to “achieve” $7.8 million in annual performance bonuses for themselves.
So with all this, what’s the point.
Broad Street, not Wall Street
STRS, and the other pension funds in Ohio, shouldn’t be “Wall Street” style investment houses. They aren’t there to make their “associates” a profit, or provide them with all of the “Wall Street” type perks. They should be protecting the future for their members; the now retired, and the future retirees. But there’s a lot of living “high on the hog” going on, with little concern for the impact of cuts to their members.
And there’s the more basic question. If the staff is achieving millions of dollars of performance goals, why is the fund still continuing to charge increased costs to the “members”? Shouldn’t the “performance” be based on achieving one basic goal – taking care of their members? That’s not what going on.
Meanwhile, if you are a retired teacher, all of the promises are in question. You don’t “need” Medicare, but with increasing STRS insurance costs, you probably do. You don’t “need” Cost of Living Adjustments, but the real “cost of living” continues to increase. Do we really want seventy-five year old substitute teachers? Or your old first grade teacher greeting you at Wal Mart? That’s not the “deal” we made.
But at least if we have to sleep on the sidewalks at 275 East Broad, they’re heated.
