It’s time to take action for Ohio’s teachers and Ohio’s economy. It’s time to care and do what is right. 

This letter addresses Senate Bill 69, sponsored by Senator Mark Romanchuk, Chairman of the Ohio Retirement Study Council (ORSC). The bill states, “To declare the General Assembly's intent to enact legislation to reform the law governing the state's public retirement systems.” The bill currently appears to be placeholder legislation. The Ohio Retirement for Teachers Association has a singular suggestion for legislation. This singular suggestion is predicated on the ORSC supporting the suggestions in Ohio Auditor Keith Faber’s report, released on December 29, 2022. Specifically, pension investments need to have more transparency. Non-disclosure agreements should be addressed by “removing trade secret provisions that shield investment decisions from further scrutiny.” Additionally, Auditor Faber stated, “That means fully disclosing how these funds are being invested and the returns or losses on those investments.” These obvious suggestions should be applied to Ohio’s five pension plans.

The STRS pension system pays out approximately $7.6 billion in benefits. Approximately half of these benefits are funded by Employee and Employer Contributions; investment returns must make up the other half. A pension plan depending on annual investment returns of $3.8 billion is risky and jeopardizes the long-term health of the pension system. This gap between known revenue and known expenses drastically impacts the ability to pay basic elements of a public pension system, such as cost-of-living adjustments. 

In 2012, after a market downturn, legislation was submitted to the ORSC to reduce benefits promised to members. These reduced benefits were intended to save the pension $11 billion. Included in this legislation was a 40% increase in the employee contribution. An increase in the employer contribution was initially part of the plan, but in the end, the employer contribution was withdrawn and an additional 2% contribution was added to the employee contribution. It is worth mentioning that the employer contribution has not increased in 41 years. These four decades of stagnant employer contributions create a conflict with Ohio laws. In a defined benefit plan, Ohio collects monies from members and invests them for their future, and they are supposed to assume all the risks. The financial shortfalls are supposed to fall on the employer, not the employee. This is addressed in Ohio’s codes, see ORC 3307.14(E). 

Currently, STRS retirees are not promised inflation protection. They cannot sacrifice anything more to help the pension’s cash flow problem. The problem is obvious. Ohio is not responsibly funding the STRS pension system. Boston College highlighted this problem in their public pension research when they identified Ohio STRS as the only pension plan in the United States with a negative Normal Cost. In other non-Social Security States, the Employer Contribution rate averages 30%, while in Ohio, it is frozen at 14%. 

The ORSC always gives the STRS investment staff accolades for being in the top percentile of investment performance. However, the staff is always under scrutiny from members and the press due to being the outliner and not even being able to pay retirees a simple 2% COLA that was reduced 13 years ago from a simple 3% COLA. A significant problem is that the State underfunds the STRS pension.

STRS consultants Meketa and Global Governance Advisors have publicly stated STRS’s biggest problem is not a performance problem but a legislative one. Crowe, STRS’s independent auditor consultant, suggests the pension funds status is vulnerable due to market fluctuations and “a fixed employer contribution rate at the statutory maximum.” Outside sources share with members and staff that STRS Ohio might be the only pension system they know that doesn’t have a variable employer contribution rate and is drastically underfunded. The problem is obvious. In non-Social Security states where retirees rely upon the State to provide a COLA, Ohio’s employer contribution rate lags by 100%. 

Ohio’s fiscal budget is being addressed. Legislators should address this ongoing problem that has been creating negative news stories for over a decade. The public will be watching. STRS Ohio members number more than half a million, many millions if you include family members. Legislators need to know that any employer contribution rate will return money to Ohio’s economy and improve it. It’s time to take action for Ohio’s teachers and Ohio’s economy. It’s time to care and do what is right. 

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Dean Dennis, Chair
ORTA Executive Committee