MANSFIELD — Carolyn Parrott was told that as a public school teacher, she had a generous retirement plan.
Parrott and her husband were both career teachers. She retired from Bellville Elementary School and her husband from Clear Fork Middle School.
Like many public educators in Ohio, they were told they’d be able to retire after 30 years with an inflation-resistant pension. They saw 14 percent of their paychecks deducted every pay period for STRS — the State Teachers Retirement System of Ohio.
“In the 11 years that I have been retired, my husband and I have only gotten two cost-of-living increases,” Parrott said. “They were each 3 percent. And then I guess we’ve got one coming up, that’s 1 percent.”
“It wasn’t what we were promised,” she said. “You see your buying power diminish and your pension isn’t what it used to be.”
Parrott now tells younger educators to diversify their retirement plans, rather than counting on STRS.
“My youngest son and his wife are both teachers and I tell them, ‘Do not think that STRS is going to be around for you,'” she said.
“It’s going to be there in some shape or form, but not what they would hope.”
STRS has troubled history
For years, teachers received a 3-percent annual cost-of-living adjustment to their pension. But funding issues at STRS have limited the buying power of teachers’ income for years.
Several local educators told Richland Source they’re concerned about what it means for the future.
Carol Bertholf, who retired as a school librarian from Ontario Local Schools, said the issues with STRS boil down to two problems — a lack of COLAs and a lack of transparency.
A quick guide to STRS
- The State Teachers Retirement System of Ohio is one of five retirement systems for the state’s public employees.
- STRS paid out $7.5 billion in benefits during the 2023 fiscal year, according to its annual report. The agency serves about 500,000 active, inactive and retired public educators and holds investment assets of around $92.8 billion.
- Members include public K-12 teachers, faculty at public colleges and universities, certified educators like school psychologists and counselors and school administrators.
- Members contribute 14 percent of their annual salary to STRS. They do not pay into or benefit from Social Security, a retirement fund that does provide annual COLAs, including 3.2 percent in 2024.
- Employers contribute 14 percent of their payroll costs into STRS each year.
- Members receive lifetime benefits after they retire. The amount varies based on a retiree’s age at retirement, years of service and earnings history.
- If an STRS member works in the private sector, their STRS benefits may reduce their Social Security benefits.
- STRS employees must work 34 years to receive full benefits.
- The eleven-member STRS board is made up of five elected contributing teachers; two elected retired teachers; the director of the Department of Education and Workforce and their designated investment expert; and investment experts appointed by the governor, treasurer of state and jointly by the Ohio House speaker and Ohio Senate president.
STRS provides benefits for its members primarily through investment gains on employee and employer contributions. Like the rest of Ohio’s public retirement systems, it struggled to stave off debt in the early 2000s.
In 2017, STRS suspended its 3-percent COLAs. Teachers went five years without a COLA.
STRS hit a low point in 2012 with a funded ratio of 56 percent and $47 billion in unfunded liabilities, according to a report by the Ohio Retirement Study Council.
“It is only with increased contributions by active members, decreased future benefits, and suspension of future COLA increases combined with remarkable long-term investment returns that STRS has avoided the possibility of having insufficient funds for existing benefits,” the report found.
In 2022, the STRS board approved a one-time, 3-percent COLA for eligible benefit recipients. Another 1-percent COLA followed in 2023.
Meanwhile, investment staff at STRS have been earning millions of dollars in raises.
The Ohio Capital Journal reports STRS lost $5.3 billion in 2022 alone — but its investment staff was awarded $10 million in bonuses.
Ohio AG sues to remove two members of STRS board
Teachers have long been fed up with STRS, but a series of investigations at the state level has cast new scrutiny on the agency.
Ohio Gov. Mike DeWine issued a statement on May 8 expressing concern that “nationally-renowned” consulting firm Aon was severing its ties with the STRS.
Aon had been hired to provide “guidance on corporate governance” following audits of STRS by Ohio Auditor of State Keith Faber and the Ohio Retirement Study Council.
While these audits didn’t uncover any illegal activity, they did issue several dozen recommendations to improve the agency’s “fiduciary performance.”
“The unstated implication is that the governance issues at STRS are so concerning that Aon could not continue its contract in good faith,” the DeWine statement read.
“STRS may now be out of compliance with portions of audit recommendations due to Aon ending the contract,” according to the statement.
DeWine’s statement also referenced an anonymously-submitted documents with “disturbing allegations regarding the STRS board.”
Those documents accused board members Wade Steen and newly-elected board chair Rudy Fichtenbaum of using their position to advocate for investing STRS money in QED, a private equity firm.
The documents also implied the Ohio Retired Teachers Association was involved in the alleged scheme.
A few weeks later, Ohio Attorney General Dave Yost filed a lawsuit to remove Steen and Fichtenbaum from the board.
Fichtenbaum was elected as a retired reacher representative in 2021. Steen was a DeWine appointee, but the governor later tried to remove him.
Many retired teachers are calling the lawsuit “political” — an attack on board members who are actually trying to reform the agency.
“I think the anger and shock of all this is starting to set in,” Parrott said.
“We started making sure that we would vote for board members who were who had the teachers’ backs. We want our cost-of-living increases, which were promised to us when we started teaching.”
Bertholf agreed. She believes the changes on the STRS board are the emergence “reform” members.
“It can’t be a hostile takeover, we’re voting for these people,” she said.
Despite her frustrations with STRS, Bertholf said she remains optimistic things will improve.
“I think we’re going to see some positive things occurring, but it’s just gonna take a while to unscramble all of this,” she said. “You can’t do it overnight. It’s a shame that politics got involved.”
