2005 STRS Ohio News E-mails

ORSC Receives 30-Year Funding Report and Budgets

At part of its April 13 meeting, the Ohio Retirement Study Council (ORSC) received two reports from Executive Director Damon Asbury. The ORSC is the legislative oversight committee for the five public pension systems in Ohio.

The first report was a presentation on the proposed 2005-2006 fiscal year budgets for STRS Ohio. The pension legislation passed last September requires each Ohio public pension system to present its annual budgets to the ORSC prior to adoption by their respective boards.

During his presentation, Dr. Asbury noted that the proposed operating budget for 2005–2006 reflects a 1% decrease from the 2004–2005 budget and is the lowest operating budget in the past five years. He further noted that the budget is designed to accomplish these goals:

Make system operations in all areas as “lean” as possible, without
- Jeopardizing delivery of pension benefits and services and health care coverage to members;
- Adversely impacting investment operations; or
- Failing to meet fiduciary responsibilities or legal requirements.
Provide an appropriate compensation and benefits package and work environment to attract, retain and engage highly motivated associates.
Comply with all Board Policies.
Be driven by Retirement Board priorities.
Demonstrate and communicate to members that STRS Ohio is managing operating expenses prudently (members’ perceptions monitored through research).

The second presentation addressed STRS Ohio’s funding status. As specified in Section 3307.512 of the Ohio Revised Code, STRS Ohio must present a report to the ORSC in any year that its funding period for the unfunded accrued actuarial liability (UAAL) of its pension fund exceeds 30 years, as well as its plan on how it will reduce this amortization period to 30 years or less. (The funding period is the number of years needed to fully fund accrued liabilities — similar to a home mortgage in amortizing a long-term debt.)

During the past fiscal year (July 1, 2003–June 30, 2004), STRS Ohio had an exceptionally good year regarding investment returns. However, the system experienced actuarial losses in other areas. Consequently, there were only slight improvements to the funding period for STRS Ohio and it now stands at 42.2 years.

The Retirement Board’s plan for returning to a 30-year funding period contains several components, including:

Conduct an asset/liability study, to be completed by August 2005.
Evaluate the actuarial liability incurred for purchased service credit.
Monitor retirement trends as part of an analysis of the overall cost or benefit to the system of the enhanced 35-year benefit formula.

During his presentation, Dr. Asbury noted that the Retirement Board is working with the Health Care Advocates for STRS and other system stakeholders to build consensus on any needed future changes to pension and health care funding.

The members of the ORSC did not raise any questions regarding either STRS Ohio report. A complete copy of the 30-year funding report is posted on the STRS Ohio Web site.

Please Note
Due to the schedule change to the State Teachers Retirement Board meetings, the Board News covering each monthly meeting will not be distributed until the following Monday. The April issue of Board News will be sent on Monday, April 18, 2005.

Return to the list of STRS Ohio news e-mails sent in 2005.