Interim STRS director warns of large negative cash flow; 82.5% funded but COLA relief limited since 2017

Aaron Hood, interim executive director of the State Teachers Retirement System (STRS), told the House Public Insurance and Pensions Committee that STRS manages approximately $97 billion in assets, serves more than 500,000 active and inactive members, and paid about $8 billion in retirement, disability and survivor benefits in fiscal year 2024.

Hood said STRS faces a substantial negative cash flow — he described contributions from members and employers as roughly $4 billion versus roughly $8 billion in annual benefit payments — and that the plan’s funding and benefit design make investment returns crucial to paying benefits. He reported a funded ratio of about 82.5% and an estimated funding period near 10.1 years in the materials provided to the committee.

The nut graf: Hood said STRS has implemented reforms since the Great Financial Crisis that raised employee contribution rates and increased retirement eligibility requirements; those measures, along with top‑decile investment performance on a multi‑year basis, helped recover funded status, but sustained COLA restoration is constrained by the plan’s negative cash flow and actuarial pressures.

Hood described STRS policy context: employer and employee contribution rates are each set at 14% of payroll (employer rate unchanged since 1984, Hood said); 90% of members choose the defined‑benefit plan; the plan’s ongoing negative net cash flow (benefits exceed contributions) makes STRS particularly sensitive to market fluctuations. Hood told members that COLA has been cut to 0 since 2017, with only three one‑time supplemental payments since then (a 3% one‑time, a 1% one‑time, and another supplemental payment). He said the board runs an annual “sustainable benefit plan” process to weigh any COLA or other adjustments against actuarial realities.

Committee members asked about how COLA expectations should be framed. Hood said pension plans are not designed to guarantee purchasing‑power maintenance indefinitely and that demographics and longevity — the ratio of active workers per retiree and increasing life expectancy — drive much of the actuarial pressure. Hood also summarized governance changes and recent board actions: STRS manages most assets internally (about 70%), which the system estimates saves tens of millions of dollars annually; the board has been active in asset‑allocation review and legislative strategy formation.

Hood said he has been holding town halls and meeting members statewide; he said retiree frustration is understandable where purchasing power has deteriorated and that the board is considering options under statutory constraints.