June Board of Trustees Meeting Summary
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees convened on June 13, 2023. In attendance were Board members Jason Steliga, Beth Knes, Allie Gassmann and Katie Webb. Also present were Executive Director Dearld Snider, Chief Operating Officer Sarah Swoboda, Chief Investment Officer Craig Husting, Chief Counsel Mike Moorefield, Chief Financial Officer Anita Brand, Director of Human Resources Kim Harris, Director of Member Services Nicole Hamler, Director of Employer Services Stacie Verslues, Director of Internal Audit Jeff Hyman, Director of Executive and Board Administration Jennifer Martin and various other PSRS/PEERS staff members.
BUDGET AND AUDIT COMMITTEE
Approval of Minutes
The Budget and Audit Committee meeting minutes from the April 16, 2023 meeting were approved by unanimous vote.
Amendment of Certain Minutes Previously Adopted
The Budget and Audit Committee meeting minutes from the December 2021, April 2022 and June 2022 meetings were approved as amended by unanimous vote.
Annual Banking Resolution
Ms. Anita Brand from PSRS/PEERS reviewed a memo regarding a banking resolution. The resolution provides continuing authority to Mr. Dearld Snider, Ms. Sarah Swoboda and Mr. Craig Husting to make necessary changes related to the Systems' banking relationship with Central Bank. The banking resolution authorizes appropriate individuals to execute documents with the bank without additional approval by the Board of Trustees. The resolution automatically expires each June 30 or when a new resolution is received by Central Bank. The Budget and Audit Committee approved the resolution by unanimous vote.
Discussion and Approval of the Fiscal Year 2023-2024 Budget
Ms. Brand reviewed the fiscal year 2023-2024 proposed budget request. Ms. Brand provided information regarding the processes utilized to develop the budget. The budget was compiled based on the Systems' mission of providing retirement security to Missouri's educators and public school employees in the most efficient and cost-effective manner possible. Ms. Brand provided the following budget highlights and provided detailed discussion on significant changes from the prior year.
As part of the annual budgeting process, management prepares annual key initiatives. Key initiatives are developed and reviewed annually by each department under the leadership of the department director and then reviewed by management to ensure consistent alignment. The key initiatives are developed based on the Systems' mission, goals, focus areas and strategic objectives. Annually, each key initiative is reviewed by management to determine if it was completed and what measurable effect (if measurable) each action had on the Systems' strategic objectives. Ms. Brand reviewed the key initiatives completed during fiscal year 2023, as well as the fiscal year 2024 key initiatives.
The total request has increased by 5.8% from the fiscal year 2022-2023 adjusted budget. The overall increase is driven by an expected 5.7% increase in benefit payments to members.
The investment expenses are comprised of investment fees and investment administrative expenses. Budgeted investment fees increased compared to the prior year. The increase is directly related to the assets under management and current contracts with investment managers. Investment fees are paid and budgeted in accordance with current legal contracts. The Systems account for and budget all investment fees including performance and incentive fees. Actual expenses will be directly dependent on the market environment.
The budget request also includes an increase in investment administrative expenses. The Board of Trustees amended the fiscal year 2023 budget at their December 2022 meeting. The budget was amended to facilitate the opening of a secondary office in the St. Louis area for the continued build out of the Private Equity and Private Credit programs. The budget adjustments included the addition of five full-time positions to the Investment department. The positions will focus on the Private Equity and Private Credit Programs. The decision to open a St. Louis office location was based on recent recruitment efforts, an analysis of the post-COVID pandemic landscape, and additional research by staff. The secondary office is expected to facilitate enhanced recruitment and retention and long-term succession planning. The secondary office will also be available for use by staff for member education opportunities, Board of Trustees activities and other events that may be advantageous to the Systems. The opening of the secondary office location and a compensation pool for staff attributed to the increase in investment administrative expenses.
The total administrative budget is made up of the capital asset budget (items over $10,000 that are capitalized) and the administrative budget. Administrative expenses have increased by approximately $2,200,000 (or 9.8%) from the previous year. The increase is attributed to the addition of eight full-time positions and compensation allocations for staff. The increase in administrative expenses is largely offset by a $1,500,000 decrease in capital assets. The total administrative budget increased by approximately $700,000 (or 2.8%).
Throughout the proposed budget request, the Systems have decreased the budget where appropriate. However, the overall proposed budget request has increased in order to meet the Systems' long-term goals and strategic objectives. The Systems' administrative expenses are funded through investment earnings.
The Budget and Audit Committee approved the budget as presented by staff by unanimous vote.
REGULAR BOARD MEETING
Approval of Minutes
The open session minutes from the April 16 and 17, 2023 Board meetings were approved by unanimous vote.
Amendment of Certain Minutes Previously Adopted
The open session minutes from the August 2021, October 2021, December 2021, February 2022, April 2022, June 2022, August 2022 and October 2022 meetings were approved as amended by unanimous vote.
Order of Business
The order of business was approved with no changes.
Mr. Dearld Snider recognized Board Chair Jason Steliga, for getting his doctorate last month. Congratulations to Dr. Jason Steliga.
Performance Report for March 31, 2023
Mr. Craig Husting and Mr. Michael Hall from Russell reviewed the investment performance for the period ended March 31, 2023. The one-year PSRS/PEERS investment return was reported as -3.7% while the fiscal year return (July 1, 2022 through March 31, 2023) was reported as 3.3%.
Ongoing Investment Activity
Mr. Husting and Mr. Hall reviewed ongoing investment activities, which included estimated investment performance through May 31, 2023. The estimated fiscal year investment return (July 1, 2022 through May 31, 2023) was reported as approximately 3.5%. Mr. Husting discussed the investment markets and the current PSRS/PEERS asset allocation.
Real Estate Portfolio Review
Ms. Susan Conrad and Ms. Chhayhea Sam from PSRS/PEERS reviewed the Systems' Real Estate portfolio including program objectives, guidelines and long-term results. The five-year annualized return for the Real Estate composite for the period ended March 31, 2023 was 9.5%.
Board Meeting Dates for Fiscal Year 2024
The fiscal year 2023-2024 Board of Trustees meeting dates were reviewed and approved by unanimous vote. The following dates were set for fiscal year 2023-2024 meetings: August 31, 2023; October 30, 2023; December 11, 2023; February 5, 2024; April 15, 2024 and June 10, 2024.
Annual Banking Resolution
Ms. Brand reviewed a memo regarding a banking resolution, which was unanimously approved earlier in the day by the Budget and Audit Committee. The resolution provides continuing authority to Mr. Dearld Snider, Ms. Sarah Swoboda and Mr. Craig Husting to make necessary changes related to our banking relationship with Central Bank. The Board approved the resolution by unanimous vote.
Fiscal Year 2023-2024 Budget Approval
The proposed fiscal year 2023-2024 budget, as presented to and unanimously approved earlier in the day by the Budget and Audit Committee, was approved by the Board by unanimous vote.
Mr. Mike Moorefield from PSRS/PEERS presented the June end-of-legislative-session update.
Mr. Moorefield said that in the last 30 years, only the 2020 legislative session – when the body was out for several weeks due to COVID precautions – saw fewer bills passed than the 2023 legislative session. PSRS/PEERS tracked 258 bills, filed 83 fiscal note requests on legislation that could impact the Systems, and had 25 bills on its Priority Legislation Track. The General Assembly Truly Agreed To and Finally Passed 19 appropriations bills and 40 non-appropriations bills and joint resolutions during the 2023 session. Of the 40 non-appropriations bills, two contained components of the PSRS/PEERS legislative package, which includes provisions that address working after retirement, the higher 2.55% benefit factor for PSRS members with 32 or more years of service, and the same sex "pop-up" provision for certain situations. Those bills, SB 20 and SB 75, are now on the governor's desk awaiting action. The governor has until July 14 to act upon legislation. If those bills become law, the provisions are effective August 28, 2023.
Ms. Sarah Swoboda and Mr. Dearld Snider from PSRS/PEERS reviewed some key accomplishments since the April Board Meeting.
Ms. Swoboda explained to the Board that 100% of our employers are now utilizing ACH payments. This has been a goal of the Systems for a very long time.
Ms. Swoboda next explained to the Board the integration of Webex into OASIS. The integration of Webex allows both members and employers to sign up for meetings online. This makes the process of enrolling in meetings more seamless not only for our members and employers, but for our employees, as well.
Mr. Snider discussed the opening of the St. Louis office. Currently, we have four employees working in a temporary location. Our permanent location is under construction for renovations, and we anticipate our staff moving in during the last part of August or the first part of September.
Ms. Swoboda covered two additional key accomplishments. The first is a Human Resources department newsletter called the Monthly Perk. This monthly e-newsletter is sent to all staff and contains information on hot topics related to health and wellness. Lastly, Ms. Swoboda discussed the Business Continuity Plan (BCP) update. It had been a few years since our BCP Plan was reviewed, so we are happy to report it's now up-to-date and modernized to reflect all of our new technology.
Mr. Snider covered the final two key accomplishments. The first one was the Board Symposium. It was another successful learning Symposium for our Board in beautiful downtown Kansas City.
The last accomplishment was the passing of positive legislation this legislative season. Mike Moorefield, along with Heath Clarkston, Doug Nelson and Jim Moody spent many hours at the Capitol speaking to representatives and senators helping to get the 2.55% PSRS benefit factor passed (with 32 or more years of service). Along with the 2.55% benefit factor, SB 75 also includes increasing the salary limit for PSRS retirees working in non-certificated positions to 133% of the annual Social Security earnings limit between August 28, 2023 and June 30, 2028; a same sex "pop-up;" expanding the Critical Shortage Employment work limit from two to four years and expanding the potential number of Critical Shortage Employment teaching positions.
Mr. Dearld Snider reviewed the COLA policy that was set by the Board of Trustees at their November 3, 2017 meeting. According to the policy, COLAs may be granted based on the CPI-U as follows:
|CPI-U||COLA per Board-Approved Funding Policy|
|Less than 0.0%||0.0%|
|0.0%-2.0%||0.0% when CPI-U is cumulatively below 2.0%|
|0.0%-2.0%||2.0% when CPI-U cumulatively reaches 2.0% or more*|
|2.0%-5.0%||2.0% when the CPI-U is at least 2.0%, but less than 5.0%|
|5.0% or more||5.0%|
|*resets cumulative calculation after a COLA is provided|
Mr. Snider explained that the Consumer Price Index for Urban Consumers (CPI-U) is calculated by the Bureau of Labor Statistics (BLS). The CPI-U is the measure of the change in prices of goods and services purchased by urban consumers between any two time periods. PSRS/PEERS' regulation requires that the time period for the CPI-U calculation used in the determination of a COLA be from June to June. Based on the values provided by the BLS, the CPI-U is up 2.6378% through May 31, 2023.
Dr. Steliga explained that since the August 2023 Board meeting will be held on August 31, which is a Thursday, we will move the Annual Legislative Meeting to October. Dr. Steliga also thanked the PSRS/PEERS staff for another successful Board Symposium.
The Board went into closed session at 12:12 p.m.
The Board adjourned at 1:39 p.m.
This summary is not official minutes of the PSRS/PEERS Board of Trustees Meeting. The official minutes will be approved at the next PSRS/PEERS Board of Trustees meeting and will be posted to our website at that time.