Blade Editorial: DIY STRS reform
- ORTA
- Jul 5
- 2 min read
The “midnight rider” inserting controversial provisions into the Ohio budget in the wee hours before the vote wasn’t an outlaw like the Allman Brothers band made famous in song but rather state lawmakers banishing elected teachers pension board members to permanent irrelevance.
It’s an Ohio political irony that “reform” board members elected by active and retired teachers enacted no meaningful reform but are being eliminated as a majority of the board so no future board could make good on their promise to require full transparency on the pension portfolio and to swing the investment fund from high-cost alternative investments to low-cost index funds.
Lawmakers, Gov. Mike DeWine, and Attorney General Dave Yost seized on a 2021 investment proposal of highly dubious nature to launch an investigation and sue the board members behind the idea for breach of fiduciary duty in 2024.
The State Teachers Retirement System of Ohio is seeking a large increase from taxpayers to the pension fund and lawmakers taking over the board with safe political appointments aren’t about to approve that without setting up someone else to take the blame.
Reform board members’ flirtation with a plan to earn fees from Goldman Sachs by helping the Wall Street giant conceal high-risk leveraged investments from federal regulators was the pretext for changing the board makeup and will no doubt be cited when schools are forced to pay more to keep STRS solvent.
The seven elected members of the current STRS board, five active teachers and two retired teachers, did nothing to distinguish themselves but are still much preferred to the collection of political hacks routinely appointed to Ohio boards and anointed with the legally required expertise in the process.
It’s amazing how easily a well-connected lobbyist becomes “an investment expert” when appointed in that category by the legislature, governor, or treasurer.
Even more amazing is how these experts universally dispute the wisdom of Warren Buffett and opt for expensive actively managed portfolios run by lavishly compensated consultants instead of a broad-based index.
Legendary pension investment adviser Richard Ennis provided the STRS reformers with his analysis of the fund showing $12.5 billion in unrealized gains because the teachers pension trailed an index fund by 1.62 percent on average for 13 years.
Given that Ohio is one of few states that pre-empt all public employees from being part of the Social Security system, this level of state oversight is far short of sufficient.
Market-trailing investment returns are behind the drive by the police and fire pension and the massive Ohio Public Employees Retirement System to increase taxpayer contributions just like the teachers.
Certainly any new Ohio teacher would be wise to avoid the state-managed fund and opt for the Russell 1000 index fund at a cost of 5/100’s of 1 percent.
The index has delivered a cumulative gain of 97.71 percent over the last five years.
New Ohio teachers should follow a DIY reform plan and keep control of their own retirement money as allowed in the STRS system.
Toledo Blade Editorial Board
July 4, 2025
