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Toledo Blade Editorial: STRS reform has begun

Reform has begun at the State Teachers Retirement System of Ohio.

The board blocked $10 million in the proposed 2025 budget for a performance-based incentive program that has become a huge part of the pay package for the STRS investment staff.

The staff bonuses have been avidly opposed by retired teachers because they add between $50,000 to $300,000 annually to the pay package of the STRS investment staff while retirees have only received 4 percent in total cost of living adjustments since 2017. They had expected 3 percent annual benefit increases, so they’re behind by 20 percent.

STRS leadership says bonuses are industry standard and portrays the staff as exceptional. Treasurer Robert Sprague’s appointed STRS board member, Alison Lanza Falls of Port Clinton, fought to keep the bonuses, claiming otherwise staff will quit. Ms. Lanza Falls spent 30 years on Wall Street and it shows. If the entire investment staff at STRS left and the pension was put on auto pilot in an index matching the broad market, history shows performance would improve.

The Nevada Public Employee Retirement System operates on this model, with just two investment department employees, paying 1/100th of 1 percent in fees on their indexed funds. Nevada’s 10 year annualized return is 8.9 percent, easily beating the 7 percent assumed rate of return STRS needs to stay on track.

As Ohio Auditor of State Keith Faber’s Special Investigations Unit pointed out, STRS has trailed the S&P 500 index for 13 of the last 22 years. The investigation was launched because of allegations the bonuses were earned through underreporting private equity expenses.

The Auditor found no fraud but criticized the easily earned and overly lavish bonuses paid by STRS. Past STRS boards ignored the recommendation for bonus-worthy performance in the 2006 fiduciary performance audit. That document recommended a benchmark of the Russell 3000 index plus 5 percent for private alternative investments.

Instead STRS used actual performance as the benchmark for the private equity portion of their portfolio, assets were valued solely by fund managers, and magically they did well enough every year to make sure the entire investment staff met their goals for a bonus.

The reform members of the STRS board were all elected by teachers except for Wade Steen, who Gov. Mike DeWine illegally removed for more than a year because of his support for policy change at STRS.

Ohio teachers have shown with their votes for pension trustees they want an end to staff bonuses, a shift in investments to lower cost indexes, and total transparency on assets and terms on every holding in their portfolio.

The STRS reform majority got one part of the plan accomplished; now they need to keep going and fulfill the promises that got them elected by the teachers over the opposition of the STRS and Ohio political establishment.

Toledo Blade Ediorial Board June 25, 2024

STRS Ohio Board members Rudy Fichtenbaum and Wade Steen are incurring legal fees, defending themselves against the lawsuit brought against them by A.G. Dave Yost. ORTA will use donations from the Pension Defense Fund to help them, if needed, pay their legal expenses. They have volunteered their time to support Ohio's teachers. Now it's time for us to show our support for them! Make a donation today to the ORTA Pension Defense Fund

ORTA advocates for the pensions and benefits of Ohio's educators, demands accountability from STRS Ohio, and lobbies Ohio's legislators to provide a strong and sustainable retirement system. We rely on membership dues to continue our work. Join ORTA!



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