STRS...this guy has got your number!
New U.S. Census data show Ohio's pension
woes
John Damschroder, June 6, 2017
In Ohio, 458,372 people receive their income and health insurance from a
state pension system suffering from the twin calamities of too little
compounding and candor.
Regular readers of this column know that the top executive of three
of Ohio’s pension system’s wrote to this newspaper
insisting that there is no problem, although no one was so bold as to match Gov.
John Kasich’s absurd claim, made on national TV no less, that Ohio pensions, unlike most in
the United States, are “rock solid.”
The newly released U.S. Census Bureau data on public pension plans reveal
what an outlier Ohio would be if the claims of financial strength made by the
governor and pension leaders were actually true. Sadly, Ohio is not
outperforming the nation, it is simply making performance claims that are
contradicted for the second consecutive year by the facts reported to the federal government.
The Ohio pension data reveal that payments to the retirees in the system
total nearly $7.5 billion more than the payroll extractions from public
employees and state and local government, plus the earnings on more than $178
billion in assets. At the same time, the future pension obligation for Ohio grew
by nearly $7 billion, putting Ohio more than $14 billion in the red last year,
while proclaiming either unique strength or no problems.
In truth, Ohio has a very big problem, compounded by the political
determination not to recognize that fact, lest the implications of the issue
cause the 1,311,351 citizens with a claim on the assets to awaken with fear and
anger over a brewing crisis.
Between 2014 and 2016 Ohio’s pension obligations grew by $17 billion while
the state's pension assets fell by more than $6 billion. In three years the
state pensions have added $23 billion to a liability that currently stands at
just under 10 percent of the state’s gross domestic product and assumes future
investment earnings that the retirement systems have not been able to achieve.
Moreover, these performance failures have occurred during strong markets.
The pension leaders tell us the $734 million they paid in outside management
fees for 2015 provide protection in a down market. I fear that hypothesis will
be tested soon with results that make our current situation seem like the good
old days.
Ohio has altered the payout formulas and increased the pay-in rates to keep
the liability from growing. But charging workers and their employers more for
less doesn’t solve the problem when investment earnings lag the market as has
been the case for Ohio.
The state pensions are the functional equivalent of a company with $15.7
billion payroll that is deeply cash-flow negative. In the campaigns for state
office that are currently taking shape, this issue needs to be forced into the
debate. More than 1.3 million Ohioans are directly affected, and the income they
keep or lose is a huge factor in the state's economic ecosystem just as it would
be if a huge employer suddenly cut its payroll.
John Damschroder, a Fremont resident who worked in Gov. George
Voinovich’s administration, writes about business and economic development in
Sandusky County.
posted by Kathie Bracy at 3:17 PM
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