Damschroder: Stand your ground to move pension policy
Fremont News Messenger
April 14, 2021
The 100 percent loss of a $525 million direct investment in Panda Power by the State Teachers Retirement System is not the end of the story
Five STRS alternative investment funds; Ares Capital, Avenue Capital, GSO Capital, HIG Capital and Oaktree Capital, with a combined total of $1,140,969,501 from Ohio teachers retirement money also invested in the bankrupt merchant power generator Panda.
STRS says, “to our knowledge none of the funds in which we are invested with these managers have exposure in Panda.” But because these funds have been given trade secret protection by STRS, the teachers’ pension has no knowledge of what has been purchased with their dollars. It’s the way Ohio’s pensions structure their alternative investments.
The lack of detailed portfolio knowledge allows the pensions avoid headline risk like more losses in Panda, while both fund managers and pension staff can base bonuses off asset valuations that cannot be checked.
Beneficiaries have no idea to flex their muscles
With $234 billion in assets ultimately owned by 1.9 million Ohioans, the political power to force systemic change in the currently lackadaisical oversight is obvious. Ohio pension beneficiaries simply have no idea how to flex their muscles and force state officials to run the pensions for their benefit or be replaced by an office holder who will.
Single-issue gun rights voters, have established Ohio as a “stand your ground” state. If STRS members want the cost of living adjustment-COLA restored they have to stand their ground as single-issue pension voters. Elected officials can’t win if they ignore 500,000 people owed the money and the multitude of friends and family who agree.
Imagine Gov. Mike DeWine facing re-election in a year, with the knowledge nearly 2 million pensioners in the five Ohio systems and another 2 million of their family members blame him for clear violations of Ohio law in the years late fiduciary and actuarial audits of the funds by the Ohio Retirement Study Council. Article three; section six of the Ohio constitution says the governor “shall see that the laws are faithfully executed.”Your stories live here.
Moreover, the Ohio Revised Code makes the Attorney General the adviser to the Ohio Retirement Study Council, the pension oversight board with a history of ignoring the law. As Attorney General, Mike DeWine did nothing to prod ORSC into following the law.
DeWine lax in forcing execution of pension law
As governor, DeWine has done nothing to force faithful execution of pension law. If Ohio pension beneficiaries become single-issue voters Governor DeWine will have much to atone for or face certain defeat.
Attorney General Dave Yost is also vulnerable. As Auditor of State, his contracted work product on the pensions always noted investments were not audited so no opinion or assurance of management provided information was established by the audit.
Because the vast majority of the dollars counted upon to pay pensions are provided by the investments, an audit that does not validate the existence of assets, let alone the valuation of investments, fails the most important mission.
Auditor Keith Faber has the legal power, as did Yost, to force a full accounting of current assets and valuations without constraint from the trade secret contracts pensions have entered with alternative fund managers Barring the Auditor of State access to records makes a state contract illegal and therefore void.
AG Yost, as the legal counsel for all Ohio pensions, has the power to require future alternative investment contracts provide granular detail on investment holdings so audits can go beyond reliance on information supplied by management. He can get also get a court order forcing pension boards to get that information in the secret contracts they now hold.
Treasurer Robert Sprague, as custodian of evidence the pensions own their investments, has the power to make the pensions specify what assets they hold in the funds they have given money.
Legislators have the power
Ohio legislators have the power to repeal laws that opened the door to pension fund alternative investments. They could require a full manifest of assets and valuations every six months.
Lawmakers could limit employee bonuses to benchmarks like the S&P 500. They could even strip the ability of the retirement fund boards to pay bonuses and make those payments a legislative issue.
If 1.9 million pension beneficiaries recruit just one friend or family member to join them as a single-issue voter, these proposals would be easily achieved. Ohio office holders will not stand their ground when confronted by political threat. Just ask the gun people.
John Damschroder, a Fremont, Ohio native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.
posted by Kathie Bracy at 7:06 PM
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