John Damschroder: Pension tension over big bucks bonus

https://www.thenews-messenger.com/story/news/2021/08/25/damschroder-message-retired-teachers-share-sacrifice/8241957002/

Damschroder: Pension tension over big bucks bonus

Fremont Messenger

August 25, 2021

John Damschroder
Columnist

Ohio teachers may want to re-read “A Tale of Two Cities” as they are living through the worst of times, while watching the best of times, financed with their money.

Thursday, the State Teachers Retirement System of Ohio approved $6.7 million in performance bonuses for investment staff, over the objection of Fremont native Wade Steen, a certified public accountant appointed to the STRS Board by Gov. Mike DeWine.

Retired teachers traveled from across Ohio and outside the state, to oppose those bonuses as evidence of misaligned pension priorities. While STRS investment staff collect bonuses plus six-figure salaries annually, and while all STRS staff work in an opulent building with operating costs nearly double what other public pensions spend, retired teachers have gone without a cost of living adjustment-COLA since 2017.

The situation is just as grim for current Ohio teachers, paying 14 percent of their salary to STRS, with more than 3 percent used to subsidize current retiree benefits.

Message: Their sacrifice should be shared

During the short public comment portion of a daylong STRS Board meeting Thursday, multiple retired teachers made it clear they consider their pension fund to be parasitic, feeding lavishly excessive compensation for staff and hired consultants while callously ignoring the teachers paying those bills.

Their message was sacrifice should be shared, through a salary freeze and elimination of bonuses, so long as STRS is unable to pay a COLA and requires a subsidy from current teachers.

The good news of STRS 29.2 percent gain in the fiscal year ending June 30, the best performance since 1983, was mostly lost to the anger, mistrust and loud taunts from the capacity crowd of protesting teachers.

Where STRS leadership was celebrating a great performance, clearly convinced bonuses were well earned, the teachers focused on a 2006 fiduciary audit of STRS, recommending extra payments only if returns are 5 percent above the Russell 3000 index, which earned 43 percent in the fiscal year.

Tactics used to meet the bonus benchmark is behind the most serious conflict at STRS. A forensic audit by  securities attorney and author Edward Siedle, commissioned by the Ohio Retired Teachers Association-ORTA, concluded STRS did not report millions of dollars in costs to boost performance.

Board member Steen went so far as to release a 10-point map to financial data showing investment costs manipulated so a negative return became positive, allowing bonuses to be paid. Using the bonus benchmark recommended in 2006 would make the debate irrelevant. It’s a rare to non-existent event for any STRS asset category to beat the market index by 5 percent.

STRS Executive Director William Neville was adamant that investment results are truthfully recorded, “I don’t lose sleep over the management of our assets but I do worry about misinformation,” said the teacher’s pension boss. “That’s why we put our meetings online.”

'You've earned our loss of trust through secrecy'

ORTA Executive Director,  Dr. Robin Rayfield, speaking during the public comment period told Neville and the board, “You’ve earned our loss of trust through secrecy.” Rayfield wants to see records that prove Neville’s assertion on fully and honestly reported financial results.

Because STRS couldn’t, or wouldn’t provide records proving actual costs, CEM Benchmarking added $23 million to the STRS supplied data to make it plausible as correct. Both Neville and CEM told the STRS Board they stand behind their number on 2018 investment costs.

In rebutting the Siedle report, Neville described multiple layers of oversight in Ohio law as adequate, perpetuating the myth that they actually exist in practice. The Ohio Retirement Study Council oversight exists in state law, but as I’ve pointed out before, the body routinely ignores that law, without sanction.

The inspection of the Ohio Auditor of State and the firm selected as partner in that task, was also cited by Director Neville as evidence that STRS financial reports are validated. Neville did not mention the disclaimer by the state auditor and the outside firm saying STRS is responsible for the accuracy and completeness of all financial information, as reported here last week.

Auditor Keith Faber has the Steen document through the legally required fraud reporting system. That law requires him to post a public document detailing how the potential fraud was handled, unless there is a criminal investigation.

To restore faith that the teacher’s pension really is subject to oversight and the fraud tip has been investigated, Faber needs the specificity of unreleased documents to give his conclusion any credibility.

John Damschroder, a Fremont native who worked in Gov. George Voinovich’s administration, writes about business and economic development in Ohio.