The Toledo Blade on Wade Steen's ouster from STRS Board
Editorial: Bonus battle postponed
May 20, 2023
The State Teachers Retirement System of Ohio board may think it can dodge the controversy over the removal of a reform-oriented board member and paying huge bonuses to undeserving staff by postponing the decision.
That’s what it did on Thursday when the STRS trustees held its eagerly awaited meeting in Columbus.
STRS Trustees made no decision on controversial investment staff bonuses totaling more than $11 million. That explosive issue will provide the fireworks for the June board meeting, and the issue isn’t going away.
The May meeting was papered with teacher protest signs asking “where’s Wade?”
Wade Steen, the first major critic of STRS investment strategy, appointed by Gov. John Kasich and reappointed by Gov. Mike DeWine, was dumped from the board by Mr. DeWine over howls of outrage from teachers.
The law says Mr. Steen was appointed to a term which expires in 2024. His attorney Norman A. Abood of Toledo warned the STRS Board any action taken was “ineffective regardless of the presence of a quorum.”
Mr. Steen intends to force a court ruling on whether the governor’s appointee serves solely at the governor’s pleasure. Mr. Steen consistently criticized payment of large bonuses to investment staff when STRS retirees received no COLA.
Mr. Steen’s skepticism on STRS asset values was based on solid evidence provided by transparent markets.
As The Blade pointed out during last year’s STRS bonus battle (“Ohio pension results hinge on private equity,” Aug. 21), all Ohio pensions including STRS reported huge private investment gains when its outside investment managers were valued on Wall Street billions of dollars less.
Large bonuses to pension investment staff based on fictitious asset values is a cruel joke to STRS beneficiaries forced to pay more and accept less to bailout its retirement fund.
Bonuses should also be an outrage to taxpayers when they discover STRS is working with lawmakers in an attempt to raise schools’ contribution to the pension from 14 percent of salary to 18 percent.
Under current investment strategy any extra taxpayer funds will go straight to Wall Street. In the last two years STRS has paid outside fund managers $504,998,393. Claimed asset values have fallen by nearly 10 percent and the near $10 billion decline is despite make-believe asset valuations.
The entire debate over STRS bonuses ignores (“Act on STRS Audit,” Jan. 2) the finding of State Auditor Keith Faber’s special audit, showing a low cost S&P 500 index would have returned $90 billion more since 2009 than STRS current investment strategy.
Moreover, as the STRS compensation consultant made clear, index investing eliminates bonuses and the need to compete for staff with Wall Street.
The STRS Board passed a statement of investment beliefs as called for in its recent fiduciary audit. The beliefs are basically boilerplate language about prudent financial management.
But acting upon the recommendation recalls the lack of action regarding bonus benchmarks in the 2006 fiduciary audit.
That document said that staff bonuses should reflect exceptional performance that can be easily documented. The recommended bonus benchmark was the Russell 3000 total market index plus 5 percent.
By that measure, STRS would never have paid bonuses. If the fund had been invested to minimize costs in an index fund rather than maximize gain with Wall Street, annual COLA’s would never have stopped.
Read the rest of the article here.
posted by Kathie Bracy at 9:12 PM
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