Toledo Blade: STRS reformers flinch

Toledo Blade Editorial: STRS reformers flinch

July 25, 2024

The top STRS legislative goal has gone nowhere in the General Assembly because the teachers retirement system has turned itself politically toxic by putting staff before beneficiaries.

THE BLADE EDITORIAL BOARD

The State Teachers Retirement System of Ohio has apparently cornered the market on indispensable men. The suggestion that investment staff at the teachers pension would resign was enough to restore performance bonuses, which reform board members had blocked in a June vote.

The reform majority lost their nerve when STRS fiduciary counsel George Vincent told them ending the bonus system would be a violation of their fiduciary duty. So another year of six-figure bonuses is all but guaranteed with the votes to approve the gravy train supplied by board members who campaigned on the promise to run the pension for Ohio teachers.

In the long run, STRS management and status quo board members have done more to set back the most important financial goal of the teachers retirement system than any of their critics.STRS has spent years trying to get Ohio lawmakers to mandate a 28 percent increase in employer contributions to the teacher pensions. That would add more than $500 million a year to STRS funds. But the only way for school districts to come up with more than half a billion dollars more every year is to raise taxes, cut staff, or some combination of both.

The state legislator dumb enough to force pain upon taxpayers to provide lavish bonuses to 69 investment staffers, who are routinely outperformed by a two-man department in Nevada that simply directs the allocations between index funds, deserves the harsh TV commercials and mailers that would come with their next campaign.

Voting for a massive increase in contributions to STRS without major reform at STRS is asking to get beat in the next election.

The top STRS legislative goal has gone nowhere in the General Assembly because the teachers retirement system has turned itself politically toxic by putting staff before beneficiaries. STRS paid their investment staff $10 million in bonuses last year despite a $5 billion loss. The benchmarks to earn a performance bonus is set so every year is a good year for STRS staff.

The majority of the STRS staff is paid more than $100,000 with bonuses taking the top investment staff over $750,000.

If the entire STRS investment staff left, STRS financial performance would improve. The $2.6 billion defined contribution program for STRS members who choose not to put their retirement funds in the $94 billion defined benefit program selects between index funds that beat STRS returns over 1, 3, 5, and 10-year periods.

STRS investment staff resigning is an opportunity, not a problem. The pension has an extensive menu of currently utilized options that bring better returns at lower cost. STRS is ripe for addition of funds by subtraction of investment staff.

The STRS reform board members who campaigned for the seats they hold told active or retired teachers they would switch the STRS portfolio to the lower cost, higher performance index funds.

It’s easy to promise reform to teachers who support big change, but following through is difficult for board members who become slaves to advice supplied by STRS consultants.The backsliding STRS board reformers demonstrated the truth of poet

Maya Angelou’s observation that “courage is the most important of all the virtues because without courage you can’t practice any other virtue consistently.”

Read the article online here.