J.D. Tremmel on why lawmakers must act NOW to reform STRS before Ohio's taxpayers are forced to pay for the gross mismanagement of STRS' dysfunctional pension system

Toledo Blade, 08/23/2025: 

Saturday Essay: STRS mismanagement tax extracts a hidden cost of new school year

"Property tax reform in Ohio means nothing without pension reform. Unless lawmakers act now, Ohio taxpayers will be forced to pay a mismanagement tax: billions wasted on underperforming investments, excessive fees, and bureaucratic self-preservation. Lawmakers can — and must — end this by reforming STRS and eliminating the mismanagement tax at its source. If they fail to act, Ohioans will remember exactly who made them foot the bill for someone else’s dysfunction."

By J.D. Tremmel

Aug 23, 2025

AS OHIO’S kids head back to school, families are bracing for the usual expenses — supplies, activities, maybe new clothes. What they are not expecting is another hit to their wallets: a property tax hike they never voted for. Not because of a bond levy or a new school project, but because the State Teachers Retirement System of Ohio, or STRS, a $96 billion public pension fund plagued by mismanagement and bloated bonuses, is quietly triggering a chain reaction that will hit your wallet — hard.

STRS is dramatically underperforming because it insists on using expensive, actively managed investments — a strategy that has produced weak returns while enriching insiders. In fact, according to a new report by the nonpartisan Equable Institute, STRS is between $20 billion and $30 billion in debt — 44 percent of unfunded liabilities are from underperforming investments.

Because STRS can’t meet its obligations, it is now calling for a rise in “employer contributions.” That “employer” is your local school district. And how do school districts make up that shortfall? Primarily through property taxes.

If you own a home in Ohio — or ever hope to — you will have to pay for STRS’s mismanagement while they give themselves bonuses in the millions.

This is not just unfair. It is unconscionable.

Ohioans are already aghast at their property tax bills — and rightly so. In some counties, homeowners are facing double-digit increases. For many families, property taxes represent one of the most punishing household expenses, made worse by inflation and a lack of legislative action. And yet here comes another backdoor hike, buried in the mechanics of a broken pension fund that has operated for years with two sets of books: one that hides losses to justify millions in executive bonuses and another that shows they are doing poorly to justify not giving their funders real cost-of-living increases.

What’s saddest is that neither the fix nor the math is complicated. We know that pension funds like STRS have underperformed passive, low-cost indexes since the Global Financial crisis of 2008.

A switch to index-based investing — a strategy which consistently outperforms active investing — is a no-brainer.

In fact, several experts in pension investments — including those at leading think tanks, as well as myself — have consistently demonstrated how a shift to passive investing could save STRS billions. Those savings could be used to implement decent cost-of-living adjustments for retirees and avoid a taxpayer-funded bailout. Yet STRS leadership — and the entrenched network of consultants and beneficiaries who profit from the status quo — have dug in their heels. Now the risk of further tax hikes grows with every day of legislative inaction on two fronts: the stalemate over meaningful property tax reform, and the refusal to address STRS’s structural failure.

Reforming STRS is no longer a technical pension issue. It is a test of political courage.

Eliminating the STRS mismanagement tax as part of broader property-tax reform is an outstanding way for the General Assembly to be serious about confronting the underlying drivers of Ohio’s property tax burden. It would show that state leaders understand whom they represent.

Lawmakers know STRS is in crisis. They’ve seen the audits. They’ve heard the whistleblowers. They know what is happening inside the fund — and they know what will happen outside of it if nothing changes.

Property tax reform in Ohio means nothing without pension reform. Unless lawmakers act now, Ohio taxpayers will be forced to pay a mismanagement tax: billions wasted on underperforming investments, excessive fees, and bureaucratic self-preservation. Lawmakers can — and must — end this by reforming STRS and eliminating the mismanagement tax at its source. If they fail to act, Ohioans will remember exactly who made them foot the bill for someone else’s dysfunction.

J.D. Tremmel, partner, QED, a Columbus-based investment management firm.

First Published August 23, 2025, 12:00 a.m.