Toledo Blade Editorial April 27, 2025, STRS: Do more

Toledo Blade

April 27, 2025

STRS: Do more

Reform board mem­bers of the State Teach­ers Re­tire­ment System of Ohio used their 6-4 ma­jor­ity to make a small in­crease in the cost-of-liv­ing-ad­just­ment for ben­e­fi­cia­ries, and it has sparked yet an­other big de­bate over man­age­ment of the $95 bil­lion fund.

Rais­ing COLA from 1 to 1.5 per­cent and cut­ting full re­tire­ment from 33 years to 32 years will cost the fund $1.84 bil­lion, and op­pos­ing board mem­bers ar­gued it was “im­pru­dent” be­cause of mar­ket vol­a­til­ity. Each year STRS pays $4 bil­lion more in ben­e­fits than it takes in from ac­tive teach­ers, so mar­ket re­turns are cru­cially im­por­tant to the fund.  (My Comment: " possible Market Volatility always exists and can be used as an excuse to not grant any benefit year in and year out")

Teach­ers, like po­lice, fire­fight­ers, and state and lo­cal gov­ern­ment em­ploy­ees are try­ing to win pas­sage of leg­is­la­tion rais­ing the pay­ments to Ohio pub­lic pen­sions by tax­pay­ers.

Some law­mak­ers are ad­vo­cat­ing leg­is­la­tion to elim­i­nate elected mem­bers on Ohio pen­sion boards.

Sadly, no one in Ohio gov­ern­ment has acted upon the high fund-man­age­ment fees and in­ad­e­quate fi­nan­cial per­for­mance at STRS, de­tailed by in­sti­tu­tional in­vest­ment man­age­ment pi­o­neer Rich­ard En­nis in The Blade more than two years ago.

“The STRS fund un­der­performed a pas­sively in­ves­table bench­mark by 1.62 per­cent­age points per year for the 13 years,” Mr. En­nis wrote. “An op­por­tu­nity cost of that mag­ni­tude on a port­fo­lio av­er­ag­ing, say, $60 bil­lion in value over time, adds up to nearly $12.5 bil­lion,” he con­cluded.

The re­form board mem­bers at STRS have done much bet­ter at keep­ing their prom­ise to re­store COLA and cut ser­vice re­quire­ments for full re­tire­ment than they have at mov­ing the in­vest­ment port­fo­lio to lower cost but bet­ter per­form­ing mar­ket in­dex funds.

Law­mak­ers look­ing at Ohio pen­sion re­form have been even worse.

The lion’s share of leg­is­la­tive dis­cus­sion has fo­cused on bills forc­ing
tax­pay­ers to bail out the pen­sions rather than mak­ing sure the pen­sions per­form bet­ter.

Even the STRS re­form board mem­bers and the tens of thou­sands of ac­tiv­ist Ohio teach­ers who sup­port their mis­sion want more money for the pen­sion from tax­pay­ers with­out chang­ing in­vest­ment strat­egy.

No Ohio pen­sion de­serves a dime more from tax­pay­ers un­til they have re­con­fig­ured their in­vest­ment port­fo­lio to de­liver the high­est re­turn at the low­est cost.

Years of study on STRS per­for­mance by a world-known fi­nan­cial ex­pert tells board mem­bers, state law­mak­ers, and Ohio tax­pay­ers where to start on a solu­tion to the state pen­sion prob­lem.