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Proposed legislative reforms to STRS, OPERS and Ohio’s other three public retirement systems will do more harm than good
By Elizabeth Rogers, president, and Jerry McClure, secretary/treasurer, Society of Miami Emeriti
The state legislature has provided us with a fine example of the "law of unintended consequences." What started out as an attempt to make necessary reforms in accountability, oversight and disclosure, and to increase the number of retired teachers from one to two on the STRS Board (to reflect the demographics) has taken off in a dangerous direction.
On Nov. 13, the Ohio House and Senate passed two separate pieces of legislation each proposing changes to STRS and OPERS, as well as Ohio’s three other public retirement systems. The Senate passed SB 133 and the House passed HB 227. Unlike SB 133, certain provisions of HB 227 propose drastic and far-reaching changes to all systems. The bills will next move to conference committee where the differing provisions of each bill will be harmonized into one bill for approval by each chamber. Conference committee is where the onerous provisions of HB 227, listed below, need to be removed:
• The appointment of the treasurer of state to each of Ohio’s public retirement system boards. This appointment invites political machinations that could put pension money at risk. (The Toledo Blade, Dec. 1, 2003)
• The granting of unprecedented authority to the treasurer of state to hire and fire the executive directors of each of Ohio’s public retirement systems, including STRS and OPERS.
• The "Buy Ohio Plan" requirements that each system conduct at least 70 percent of all equity and fixed-income trades through Ohio-based brokers and that any system using external investment managers award not less than 50 percent of its externally managed assets to Ohio-based firms. The Buy Ohio Plan curtails independent investment decisions.
HB 227 has been widely denounced. The day after it was passed, the Ohio Retired Teachers Association posted a legislative alert on its Web site, http://www.orta.org, supporting the Senate bill and strongly denouncing the House bill. An editorial of 19 November in the Columbus Dispatch said it was "A bad investment — giving state treasurer power over pensions would invite problems," and on the same date, the Cleveland Plain Dealer reported that "Pensioners fear legislature will ruin system." In an 18 November letter to the governor, the president of the Senate and the speaker of the House, the directors of the five state retirement systems concluded that this bill would cost the systems as much as $180 million otherwise available for retirement and health care benefits. They also charge that it would impede the trustees’ fiduciary duty by diverting authority for running the system from the trustees to the treasurer of the state. Finally, the Ohio Retirement Study Council voted down both the investment mandates and the treasurer’s authority. A detailed analysis can be seen at their Web site, http://www.orsc.org.
It is not too late to have an impact on this legislation before a final version is passed. Whether you are an active employee or retiree, we urge you to contact your state senator and representative and ask them to support SB 133 which does not include the provisions mentioned above.
Senator Scott R. Nein (R - 4th District), (614) 466-8072, SD04@mailr.sen,state,oh.us
Representative Shawn N. Webster (R - 53rd District), (614) 995-1863, email@example.com
Representative Gary Cates (R - 55th District), (614) 466-8550, firstname.lastname@example.org
Representative Gregory V. Jolivette (R - 54th District), (614) 644-6721, email@example.com
Date Published: 12/04/2003