Ohio STRS Update: Teachers to Lose Control?

Plans for governance change?

I last looked at Ohio STRS at the end of September 2024. So let’s see what’s been going on since then (in no particular order).

First, a Board Election announcement, 7 May 2025:

On Wednesday, May 7, 2025, the results of the State Teachers Retirement Board election were certified by Election Services Company — the independent firm administering the election for the board. The results of the election for the two contributing member seats on the board are as follows:

• Chad Smith, 11,293 votes

• Michael Harkness, 10,647 votes

• Joel Gleason, 6,155 votes

• Write-Ins, 133 votes

The term of office for Chad Smith and Michael Harkness will begin on Sept. 1, 2025, and will end on Aug. 31, 2029.

Current board chair Rudy Fichtenbaum was the only candidate to qualify for the retired member seat that is up for election this year, so no election was required. He will retain the seat with his new term beginning Sept. 1, 2025, and running through Aug. 31, 2029.

Chad Smith and Michael Harkness are active members and Rudy Fichtenbaum is a retired member.

This is the current board, which I will group by pertinent qualities:

• Retired member, and board chair: Rudy Fichtenbaum

• Retired member, and board vice chair: Elizabeth Jones

• Contributing members: Carol Correthers, Pat Davidson, Michelle Flanigan, Michael Harkness, Julie Sellers

• Appointed/ex-officio members: Jonathan A. Allison, Stephen D. Dackin, Alison Lanza Falls, Open Seat

There are currently 2 retired members, 5 “contributing” members, 4 members either appointed or on the board due to their political office in the state.

Seven of the eleven board members are elected by the teachers, whether active or retired. I’ve covered this a year ago:

15 May 2024: Ohio State Teachers Pension Drama Continues! Board Turmoil!

The way this is set up, if the working and retired teachers are annoyed enough about their retirement plan, they could elect enough members of the board to control policy. Their 7 would outnumber the appointed 4.

In this case, it was one of the appointed investment experts, Wade Steen, who is supposedly the issue, along with a retired teacher member, Rudy Fichtenbaum.

Fichtenbaum is firmly ensconced on the board. Steen is gone.

Michael Harkness continues on the board, and Chad Smith will replace Carol Correthers.

But wait, what’s this?

Changing the Ohio STRS Board Composition?

30 April 2025, Cincinnati Enquirer: Should Ohio change its teacher pension board? Lawmakers to consider it

State lawmakers are opening the door to consider changing the board make up for the second largest public pension system in Ohio.

The Ohio Retirement Study Council, a bipartisan, bicameral watchdog group, will hear from national experts on May 8 about how other states' teacher pension boards are constituted.

The meeting archive of the ORSC is here: link.

I found two presentations: NCSL Presentation - Teacher Retirement Boards: 50-State Analysis - NCSL is the National Conference of State Legislatures and has a comprehensive comparison of states: Pension and Retirement Legislation Database

Two slides from that presentation:

Slide 4 from the NCSL presentation

Slide 8 from the NCSL presentation

I note they do not compare the funded ratio of the 4 systems: [and all the hideous problems some of these states have had… looking at you, Pennsylvania.]

• Ohio Teachers: 81.3%

• Pennsylvania School Employees: 63.7%

• Indiana Teachers: 75%

• Kentucky Teachers: 58.6%

There are all sorts of stories in there.

It’s not necessarily the fault of governance (though, cough, PSERS, you have some serious issues.) It’s not the board’s fault that the legislature decided to choke the state pensions of contributions.

There was a second presentation, from Jim Voytko of RVK - Observations on the Composition of Public Pension Boards

He had some good points:

Slide 3 from the RVK presentation

Slide 6 from the RVK presentation

Slide 12 from the RVK presentation

The issue is, again, that specific elected teacher members to the board (whether active or retired) are annoying the politicians in the legislature and the staff of the Ohio STRS.

The reason they are annoying is that they have not gotten the benefits they desire, most notably COLAs (cost-of-living adjustments), which is partly why the funded ratio is so high for their pension system compared with their neighbors. Also, why are their contribution amounts relatively small?

Reactions to potential change

Toledo Blade editorial, 3 May 2025: Editorial: Pension power play wrong

The General Assembly’s plan for elected members of the State Teachers Retirement System board appears to be, “If you can’t beat them, eliminate them.” The Ohio House Pension Committee has begun the process to change the composition of the STRS board with the goal of eliminating elected active and retired teachers from control of the fund.

It’s an undemocratic power play and totally unfair to teachers if they are the only pension singled out for legislation to restructure the board.

STRS, like all of Ohio’s public pensions, has three “investment experts,” on the board, who are appointed by the governor, treasurer, and legislature. The State Superintendent of Schools, appointed by the governor, is an ex-officio member, so Gov. Mike DeWine controls two board seats. The other seven members of the STRS board are elected by active and retired teachers.

….

Republican legislative leaders this week signaled their intent to introduce legislation to eliminate the seven elected teacher representatives to the board so that government officials have total control.

….

Pension governance is soon to be a big tax fight and hot political issue. STRS, the Ohio Police & Fire Pension Fund, and the Ohio Public Employee Retirement System are all seeking an increase in pension contributions totaling more than $1 billion from taxpayers.

9 May 2025, David Pepper: Who Do You Trust: Teachers/Retirees, or the Politicians?

Don’t you dare reduce or eliminate teachers/retirees voice in the governance of their own pension fund. They built it, and they’ve earned that voice. And they certainly have a right to have checks and balances against an Ohio political system with a long and ongoing track record of highly tainted board appointments.

25 Apr 2025, Edward Siedle: Ohio Pension Lies, Threats and Misinformation Harm Investors Globally

A year ago, after reform-minded teachers won—for the second time—control of the pension board, state officials, including Governor DeWine and Attorney General Yost, incredulously claimed the pension had been the subject of a “hostile takeover.” Suddenly, the duly-elected board members—voted in by teachers who had long had grave concerns regarding management of their pension (for good reason)—became targets of state-funded litigation, with no right to independent counsel paid for by the pension they had a fiduciary duty to defend. State officials have joined together and continue to use unlimited state resources to crush the reformers who have no access to state funding for their defense.

Contrary to DeWine and Yost’s wild assertions, in reality the reform-minded STRS Ohio board was poised to end a longstanding and notorious hostile takeover of the pension by elected officials who have for decades hijacked state pension assets for their own benefit—contrary to applicable law. In Ohio, state officials have long steered pension contracts to Wall Streeters who contribute to their political campaigns.

Who can ever forget the Beanie Baby fund the Ohio Bureau of Workers Compensation invested in for political reasons.

It’s no secret that, in Ohio, decisions about pension investments controlled by elected officials have nothing to do with what’s right for pensioners, i.e., investment merits.

In my own opinion, pulling out of alternative investments and going into index funds won’t do much in terms of improving performance, but it will reduce the amount of bellyaching over fees and illiquid investments, so why not?

This is similar to cleaning up federal operations by DOGE — it won’t necessarily save a lot of money, but some painful cuts are coming, so let’s do some easy clean-up for trust-building purposes. (Note: this is not intended to make the government employees feel better. It’s definitely not intended to make politicians feel better.)

I will return to that issue in a separate post, because as I wrote a year ago, there is nothing particularly special about Ohio STRS with respect to its asset allocation or asset management. It’s pretty middle-of-the-road. If there’s something wrong with its allocation, there’s probably something wrong with most public pensions’ allocations.

To wrap it up: we have a lot of coverage from the teachers’ side that, yeah, they’re not happy with the power move to take their Ohio STRS control away.

COLA coming… but it’s small

There is a large contribution request alongside a modest COLA increase:

2 May 2025: Ohio STRS’ 1.5% COLA ‘Doesn’t Go Far Enough,’ Says Retirement Group

The State Teachers Retirement System of Ohio’s recent approval of a 1.5% cost-of-living adjustment “doesn’t go far enough,” according to the Ohio Retirement for Teachers Association. According to that organization, the increase not only falls well short of inflation, which has risen 23.3% since 2020, but the adjustment also does not meet the pension fund’s legal requirements.

“What is disturbing is that in Ohio Revised Code 3307.67, the language states that a 2% [COLA] shall be paid unless it jeopardizes the fiscal integrity of the pension plan,” ORTA Executive Chair Dean Dennis wrote in a post on the organization’s website, adding that the pension fund’s actuary made it clear that a 2% COLA would not hurt the plan. “It was disappointing watching our board approve a 1.5% COLA when a 2% COLA was required by law, and irresponsible that the STRS legal department didn’t intervene with proper legal advice.”

At its April board meeting, the $96 billion pension fund’s board approved a 1.5% cost-of-living adjustment for its participants, beginning in fiscal 2026, and reduced the number of years of service required before participants can receive retirement benefits. Retirees who began receiving benefits on or before June 1, 2021, will get a COLA added to the base benefit on their retirement date anniversary and included in their benefit each month after.

7 May 2025, Dean Dennis, ORTA: Is the Ohio Retirement Study Council Properly Informed?

Let’s visit what is driving these sensational headlines. On the surface, you’d think the STRS board is doing something terrible.

• It doesn’t help that News 5 Cleveland misrepresents the actions of the STRS board. They wrongly reported that the meager 1.5% cost-of-living allowance passed by the STRS for retired teachers for the 2026 fiscal year cost $2 billion when it actually cost $660 million. Legislators and the press, please note that Ohio’s retired teachers have lost over 20% of their purchasing power since 2020.

….

This leads back to the question of whether the members of the Ohio Retirement Study Council (ORSC) are being adequately informed.

The ORSC oversees the five pension boards for the members of the Legislature and has consistently championed the returns of the STRS pension plan.

The STRS board approves investments and allocations. The board oversees a pension dramatically underfunded by the Ohio Legislature. The national consultants who were contracted to advise our pension plan all agree that the Ohio Legislature has disadvantaged our pension plan when it comes to providing benefits and a proper normal cost compared to other national public pension plans.

….

The STRS board extensively consulted with our actuarial firm, Cheiron, and crafted a conservative Sustainable Benefit Plan, a way to restore benefits that were once promised to members but were taken away to balance STRS's books.

The first factor needed was to adopt a rate of return in line with what staff could achieve. This laid the foundation for a three-step process.

1. The first was to maintain a trajectory to become 100% funded. Currently, we are ten years away, which is very good.

2. The second was to use a tread water measurement to ensure that benefits paid allowed the board to move towards the 100% funding goal.

3. The last was a safety net measurement. This variable simulated a severe market downturn to determine how much benefit could be granted, and still allow the pension to recover within 5 years to be on track for its 100% funding goal. No Sustainable Benefit is permitted if the “safety net” measurement can’t be passed.

The STRS board also put into policy that a de minimis benefit of 1% of assets could be granted if the pension plan didn’t fall outside of 20 years in becoming 100% funded.

All of the above is simplified. Many more variables are involved, such as our asset allocations' volatility factor.

Hopefully, our legislators and ORSC members will see this article. I’m guessing that none of the other four pension boards have adopted a plan so carefully thought out and understood by board members.

I have no comment on the costs of the COLA.

There are reasons that teachers’ pensions tend to be more expensive than “comparable” state non-teacher pensions.

Board Meeting to Come This Week, May 14-16, 2025

There is a notice of a board meeting:

No, I’m not going to attend virtually. I’m kind of busy. But others may be interested.

One more relevant news item:

9 May 2025, Cincinnati Enquirer: Ohio politicians tell teachers pension board to hold off on hiring new executive director

Ohio's top political leaders are telling the State Teachers Retirement System to hold off hiring a new executive director.

Gov. Mike DeWine, House Speaker Matt Huffman, Senate President Rob McColley and Ohio Treasurer Robert Sprague signed a one-page letter on May 8 to the State Teachers Retirement System.

The politicos asked the board to wait until the June board meeting to vote on the new executive director. Three finalists for the job were named in April.

….

Legislative leaders say they need more time to appoint a financial expert to the board − a seat that has been vacant for about six months.

But some lawmakers have already signaled interest in potentially changing the makeup of the teacher pension board.

This is going to continue as an issue as long as the teachers continue to have what they consider inadequate benefits.

Even if the politicians manage to change the board composition, it’s not like the problem goes away. The teachers will still be angry.

They will just redirect their political efforts into replacing the politicians they believe have screwed them over more directly, rather than simply changing the members of the pension board.

That’s a very obvious reaction in that case. So beware, politicians, before overreacting to the short-term annoyance in the working out of a long-term problem.

Prior Ohio STRS Posts

• 6 May 2024: Public Pension Governance Drama in Ohio

• 10 May 2024: Ohio Pension Drama Continues: Investigation Called on "Hostile Takeover"

• 16 May 2024: Ohio State Teachers Pension Drama Continues! Board Turmoil!

• 17 May 2024: More Ohio STRS Commentary: Alternative Assets in Pensions, Anonymous Memos, and Teachers Pensions in General [corrected/updated on May 22]

• 1 June 2024: Corrections and Clarifications on Ohio STRS: Audits and Investments

• 27 June 2024: Ohio STRS Drama Continues: No Bonuses and Board Member Resigns

• 15 July 2024: Ohio STRS Update for 15 July 2024: More Legislative Action, Advisor Resignation(s), Research on Public Pension Asset Returns

• 18 July 2024: Ohio STRS: Trade-Offs, Alternative Assets, and More

• 28 Aug 2024: Ohio STRS Drama Continues: Subpoenas Filed Against Some Board Members

• 28 Sep 2024: Ohio STRS Drama Continues: CIO and Acting Executive Director Resign... In Time for Retirement from Ohio PERS