While reform board members of the State Teachers of Retirement System of Ohio have not fully implemented transparency of investments and expenses, they have done far more than any of the other state officials who are supposed to be watching Ohio’s public pensions.
The reform board members forced a deeper dive on investment costs using the services of an alternative investment verification specialist and the results are enormous but not surprising.
Where STRS reports total investment management expenses of $264 million in the Annual Comprehensive Financial Report for 2023, released in late November, the consultant’s report at the December board meeting shows STRS spent $708.9 million solely for their alternative investment management.
The two-year total discrepancy between STRS financial reports and what the expert consultant found is more than $910 million. These are huge numbers that align closely with the 2021 investigation performed for the Ohio Retirement for Teachers Association by pension expert Edward Siedle.
Ohio’s other public pension funds also use high-cost alternative investments and their reported financial figures are taken at face value by the Ohio Retirement Study Council, the state’s pension oversight body, just as STRS numbers have been. The same scrutiny STRS reformers have instituted should be applied to all Ohio pensions.
The ORSC is best known for ignoring the actuarial and fiduciary audits of the pensions that are their chief purpose for existence. In a high-functioning state government it wouldn’t take reform board members to implement credible cost accounting on the hundreds of private investments in the pension portfolios. ORSC would have done this years ago.
Now lawmakers could, and should, require full transparency as a rule of law from every pension investment. The Auditor of State could, and should, use the power to require total detail of each pension investment.
But that is very unlikely to happen so the ORSC should simply follow the STRS reformers’ good example and extend the fee verification consulting contract to all of the other Ohio funds.
Toledo Blade Editorial Board December 18, 2024