The acting executive director of the Ohio retired teachers' pension fund and their chief investment officer have resigned after months of controversy.
The day after an exclusive 45-minute interview with me, State Teachers Retirement System (STRS) Acting Executive Director Lynn Hoover has resigned effective Dec. 1. Chief Investment Officer Matt Worley has also resigned effective March 31.
Both letters to the STRS board came Wednesday evening. Despite requesting to hold off on sharing the information until Friday, the details were leaked to me Thursday morning.
I reached out to STRS, and their spokesperson confirmed. I am awaiting responses to my questions and records requests.
These resignations come as STRS has been in endless chaos. In summary, there has been constant fighting, two board resignations and allegations of both a public corruption scheme and mishandling of funds. As of this week, there has been a dismissal and two senior staff resignations.
Hoover had been the head and chief financial officer since November 2023 after predecessor Bill Neville was put on paid leave while a law firm appointed by Attorney General Dave Yost investigated allegations of violent outbursts and sexually explicit language. Neville was just given $1.65 million to part ways with STRS.
Before that, Hoover spent 30 years with the system and was CFO before Neville's leave. Her contract was set to be up Dec. 31.
Worley, along with being CIO, has worked at STRS for 30 years. By resigning when they each hit 31 years, they can collect pensions from the Ohio Public Employees Retirement System (OPERS).
Context
The controversy began from a debate on how STRS should invest money — through the current system of actively managed funds versus an index fund. Active funds try to outperform the stock market, have more advisors and typically cost more. Index funds perform with the stock market, are seen as more passive, and typically cost less. In short, "reformers" want to switch to index funding, while "status quo" individuals want to keep actively managing the funds. Recent elections have allowed the "reform-minded" members to have a majority of the board.
Reformers want a cost-of-living adjustment, or COLA. The COLAs were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. They were reinstated, but there has been a suspension of increases, significant for retirees who need this money and are dealing with inflation.
STRS staff have explained that they know the COLA is essential and are working to get it back. They added that the system is functioning well — better than any of the other pension systems in the state. A report done by the Ohio Retirement Study Council found that STRS has a higher return than any of the four other state pension systems.
However, STRS has $20 billion in unfunded liabilities. There are additional risks related to negative cash flow, investment returns and the ratio of actives to retirees that are exacerbated by the size of this unfunded liability, according to the ORSC.
Because of this, the COLA can't be fully restored at the current time but is on track to be restored in the next decade.
Due to the lack of a full COLA, and other concerns from reformers, the faction of pensioners have been demanding Hoover and Worley resign for months now.
Morgan Trau September 26, 2024