The soap opera at the State Teachers Retirement System (STRS), the entity that manages Ohio’s teacher pensions, has made non-stop headlines of late. The turmoil includes complaints from retirees about meager cost-of-living adjustments (COLAs) in an age of sky-high inflation, STRS staff bonuses paid in a year when the system lost billions, an investment wipeout tied to the Silicon Valley Bank collapse, and the suspension of the STRS executive director. The latest is an allegation from Attorney General Dave Yost that two STRS board members pushed a questionable investment deal behind the scenes.
Looming in the background is a system that
Has amassed some $20 billion in unfunded pension Japan Phone Number List liabilities and is lobbying the legislature to increase employer contribution rates—a move that would take another bite out of school budgets—to fill some of that gap. Ohio teachers deserve better. Their hard-earned money shouldn’t get funnel into a troubled pension system. Taxpayers, who could be ask to foot the bill if contribution rates rise, deserve better, too. And so do students, who may suffer if pension payments divert more dollars from the classroom. What to do? Remembering the adage “if you’re in a hole, stop digging” would be a good place to start. In that vein, let us first pause and consider why STRS seems to face such endless drama—and then consider what Ohio could do to improve the situation.
A key problem facing
STRS—and other public pensions, too—is that high-stakes CW Leads decisions about other people’s money and retirements are made centrally through a political process. In a traditional pension (“defin benefit”) system, retirement contributions go into a big old pot, i.e., the “pension fun,” which is use to pay out benefits. Policymakers and bureaucrats are charge with making decisions about how those dollars are investe and how retirement benefits are determin. Even without myria scandals that can ensue, politics puts tremendous stress on this model. In the case of STRS, teachers, often via union representatives, push for more generous benefits and bigger investment returns. State officials must then wrestle with these demands (and sometimes resist them) based on fiscal or risk-taking implications.
