Just as dissidents achieve majority on pension fund board, DeWine removes one
Fund under fire for high staff pay, giant fees & stingy benefits for retired teachers
Statues outside Ohio State Teachers System headquarters in downtown Columbus. – Marty Schladen, Ohio Capital Journal
Gov. Mike DeWine is being accused of pulling “a switcheroo” on Ohio’s retired teachers by terminating a change-minded member of the pension board just as that faction was achieving a majority. But the governor’s spokesman said all the governor wants is a member of the State Teachers Retirement System Board who will faithfully attend its meetings.
On Friday, Ohio’s retired teachers put the lie to claims that only a few squeaky wheels are upset about how the State Teachers Retirement System is being run. Pat Davidson, who seeks change, defeated incumbent Arthur Lard by a 20,410-8,853 margin.
That would have given the self-styled reformers a one-vote majority on the board of the pension fund, which controls more than $80 billion. But a day before the vote, a DeWine aide called incumbent Wade Steen and told him to resign, Steen said. Steen has been among the board members seeking changes to the way the pension fund does business.
When Steen refused, DeWine terminated him a day later — a move Steen said he didn’t believe was legal and that he’s considering legal action over.
“I’m hopeful that this was an oversight,” Steen, a DeWine supporter, said in a phone interview Monday.
The retirement system and its 11-member board have seen considerable controversy in recent years. Seven members are current or retired teachers who are elected, one is appointed by the governor, one by the state treasurer and one is jointly appointed by the Senate president and House speaker. The superintendent of public instruction serves in an ex-officio capacity.
Ohio teachers and retirees have been frustrated that the system has only paid out one, 3% cost-of-living increase since 2017 and the number of years they’ve had to work before being eligible for benefits has increased.
Meanwhile, STRS has a large, well-paid staff 91 of whom have gotten big bonuses even in years when the system has suffered heavy losses. Last fall, for example, the board approved $10 million in bonuses just before learning that the system lost $5.2 billion during the previous fiscal year — 77% more than the staff had projected. Apparently unchastened, the staff last week proposed increasing bonuses by 31% for the current fiscal year.
Also fueling controversy is the fact that the system is heavily invested in high-fee “alternative” funds such as private equity. In doing so, it’s paid out billions in often non-transparent fees for investments that have only once outperformed its traditional investments since 2009.
Steen, who is CFO of Cleveland Metroparks, said those investments were concerning to him.
“Those are the questions I’ve been asking,” he said. “I ask a lot about benchmarks. I ask a lot about performance. Alternative investments. Hedge funds. We just don’t have a lot of information. The transparency’s not there. A lot of times it’s because something is considered proprietary and I’ve continued to ask for more and more transparency. That’s something I’ve continued to advocate for more than some of the others — more openness and transparency.”
But just as a majority that would support efforts at transparency was about to be seated on the board, DeWine replaced Steen with G. Brent Bishop, founder of a real estate investment company. To at least some retirees, the move was suspicious.
“Interesting that the evening before the vote for the STRS board active teacher seat was announced (a landslide win for the reform candidate), the governor’s office informs pro-reform board member Wade Steen that they’re going to replace him. That’s not coincidence; it’s corruption,” one retiree said in an email. She asked not to be named for fear of retaliation, but she titled her email “Governor’s switcheroo.”
DeWine Press Secretary Dan Tierney said Steen’s ouster was far more straightforward than what some suspicious teachers and retirees might believe.
“He has had very poor attendance at STRS board meetings,” Tierney said, adding that since September, Steen has missed all of three meetings and parts of three more.
“These are important seats,” Tierney said. “The governor only has one seat that he appoints on the board to advocate for retired teachers. The board is a fiduciary for these funds that protect the retirement for the current retirees; the people paying into the system and the people who will pay into the system in the future.”
Steen disputed that he’d missed as many meetings as Tierney said and added that over his seven years on the board, his attendance was as good as anyone.
Another board member, Rudy Fichtenbaum, said the board blocks off three days in the third week of every month for board meetings, and that Steen sometimes had meetings for Cleveland Metroparks that conflicted. Steen recently moved from Columbus to take the Cleveland Metroparks job.
Steen said that when he hasn’t been able to physically join STRS meetings, he’s joined remotely. Besides, he asked, if his attendance was such a concern, why is he just now hearing about it?
“I guess I would have expected somebody to call me and say, ‘Hey, what’s going on?” he said.
For Fichtenbaum, the timing alone of Steen’s removal is cause for suspicion.
“If the real reason is he missed too many meetings, why did they wait until the night before the election?” he said, explaining that STRS staff knew they were receiving a relative flood of ballots — a bad sign for the incumbent. “The timing of that is so suspicious it just cannot be coincidental. They just want to send a message, ‘You thought you were going to have six votes, but you’re not going to have six votes. I’ll be appointing somebody else.'”
For his part, Tierney said the governor shared Steen’s goals to bring better performance and transparency to STRS.
“The governor does share concerns that we need to make sure the money management strategy is the best money management strategy for the long-term health of the fund. And the governor does share the concerns that are rightly being brought forward about the cost-of-living adjustments. That’s a very important thing with inflation being as bad as it’s been.”
Steen said the fact that such adjustments haven’t happened conflicts with claims that the STRS staff has been making about the system: that it’s the best in Ohio and that retirees and teachers are satisfied. The claims are also belied by the fact that the reform challenger just beat incumbent Lard by a 70-30 margin in an election with huge turnout.
“If we’re such an award-winning pension and we’re doing so well with investments, who can’t we pay a” cost-of-living adjustment? Steen asked. “What do (other Ohio public pensions) do that they can?.. It’s just like in sports. You can’t just keep saying you’re the best. If you don’t win the championship, you’re not the best.”
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