The long-running battle over investment management of Ohio’s State Teachers Retirement System is now in front of the 10th District Court of Appeals in Columbus. If justice prevails, Gov. Mike DeWine will be reminded that he is not a law unto himself.
At issue is DeWine’s expulsion of Wade Steen as his appointed investment expert on the STRS Board in the middle of Steen’s four-year term.
The governor says his action was based on missed meetings by Steen. In essence DeWine accuses his appointee of dereliction of duty, legally specified grounds for removal of a pension-board member.
But DeWine never followed the process for removal that starts with a complaint alleging willful neglect of duty filed in Common Pleas Court. Steen disputes DeWine’s charge and has filed suit against the governor and the entire STRS Board, claiming his removal was illegal, and is seeking immediate reinstatement.
Ultimately the court must decide whether a specified four-year term of office with detailed standards on grounds for dismissal and process for dismissal can be reduced to service at the pleasure of the governor.
If anyone deserves a historic judgment of dereliction of duty in regard to STRS and the entire Ohio public pension system it is Mike DeWine. As attorney general DeWine reached malpractice-level malfeasance in his failure to require legally mandated fiduciary and actuarial audits from all of the state’s pensions.
DeWine turned a blind eye to the loss of $32 billion by the five Ohio pension funds last year but seeks the ouster of Steen, the first and most ardent voice for investment management reform in the entire state pension system.
The most actively engaged beneficiary in all of the public pensions, the Ohio Retirement for Teachers Association, has raised the money through donations from members to pay Steen’s lawyer, Norman Abood of Toledo.
ORTA says DeWine has “poured jet fuel onto a raging fire” and claims the governor’s action against Steen was based on the election of a reform candidate to the STRS Board, creating a majority to enact the reforms Steen was the first to advocate.
Transparency of investment holdings and reduction of fees is at the top of Steen’s list. It was a policy recommendation in the Special Audit of STRS by Auditor of State Keith Faber, and DeWine claims to support those goals. But firing the one board member on any state pension questioning blind investments and conflicted asset valuations directly contradicts mere words.
Ohio has poured tens of billions of pension dollars into assets it can’t specify and value solely on the word of the fund managers it’s given capital. “What’s the problem, we’re making money?” The pathetic first response from Ohio government in the Coingate scandal is still the operative investment strategy. Underperforming, politically connected fund managers still get rich in Ohio.
The state pension problem extends far beyond the 489,000 beneficiaries who received $9.9 billion from the retirement funds in 2021. Both STRS and the police and fire pension sought a change in law to get more money from taxpayers in the last legislative session and plan to try again this year after the General Assembly passes a budget.
Eventually the ramifications of years of underperformance by all of the pension funds will confront taxpayers. Coingate has shown how Ohio voters will react to an investment management scandal. Steen’s push for transparency and cost control seeds the cloud for political scandal and is behind his ouster from the STRS board.
