An Ohio Court of Appeals has restored an ousted Ohio State Teachers’ Retirement System trustee to its board, tilting the majority to reformers who are seeking to restore an annual cost-of-living adjustment, cut the investment staff and move to all index funds.
The 10th District Court of Appeals on April 18 ruled that Ohio Gov. Mike DeWine did not have the authority in May 2023 to remove Wade Steen as his appointed investment expert on the $94 billion Columbus-based system’s board before the completion of his four-year term.
DeWine originally appointed Steen for a term beginning Nov. 25, 2020, and ending on Sept. 27, 2024.
After DeWine appointed G. Brent Bishop as Steen’s replacement, Steen filed suit in June and stated in his complaint that Bishop “has wrongfully taken and is acting in, the position of the Governor’s appointed ‘investment expert’ to the STRS Board, the public office position to which Mr. Steen is legally entitled and from which Mr. Steen has been wrongfully removed.”
Reform-minded board member
Steen has been vocal in his support of a grassroots movement of retirees and active Ohio teachers angry about reduced or eliminated annual cost-of-living adjustments.
In 2012, the Ohio Legislature passed pension reform that gave the STRS board the authority to set the system's COLA. The previous fixed 3% COLA was seen as unsustainable following the financial crisis of 2008, and the board cut the COLA to 2% from 2013 to 2016, and did not provide one from 2017 to 2022.
The board argued that the reduction was necessary to preserve the fiscal integrity of the system.
While the board has since set a 3% COLA for fiscal year 2023 and 1% for fiscal year 2024, the six years of no COLA sparked a wave of protest among pension fund members throughout the state, resulting in a sea change in the composition of the board of trustees in the last several years.
The 11-member Ohio STRS board consists of seven trustees elected by STRS participants and four trustees appointed by state officials. Of those seven elected trustees, five — all elected since 2021 — are in favor of reforming the system by converting to index funds and cutting bonuses.
With the restoration of Steen to the board, the reformers appear to have a majority that may grow larger thanks to a board election in progress. The seat currently up for election with a May 6 deadline is held by Dale Price, current chairman and not considered one of the reform trustees.
Price's primary opponent is Michelle Flanigan, who has cited the $60.4 billion Nevada Public Employees’ Retirement System, Carson City, as a future model for STRS’ investment management. NVPERS target 88% of its portfolio to passive equity and fixed income and employs only three investment professionals, compared to the over 90 professionals employed by STRS.
Once the court of appeals ruling was announced, Steen arrived at the April 18 STRS board meeting in executive session to take his seat. Chairman Price soon adjourned the meeting.
In an April 19 news update on the STRS website, Price said the system’s counsel had not had the opportunity to review the opinion and consider its implications.
“The board then resumed public session. When it became apparent that I was unable to conduct the meeting in an efficient and effective manner, I decided to conduct the necessary business and adjourn the meeting,” Price said. “I plan to have the retirement board consider the remaining items from today’s agenda at the regularly scheduled May board meeting.”
