In the nearly 600 amendments to the 5,500-page operating budget bill, the conference committee led by House Finance Chair Brian Stewart, R-Ashville and Senate Finance Chair Jerry Cirino, R-Kirtland, included changes to the State Teachers Retirement System. The amendment was included and announced at about 1 a.m.
A provision in the bill would change the makeup of the board from seven elected teachers — five contributing and two retired — to three elected after seats are phased out over several years. Two of the educator seats will be for actives and only one retiree seat.
Each elected member will be able to finish their term, but once they term out, four of the seven seats will not be refilled. This means that once retiree Rudy Fichtenbaum and actives Michael Harkness and Chad Smith — the most recently elected members — would be the remaining seats as members term off.
Those four removed educator seats will be filled with newly appointed members. Right now, the governor gets to appoint one investment expert. The Speaker of the House and the Senate President jointly appoint an expert. The treasurer gets an appointee, and so does the director of the Department of Education and Workforce.
Under this legislation, the treasurer would get two appointees, the legislative leaders get one each and one combined — equaling three, the chancellor of the Department of Higher Education gets one, and the governor and DEW get one each.
This provision was proposed by state Rep. Adam Bird, R-New Richmond, the chair of the Ohio Retirement Study Council. For months now, he has been evaluating the board makeup due to the controversy inside the fund.
“The state legislature established these pension systems and has an ongoing responsibility to ensure the long-term health of the fund for retired and active teachers,” Bird exclusively told me. “The ongoing turmoil has clarified the need for the General Assembly to rebalance the Board composition.”
How we got here
In summary, there has been constant fighting, two board resignations, and allegations of both a public corruption scheme and mishandling of funds. There has been a senior staff dismissal and at least two senior staff resignations.
A 14-page whistleblower memo given to Gov. Mike DeWine in May alleged a massive public corruption scandal brewing and moving quickly within STRS.
Attorney General Dave Yost soon after filed a lawsuit to remove former member Wade Steen and current Chair Fichtenbaum from the board, stating they were participating in a contract-steering “scheme” that could directly benefit them.
The lawsuit accuses the pair of “colluding” with investment startup QED Technologies, run by former Ohio Deputy Treasurer Seth Metcalf and Jonathan (JD) Tremmel, to secure a contract giving them 70% of the STRS assets — about $65 billion at the time. The memo accuses QED of helping to elect board members who may be more sympathetic to their proposal.
Steen and Fichtenbaum have continued to defend their innocence, arguing that Yost and DeWine are part of a “political scheme” to prevent educators who want more transparency and to change the investment structure. The men are seen as the leaders of the “reform movement.” This fight 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.
Removal
The removal of the board members has been debated for months now.
“The Ohio Retirement Study Council has a duty to inform and advise the state legislature, and we have done that regarding our view of the STRS Board composition,” Bird continued. “Many of my fellow colleagues in the legislature are supportive of this change, which we believe will bring stability to STRS. I believe that the Governor will support this update to the STRS Board composition, as it provides greater accountability to the appointing authorities on the board — preventing conflicts of interest and ensuring the future health of thefund.”
Educators we have spoken to have argued that the removal of elected members of the board is anti-democratic.
Retired educator Mary Binegar, who doesn’t trust the “reform” faction of the board, still says that removing the teachers’ voices is a bad move.
“Whether we like the board members are there or not, we do have the opportunity to vote for them,” Binegar said in March. “I think it’s important for educators to have that sense that there are other educators watching out for them.”
Each of the dozens of educators we spoke to said that removing their perspective from the board will hurt the fund and cause teachers to feel isolated and unheard.
Teachers have brought up the fact that when Democrats took control of the Ohio Board of Education three years ago, the GOP lawmakers swiftly took away the vast majority of their power.
However, the Republican leaders had been debating taking away their power for years, even when the GOP controlled them, since the board either took too long to implement new laws or just ignored lawmakers, according to then-Senate President Matt Huffman (R-Lima). The board also, instead of looking for a superintendent, debated culture war issues that they had no jurisdiction over.
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