Ohio Auditor Warns State Teachers Pension: Stop Misleading the Public
The State Teachers Retirement System of Ohio has long embraced secrecy and misled the public on crucial investment matters.
State pensions generally, and the State Teachers Retirement System of Ohio in particular, have long embraced secrecy and misled the public on crucial investment matters. Rarely, are these massive funds called-out for their wild misrepresentations to the public. STRS Ohio is a notable exception.
On April 27th, Keith Faber, the Ohio Auditor of State, sent a blistering letter to the Executive Director and Chair of the $90 billion State Teachers Retirement System of Ohio. In his letter, Faber chastised pension executives for misrepresenting to the public that a general transparency award his office granted the pension for 2023 amounted to an endorsement of the public entity’s overall transparency.
To be clear, wrote the Auditor, his office’s general transparency rating was “simply our rating of an entity’s compliance with Ohio’s open meeting and public records laws. It is NOT to be taken as the Auditor of State’s examination or determination of a public entity’s overall transparency.”
To be clear, wrote the Auditor, his office’s general transparency rating was “simply our rating of an entity’s compliance with Ohio’s open meeting and public records laws. It is NOT to be taken as the Auditor of State’s examination or determination of a public entity’s overall transparency.”
In fact, just a few short months earlier—Faber reminded the pension—“my office issued a detailed special audit finding that STRS has a long way to go to being fully transparent with Ohioans, its retirees, and members of the General Assembly. For any person or organization to conflate our StaRS (transparency) award with a determination of overall operational transparency is simply wrong and may serve to confuse the public. As noted in our special audit, we strongly encouraged STRS to change its practices to become more transparent with its STRS Board and members.”
“For any person or organization to conflate our StaRS (transparency) award with a determination of overall operational transparency is simply wrong (emphasis added) and may serve to confuse the public (emphasis added). As noted in our special audit, we strongly encouraged STRS to change its practices to become more transparent with its STRS Board and members.”
This is hardly the first instance of STRS Ohio misrepresenting critical facts regarding the pension to teachers and the public. As I have noted in the findings of my prior forensic investigations, the pension previously misrepresented to teachers and the public that:
(1) Billions of investment performance fees paid to Wall Street are not fees or expenses that need to be disclosed (despite the fact that the SEC has clearly stated otherwise);
(2) Paying billions in fees paid to Wall Street for doing absolutely nothing—fees on committed capital yet to be invested—is perfectly acceptable (contrary to statements by the Oracle of Omaha, Warren Buffett) and no different than paying teachers a portion of their annual salaries over summer vacation; and
(3) STRS is regulated comparably to corporate pensions subject to ERISA—the comprehensive federal law governing private pensions (even though ERISA does not apply to state pensions).
Specifically, with regard to past misrepresentations about its transparency ratings from the State Auditor, as I noted in a May 2022 Forbes article:
“STRS Ohio never tires of telling its members of past transparency awards it has received from Ohio State Auditor Keith Faber. The fact that Faber’s office is currently conducting a special investigation into the pension’s transparency practices, prompted by public records lawsuits and numerous member complaints—the results of which could, says the auditor, affect the retirement system’s rating in the future—is not disclosed by the pension...
As I told his office recently, “In my opinion, for the pension to tout its past transparency awards while under special audit of its transparency at this time is, at best, grossly misleading. I would encourage the auditor to let the pension and/or the public know whether or not, in his opinion, such incomplete disclosure is misleading.””
To his credit, Faber has now—following the release (late last year) of his office’s damning findings regarding the lack of transparency at the pension—let the pension know that its statements regarding transparency awards are misleading to the public.
It’s about time.
Here’s what his letter said:
Dear Executive Director Neville and Chair Correthers:
This letter is in response to STRS’s recent announcement of a StaRS award and that award being conflated with a lack of operational transparency addressed in our recent special audit of STRS.
Enhanced transparency is a focus of my efforts as Auditor of State to improve state and local government operations for the benefit of all Ohioans. The Ohio General Assembly enshrined a key aspect of government transparency more than 50 years ago with the passage of the Ohio ensure that the public has a clear view into the operations and dealings of their governments, elected officials, and many entities providing a public service.
Upon taking office in 2019 as Ohio’s watchdog, I created an enhanced review and audit program to examine state and local government compliance with both the Open Meetings Act and Public Records Act. This program, known as “StaRS,” highlights for the public the degree to which their state and local governments are complying with these two key transparency requirements. The stars ratings were created to acknowledge the accomplishments of those meeting Ohio’s public records and open meetings laws and to recognize public bodies that exceed legal standards by implementing specific best practices.
To be clear, a StaRS designation, including the “Highest Achievement in Open and Transparent Government,” is simply our rating of an entity’s compliance with Ohio’s open meeting and public records laws. It is NOT to be taken as the Auditor of State’s examination or determination of a public entity’s overall transparency. In fact, just a few short months ago, my office issued a detailed special audit finding that STRS has a long way to go to being fully transparent with Ohioans, its retirees, and members of the General Assembly. For any person or organization to conflate our StaRS award with a determination of overall operational transparency is simply wrong and may serve to confuse the public. As noted in our special audit, we strongly encouraged STRS to change its practices to become more transparent with its Board and members. Such transparency should exceed the minimums required to the public under Ohio’s Public Records and Open Meetings Laws that are tested under StaRS.
Concerns over lack of transparency at STRS, whether actual or perceived, spawned distrust, misunderstandings, and accusations that made a special audit necessary. The State Teachers Retirement System, the Ohio Retirement Study Council, and state lawmakers should institute additional transparency with retiree funds and ensure that they are properly managed and investment results are fully disclosed. Additionally, pursuing an increase in bonuses being paid to investment staff prior to these issues being addressed is premature.
To help rebuild the trust of the beneficiaries, our audit stated very clearly that STRS must improve their efforts toward being more forthcoming with investment strategies and results. It’s crucial that the line between a StaRS rating, that mainly recognizes public records policies and procedures, is not confused for the idea that the transparency issues identified in our Special Audit have been remedied. To date, we have not seen this to be the case.
I note with great emphasis Faber’s final sentence: “It’s crucial that the line between a StaRS rating, that mainly recognizes public records policies and procedures, is not confused for the idea that the transparency issues identified in our Special Audit have been remedied. To date, we have not seen this to be the case.”