COLUMBUS, Ohio (AP) — The outgoing head of Ohio’s troubled teachers’ pension system said she is leaving the fund in good financial shape despite the turmoil at the top that her successor will inherit.
In a recent interview with The Associated Press, acting CEO and CFO Lynn Hoover said the State Teachers Retirement System of Ohio’s $94 billion returns remain among the top 10% of peer funds over the tiny, medium and long term located throughout the country.
“We delivered,” said Hoover, who saw her investment staff denied performance bonuses amid recent tensions. She is retiring Sunday after 31 years at STRS, one of the country’s oldest and largest public pension funds. Its more than 500,000 members include dynamic and inactive public school teachers and retirees.
That doesn’t mean the next interim director, Aaron Hood, doesn’t have a huge task ahead of him, she said.
The U.S. Army veteran and veteran asset manager came on board this month and will lend a hand lead a nationwide search for a modern enduring director to replace Bill Neville, who was fired in September after being placed on leave following misconduct allegations. Hood also must fill Hoover’s role as chief financial officer, fill a chief investment officer vacancy in March and find a modern head of internal audit.
The top priority “is to fill these and bring quality people here who can carry on this great legacy,” Hoover said.
The staff departures come amid years of tensions that boiled over this spring. Would-be reformers on the STRS board took aim at the fund’s internal operations and investment decisions after retirees were upset when the previous board cut their cost-of-living adjustments and then eliminated them for five years to lend a hand stabilize the fund. Many remain dissatisfied with the 3% adjustment in 2023 and the 1% adjustment in 2024.
In May, Republican Ohio Gov. Mike DeWine announced that he had obtained an anonymous 14-page memo and other documents containing “disturbing allegations” about the STRS board and would turn them over to authorities. Ohio’s Republican Attorney General Dave Yost launched an investigation the next day into what he called the fund’s “vulnerability to a hostile takeover by private interests.” The investigation is ongoing and lawmakers have since begun considering a proposal to remove elected members from the board.
When Yost began his investigation, he filed a lawsuit to remove two of the reform-minded board members. One of these members, Rudy Fichtenbaum, became chairman of the board. The other, Wade Steen, has since left the board. He also filed a lawsuit in October against two other former board members, claiming they participated in a “civil conspiracy” that prevented him from exposing the fund’s deficiencies.
When the same whistleblower attorney who investigated STRS’s performance metrics showed up in Minnesota to do something similar, The Blade of Toledo reported that records there showed Hoover and others communicating with their colleagues “to determine the impact of the.” to undermine the investigation.”
Hoover said the communication was “natural and normal.”
“They just reached out to us and asked if you could get on the phone with us,” she said, calling it “pretty common” for peer organizations to share information about best practices and how they have handled similar issues , exchange.
Hoover said she is proud of the professionalism of the staff despite all the controversy in recent years.
“The staff has always remained true to the mission and fully focused on the protection and safety of members,” she said.
STRS has paid out more than $4 billion in positive benefit changes to dynamic teachers and retirees over the past three and a half years, she said, which she attributed to sound investment strategies and strong markets.
“Our fund is in a situation where we pay out more in benefits than we receive in contributions, so investment returns are critical in the long term,” she said.
At the same time, she acknowledged that members had to bear the brunt of pension reform changes and high inflation and “it was tough.”
Hoover said members should be pleased that the fund now reviews cost-of-living adjustments annually. She added that STRS is also fighting to enhance employer contributions to the funds. The percentage they pay in Ohio has remained the same for 40 years, she said.
STRS also hired global commercial real estate firm CBRE to analyze the future operate needs of its buildings, which are capital rather than fixed assets, and remains committed to fair school funding, she said.
The pension system is also eyeing the implementation of Ohio’s modern universal voucher system, open to both public and private school students.
“To the extent that it starts taking children out of public education and thereby reducing the number of teachers and therefore the wage bill, that has an impact on our system,” she said. “We want to support public education, and the public pension model is so valuable for the teacher. They served, worked and taught our children, and when they retire they should have a reliable, reliable and secure monthly pension until they die.”
