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#3 December 1, 2003 PLEASE CIRCULATE THIS BULLETIN TO YOUR COUNCIL, DEPARTMENT HEADS & STAFF How much Reform is too much Reform? As everyone has now heard the members of the General Assembly have decided to fix the State’s five pension systems. The concerns of the League and our membership are centered on two of the five systems, the Ohio Public Employees Retirement System and the Ohio Police & Fire Pension Fund. The call for reform started when a few members of different retirement boards took advantage of travel opportunities and other loopholes found in current law. To the credit of the press, the General Assembly and a few others some of the worst offenders have left their positions with retirement boards. A few still remain but there is still a drive for their removal. We’ll keep you informed as the saga continues. The resulting political fallout of the debacle resulted in two pieces of legislation HB277, sponsored by Representative Schneider, and SB133, Sponsored by Senator Wachtmann. Both bills contain provisions that the League and many other employee and employer groups support. Some of the changes: 1) Increased reporting requirements for board members and key employees 2) Requiring board candidates to file election campaign disclosure statements 3) Require travel and compensation policies to be reported to the Ohio Retirement Study Council 4) Requiring regular fiduciary performance audits 5) Requiring the retirement systems to adopt formal ethics policies 6) Require each system’s board to hire internal auditors All these ideas are good ideas and should be put into practice. However, there are two proposed changes that the League is opposed to. One deals with expanding the authority for the State Treasurer. This proposal was a last minute amendment to HB 227. The amendment places the State Treasurer on all the retirement boards and grants the Treasurer the authority to hire/fire the directors of all five Ohio retirement systems. Currently, such decision making rests with the entire board of the various retirement funds. This proposed change concentrates in one board member most of the administrative and investment authority over the $115 billion in state pension funds. We feel that the current board structure works well in this area because it requires joint decision making with automatic checks and balances that prevent any one person from exercising too much control. Even the Ohio Retirement Council, whose sole purpose is to provide oversight for the retirement systems recommended removing the Treasurer proposal from the bill, stating "Current law provides that ……the administration, control and management of the systems are vested in the board as a whole. All board members have equal fiduciary responsibility and liability, which suggests that each board member should have equal authority." The second change deals with investment mandates. HB 227 sponsored by Representative Schneider mandates that OPERS and Police & Fire use Ohio-based brokers, dealers, banks and firms for 70% of its investment trades and 50% of its externally managed assets. These mandates will significantly increase trading costs and lower potential investment income for the pension systems. |
