UPDATE: The Overnight Coup by Politicians Over Teachers/Retirees, and $90B!

A Brutal/Sneak Attack on Democracy and Retirees

As painful as it is, I often journey to the Ohio statehouse to witness for myself just what a broken, cynical, anti-democratic, out-of-touch and lawless place it is. Years of gerrymandering—entire careers spent with no accountability to the voters but non-stop support from lobbyists and deep-pocketed big shots—have made it this way.

Sadly, every time I visit the statehouse, my expectations for bad behavior are always met.

But no behavior has been worse than what just happened with the the state teachers’ pension board—an outright coup over the control of a board that oversees $90B.

Specifically, after 1 a.m. two nights ago, the politicians from the nation’s most corrupt statehouse disenfranchised Ohio teachers and retirees from controlling the pension fund they built and on which they rely.

Instead, the politicians’ picks will now dominate the board, and three years of election results will be wiped out through this one sneak attack.

It’s a travesty as matter of democracy. Potentially lawless. And a case study of how gerrymandered politicians (and this spans way beyond Ohio) behave when monied interests demand something.

Here are the ugly details:

My May Statehouse Field Trip

Some of you may remember that in May, I drove to Columbus to watch what may have seemed like a very dry meeting.

I was there to observe a subcommittee of Ohio’s Retirement Study Council, where two presentations were made about the composition of pension boards around the country.

Serious presentations and thoughtful questions—looking specifically at “Teacher Retirement Boards.” You can even see the slide deck here.

Background: A Clash of Two Visions

I explained at the time that what looked like a ho-hum public meeting had major consequences and importance, because for years there’s been a struggle between two different visions among the board about how the $90B pension fund (called STRS) should be managed.

On one side are “reformers” who believe the fund should “switch to index funding;” on the other, a faction that wants to stick with a model of “actively managing the funds,” which also comes with higher fees. “Reformers” also want “a cost-of-living adjustment, or COLA. The COLAs were suspended for more than 150,000 retired Ohio teachers for five years starting in 2017. They were reinstated, but there has been a suspension of increases, significant for retirees who need this money and are dealing with inflation.”

I don’t have a dog in the fight, but teachers and retirees do because: 1) their years of hard work and contributions built the pension fund to its $90B+; 2) they rely on the pension for their economic well-being; and 3) (until this week) they elect seven of the board’s 11 members (the other four are appointees).

A Winning Streak for the Reformers

Over the past several years, including this past May, elections were held for seats on this teachers pension board. The voters in these elections are either active teachers, or retirees. And for a number of elections in a row, the voters in these elections delivered decisive victories for the “reformer” candidates. In fact, the “reformers” have won so much, it’s sparked a sea change in the overall board, flipping the board majority itself.

That’s how democracy works, right?

But in America’s most corrupt state, things are never so straightforward.

Specifically, ever since the “reform” side started winning a few years ago, irregular things have happened right around election time (often after the votes are cast and before the results are announced) to thwart the outcome.

Two years ago, days before a “reformer” victory was announced, Governor DeWine unilaterally fired his own appointee to the board, who also had emerged as a “reformer.” DeWine’s last-minute maneuver denied the “reformers” the majority they would have earned when the election outcome was announced a day later. (Courts later held that DeWine's termination of that member—which he said was due to absenteeism, a lie that was quickly debunked—violated Ohio law, but he’s never been held accountable for this egregiously illegal act).

Then, the next year, days before the next election results were announced, Attorney General Dave Yost filed an action in court to remove two “reformers” from the board (based on allegations from a last-minute anonymous memo sent to DeWine, again, right around election time). Days later, it was announced that another “reformer” won that election—so even the court case and memo couldn’t stop the “reformers” from taking over the board majority.

And this past May, two more “reformer” candidates won elections.

Which of course came around the time I went to that statehouse hearing, as the Columbus politicians—having failed to undo election outcomes they’ve been defying for years—all of a sudden have an interest in simply upending the composition of this pension board. Why undo individual election results when you can just eliminate those elected seats outright?

And the politicians hadn’t been shy that that’s what they had in mind. Adam Bird, the chair of the subcommittee meeting I watched in May, had previously said: “I'm concerned that the STRS current composition of 7 teachers and 4 appointed investment experts appears to be imbalanced, which can lead to a perception of lack of fiduciary responsibility.” Another member proposed a reduction in teacher representatives last summer, shortly after the majority flipped, insulting retirees by saying: “We need retirees' input but people need to have logic and common sense.”

The Toledo Blade, which has watched this for years more closely than any other newspaper, ripped these proposals, calling them out for what they clearly are:

“The General Assembly’s plan for elected members of the State Teachers Retirement System board appears to be, “If you can’t beat them, eliminate them.” The Ohio House Pension Committee has begun the process to change the composition of the STRS board with the goal of eliminating elected active and retired teachers from control of the fund.

It’s an undemocratic power play and totally unfair to teachers if they are the only pension singled out for legislation to restructure the board.”

Amen.

Just the Beginning…

So that’s the backdrop that inspired me to drive up to that May meeting.

But as I explained, it turned out to be a dry, civil meeting. The presentations laid out a wide variety of governance options used by different state pension systems, and the legislators asked general questions about those options. To the best of my recollection, lawmakers engaged in no discussion or conversation of specific proposals or suggestions for the make-up of the Ohio teachers’ pension board. Certainly no consensus or proposal or bill emerged, nor any schedule of when one might appear. And when that May meeting ended, the distinct impression left was that this was the beginning of a long conversation.

But to make sure I hadn’t remembered this incorrectly, I asked a state legislator who served on that retirement committee and was at that meeting if he remembered things as I did. I specifically asked Sean Brennan, a highly respected state rep. and retired high school teacher—who’s in the upper right of the photo above—if any specific proposals had ever come from this group.

His answer: “Never!”

So, while I left as concerned as I was when I arrived, it felt like this would be a drawn-out deliberation, with future opportunities for many to weigh in through the formal lawmaking process, including required committee hearings, the opportunity for proponents and opponents to testify, etc. In particular, I left confident that the 500,000 Ohioans who rely on this pension, many of whom have been voting for reform all this time, would have an opportunity to object to any effort to disenfranchise them.

The Sneak Attack

And then came this week, and this story….which someone sent to me first thing Wednesday morning.

At the last minute, stuffed into overnight deliberations (literally, 1 a.m.) of the the 6-person Ohio budget “conference committee” (3 Ohio house members and 3 Ohio Senate members), came a provision wholly unrelated to the budget, and which had appeared in neither the House nor the Senate budgets that passed earlier in the process. (The “conference committee” exists to reconcile difference in the two bodies’ approved budgets).

As the headline above suggests, this middle-of-the-night amendment involved the makeup of the teacher pension fund’s board. And with no notice or hearings or committee deliberations or feedback from anybody, the proposal executed a takeover of the pension’s board by politicians’ appointees while eliminating the retirees/teachers collective control of their own pension.

Specifically, the board has been made up of 7 elected members (5 elected by current teachers, 2 by retirees) and 4 political appointees. This new provision inverted that makeup, to instead comprise 8 political appointees and just 3 elected members (and only one seat elected by retirees). Four of the current elected members will simply be eliminated when their terms expire, replaced by the politicians’ appointees. And the result of three years of retiree/teacher elections…nullified.

Bird, the guy who chaired the committee meeting I observed, who left the impression that the conversation was just beginning, took credit for getting this change snuck into a budget process in which it had never previously been discussed.

And he did so claiming that his committee, "[t]he 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."

But the truth is, I watched their meeting myself, and they did nothing of the sort!

Still, the sneak amendment passed out of that 6-person conference committee (around 1:30 a.m.), immediately was sent to the the Ohio Senate and Ohio House, where within hours—again with no opportunity to hear from anyone—the disenfranchisement of hundreds of thousands of teachers and retirees passed on a party-line vote.

Truly a breathtaking coup.

Just as the Toledo Blade predicted: “an undemocratic power play”—both in its substance, and in its execution.

Back to Representative Brennan, the retired teacher who’s seen this all up close:

“The move to strip directly elected teacher and retiree representation from the STRS Board is deeply troubling—both in its substance and the way it was pushed forward. This structural overhaul was introduced without meaningful transparency, without stakeholder input, and without the careful vetting a change of this magnitude demands….Rather than strengthening the system, this proposal diminishes the voice of working educators and retirees—those who pay into and rely on STRS every day. Reducing the number of elected contributing and retired members and stacking the board with political appointees not only silences the voices of frontline educators, but risks turning this vital system into a tool for partisan control….

Any change to the STRS Board structure should be developed in the open, with robust public dialogue and participation from the people most affected. This is not reform—it’s a power grab.”

A Legal Wrinkle

After years of demanding and achieving change, retirees of all viewpoints are devastated. Their voices and votes eviscerated in this overnight sneak attack.

One final hope is that Governor DeWine can line item veto this amendment of the budget. That would clearly be the right thing to do. But given that he started the first domino of this mess with his illegal termination of a “reform” member a few years ago, that seems unlikely.

But there is perhaps one other opportunity to stop this.

I mentioned above that the “conference committee” process exists to reconcile differences between the Senate budget and the House budget. This has always meant that the only items to be raised and passed by the conference committee must be drawn from either the Senate or House budget.

But in this case, neither body’s budget included any provision on the makeup of the teachers’ pension board. So on this issue, there was nothing to reconcile. This was simply a blatant and illegitimate shoe-horning of a dramatic policy change into that conference committee process to avoid hearings, deliberation and criticism if this had advanced as a separate bill.

But this also means that this change did not go through the required legislative process of three hearings, proponent and opponent testimony, committee votes, and then full votes in both chambers.

None of that happened.

This is not only an undemocratic law. It’s a lawless law.

And if DeWine doesn’t veto it, someone should challenge the highly irregular and inappropriate way in which it was enacted.

Reminder: Ohio Statehouse Leads the Nation in Corruption

More broadly, this travesty is a blaring reminder of the overall, corrupt culture of Ohio politics at the moment.

Pay to play dominates the place. And pay to play often involves appointments to key government bodies and boards. For example, the First Energy scandal was kick-started by the Governor handing over control of the Public Utilizes Commission of Ohio (PUCO) to private industry and First Energy, only months after First Energy boosted the Governor and Lieutenant Governor’s campaign efforts with millions in dark money.

And even as that scandal has played out for years—and is still playing out—no ethics reforms or other changes have ever been made.

And that is the context we should never forget as we weigh every decision about power in Ohio.

So when we see Ohio’s politicians breaking rules to rush through dramatic changes in early morning hours, to give themselves more appointments over a board that controls $90B, we should be on high alert.

Just as handing more pension power to politicians who’ve never shown an ounce of remorse for prior (and recent) pay-to-play scandals is about as bad as an idea could get.

Bottom line: teachers and retirees earned their voice in the governance of their own pension fund. They built it, they rely on it, and they have every right to demand change to how things are managed.

And they certainly have a right to have checks and balances to protect them against an Ohio political system with a long and ongoing track record of corruption.

As if we needed any more proof, the way this coup was pulled off is exactly why the politicians can not be trusted to control their pension.