COLUMBUS, Ohio — The departing leader of Ohio’s struggling teachers’ retirement system has stated that she is leaving the fund in solid financial health, despite the challenges her successor will face.
In a recent conversation, Acting Executive Director and CFO Lynn Hoover emphasized that the $94 billion State Teachers Retirement System of Ohio has consistently ranked in the top 10% of similar funds nationally across various investment timelines. “We’ve delivered,” Hoover remarked, amid recent disputes resulting in investment staff being denied performance bonuses. After dedicating 31 years to STRS, one of the largest public pension funds in the United States, Hoover’s final day is set for Sunday. The system serves over 500,000 members, including active and retired public school educators.
However, Hoover acknowledged that Aaron Hood, the newly appointed interim director and an experienced asset management professional who joined this month, faces significant responsibilities ahead. Hood will not only assist in the search for a permanent director to replace Bill Neville, who was dismissed in September amid misconduct allegations, but he is also required to fill Hoover’s vacancy as CFO, manage a key Chief Investment Officer role that will soon become available, and recruit a new head of internal audit.
Hoover noted that the primary focus now is to swiftly fill these key positions with qualified candidates capable of maintaining the positive legacy of STRS. The recent staff changes are occurring against a backdrop of escalating tensions that peaked this past spring. Reform-minded members of the STRS board have scrutinized internal operations and investment choices, largely in response to retirees’ frustrations over significant cuts to their cost-of-living adjustments. The board’s decision to eliminate these adjustments for five years has endured criticism, especially from those dissatisfied with the mere 3% increase they received in 2023 and the anticipated 1% for 2024.
In May, Ohio Governor Mike DeWine publicly shared that he had received a concerning anonymous memo detailing allegations about STRS, prompting a subsequent investigation by Attorney General Dave Yost. Yost’s inquiry is examining risks of a potential hostile takeover by private entities, and legislative discussions are underway regarding the removal of elected board members.
Yost’s response included a lawsuit targeting two reform-oriented board members, including board chair Rudy Fichtenbaum. Wade Steen, the other board member who was targeted, has since resigned. Additionally, Yost has filed a suit against former board members, claiming they engaged in a “civil conspiracy” that thwarted efforts to expose vulnerabilities within the fund.
When concerns emerged surrounding the performance metrics of STRS, reports indicated that Hoover and her team had communicated with counterparts in Minnesota, suggesting an effort to downplay the investigation’s effects. Hoover defended these communications as regular and typical within professional protocols. “They simply reached out to us and said would you be able to get on the phone call with us,” she explained, asserting that sharing best practices is a standard procedure among similar organizations.
Hoover expressed pride in her staff’s commitment to maintaining professionalism during turbulent times. “The staff have stayed really aligned with the mission and laser-focused on protecting and providing member security,” she stated. Over the past three and a half years, STRS has distributed over $4 billion in positive benefit changes for both active educators and retirees, a feat Hoover attributes to effective investment strategies and favorable market conditions.
She admitted the fund faces challenges, especially given that its benefit disbursements exceed contributions; thus, investment returns are crucial for its long-term sustainability. Hoover acknowledged the pressure members have endured due to pension reforms and high inflation, describing the situation as difficult. However, she reassured members that STRS is now assessing cost-of-living adjustments on an annual basis and is actively advocating for increased employer contributions, which have not changed in 40 years.
The retirement system has also enlisted the help of CBRE, a global commercial real estate firm, to evaluate future usage requirements for its properties, emphasizing that they are capital assets rather than investment assets. Furthermore, Hoover indicated that STRS is closely monitoring Ohio’s new universal voucher system, which is accessible to students in both public and private institutions. “To the extent that it starts taking kids out of public education, thereby reducing teachers, thereby reducing payroll, that does affect our system,” she explained, stressing the importance of supporting public education and highlighting the vital role of a trustworthy pension system for educators who have dedicated their careers to teaching and nurturing future generations.