The Ohio Retirement Study Council was created by the Ohio Legislature to provide legislative oversight of Ohio’s $200 billion-plus statewide public pension systems. For decades, it has epically failed to perform its limited statutorily-mandated duties.
The Ohio Retirement Study Council (ORSC) was created by the Ohio Legislature in 1968 to provide legislative oversight of Ohio’s statewide public pension systems. The five state retirement systems have combined assets of approximately $203 billion with approximately 2 million members, beneficiaries and recipients. The ORSC is comprised of three senators, three representatives and three governor’s appointees.
The ORSC is statutorily required to have conducted by an independent auditor at least once every ten years a fiduciary performance audit of each of the pension systems and actuarial audits of the pensions. The purpose of a fiduciary performance audit is to critically review and evaluate the organizational design, structure and practices of the systems. An actuarial audit provides an independent review of the systems’ consulting actuary. The ORSC also reviews the annual operating budgets for each of the pensions. In addition, the ORSC hires its own independent investment consultant to perform the statutorily required semi-annual performance review of the policies, objectives and criteria of the systems’ investment programs.
Lack of Fiduciary and Actuarial Audits
Despite the statutory requirement of an independent fiduciary performance audit and actuarial audit at least every ten years, it has been approximately 15 years since the last such audits of the $93 billion State Teachers Retirement System (STRS) commissioned by ORSC.
When statutorily mandated, critical audits designed to protect the integrity of a $90 billion retirement plan are not commissioned, and delayed year-after-year, it is inexcusable. An investigation into the failures to audit—by ORSC, as well as STRS’s failure to demand such audit results—is warranted, in my opinion.
Any mismanagement or malfeasance which could have been exposed years earlier through timely audits has been allowed to persist, potentially resulting in great risk and cost to the plan. Worse still, the last fiduciary performance audit in 2006 revealed multiple serious deficiencies which have never been addressed over the past 15 years.
The ORSC failure to audit is especially troubling because it indicates a lack of diligent legislative oversight potentially impacting all $200-plus billion in Ohio public pensions and millions of citizens. The fiduciary audit for Ohio Public Employees Retirement System was not performed by an independent auditor (as required under applicable law) and was three years late; the Ohio Police & Fire Pension Fund is only now requesting proposals for the fiduciary audit due 2016; and the actuarial audit of the Ohio State Highway Patrol Retirement System is 21 years overdue.
Clearly, legislative oversight has been compromised for decades.
That’s bad news for Buckeyes.
According to ORSC, “decisions about public pension plans typically involve significant long-term costs, such as 30-year pension obligations. If not made carefully and with foresight, such decisions can seriously threaten the budgetary stability of state and local governments years later when the pension obligations become due. Those decisions can also result in an unfair burden on future generations of taxpayers and adversely affect the credit rating of the state or local government’s debt.”
When asked recently why the audit is already five years late, State Rep. Rick Carfagna, the assistant majority floor leader of the Ohio House and the new chairman of the ORSC said in a statement to NBC News that the delay was due to state pension reform in 2013 and—get this—Covid-19.
Sounds a lot like the dog ate the legislators’ homework.
Well, the good news is that since ORSC is now finally looking to hire a firm to conduct the statutorily mandated fiduciary audit of the Ohio Teachers’ pension, the audit should be complete within the next two years—a mere seven years late. If—as in the past—the most serious concerns identified in the fiduciary audit are ignored, Ohio Teachers can anticipate another decade of costly mismanagement of their pension and costly benefit cuts. So much for so-called “legislative oversight.”