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What comes next for Ohio’s teacher pension fund?

COLUMBUS, Ohio (AP) — A battle is under way for the future of Ohio’s $94 billion teacher pension fund, as would-be reformers’ attempts to deliver long-promised benefits to retirees with the help of an aggressive investment firm touting an untested AI-driven trading strategy face intense scrutiny.

The eyes of Wall Street and the half-million members of the State Teachers Retirement System of Ohio are on the state as the drama unfolds. A special meeting has been called for Thursday of a board nearly paralyzed by infighting whose executive director is on long-term leave over misconduct allegations he denies.

Years of tension at the fund came to a head on May 8, when Republican Ohio Gov. Mike DeWine announced that he had come into possession of an anonymous 14-page memo and other documents containing “disturbing allegations” about the STRS board and was handing them over to authorities.

Republican Attorney General Dave Yost launched an investigation the next day into what he called the fund’s “susceptibility to a hostile takeover by private interests.” He followed up with a lawsuit seeking to unseat two reform-minded board members — Wade Steen and Rudy Fichtenbaum — for backing a plan to turn over $65 billion, or roughly 70% of STRS assets, to a fledgling investment firm called QED. The outfit is co-run by two people, one a former deputy Ohio treasurer, out of a condo in suburban Columbus.

“This isn’t monopoly money; it’s hard-earned income that belongs to teachers,” Yost said in launching his probe. “There is a responsibility to act in their best interests.”

The Ohio Retirement for Teachers Association, a retiree watchdog group, says Steen and Fichtenbaum have been unfairly targeted. The group defends reformers’ push for change as a fight against years of opaque management and greed.

Teachers, who are generally ineligible for Social Security and so rely heavily on the fund in retirement, are particularly upset at the dearth of cost-of-living adjustments and market losses that the fund has seen over the years, even as STRS investment professionals have collected large bonuses. They have called for more transparency into the fund’s investment and pay practices.

“We’ve been calling for an investigation for years,” said Robin Rayfield, the association’s executive director. “So our response to them would be, ‘Where you been?’”

Rayfield said public education in Ohio will be “fully politicized” if DeWine and Yost succeed in shutting down STRS reformers. He described it as the third leg of a stool that also includes approval of a universal school voucher program in last year’s state budget and the transfer of K-12 education oversight from Ohio’s independent state school board into DeWine’s Cabinet. An ongoing lawsuit challenges the latter as unconstitutional.

“Governor DeWine has done more to ruin public education than all the other governors combined,” he said.

The nearly $6 trillion U.S. public pension sector has increasingly swapped stocks for riskier actively-managed alternative investments, such as hedge funds and private equities, in recent years — a trend that David Draine, the Pew Charitable Trust’s principal researcher on public sector retirement systems, says demands the type of transparency that the Ohio reformers have sought.

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