Governor Bob Taft is opposed to giving the state treasurer the power to hire and fire the five public pension system directors, according to the Dayton Daily News – a proposal contained in a pension reform bill recently passed by the Ohio legislature. “My view is that the entire board should be responsible for hiring the directors,” Taft said last week, according to the report.
The Buckeye State’s five retirement systems have challenged the provision, claiming that this “super authority” would disrupt the checks and balances that exist in the current board structure by concentrating too much power with one person, and further caution that empowering the state’s treasurer with these appointment responsibilities impedes board members’ fiduciary duty, and potentially interferes with the current statutory structure that separates investment decision-making from political considerations (see Ohio Retirement Systems Unite Against Common “Foe” ).
Taft also questioned the so-called “Buy Ohio” provision contained in House Bill 227, a provision that would require that 70% of investment trades and 50% of externally managed assets go to managers with a significant presence in the Buckeye State – a provision that the state’s retirement systems say could cost an estimated $180 million. The Ohio Retirement Study Council, which evaluates pension-related bills, opposes both Buy Ohio and vesting the hiring and firing power with the state treasurer. Directors of Ohio’s five public pension systems have also come out against the two provisions (see Ohio Retirement Systems Unite against Common “Foe” ).
Governor Taft said that while it is important to have a goal to use Ohio securities dealers whenever they can provide adequate service, “…that doesn’t necessarily mean that you have to have a fixed quota in the bill.” The Ohio Bureau of Workers’ Compensation has a goal of making 70% of its securities trades through Ohio brokers, but it is not required to do so.
Last month the Ohio House and Senate passed competing pension reform bills, setting the stage for a legislative battle as the two bodies try and hammer out a compromise before the legislature adjourns in December (see Bill Places Ohio AG in Pension Investigator Role ). While the two bills share similarities, the investment-restrictive provisions of H.B. 227 have also drawn criticism from the Council of Institutional Investors and the National Association of State Retirement Administrators (NASRA) (see Ohio Pension Funds Face “Home Grown” Investment Restrictions ).