Taft Calls for Ethical Reforms at Ohio Funds

April 12, 2004 (PLANSPONSOR.com) - With pension reform stalled in the legislature, Ohio Governor Bob Taft has called on the state's five public-employee retirement systems to enact ethical changes on their own.

“Taking immediate action to implement these reforms not only will send a strong and supportive message to the 1.5 million future and current retirees served by the five Ohio retirement systems, but will mean real progress for them,” Taft said in a letter to each of the systems, according to the Plain Dealer.

The proposals identified in the letter from Governor Taft include:

  • requiring annual financial disclosure statements for key investment staff;
  • adopting an ethics policy in consultation with the Ohio Ethics Commission;
  • adopting policies to govern travel and expense reimbursements for board and staff;
  • hiring an internal auditor who shall report to the board’s Internal Audit Committee;
  • periodically conducting a performance audit of the system.

Buckeye State legislators got close to a final bill last year that had gotten caught up in controversy on a so-called “Buy Ohio” provision that would require Ohio’s five public-employee pension funds to use Ohio-based brokers and money managers for a majority of their equities trades (see  Ohio Lawmakers Close to Pension Reform Compromise ).   The provision, still favored in the House, is opposed in the Senate and by the pension funds themselves (see  Ohio Pension Funds Face “Home Grown” Investment Restrictions ).   The Council of Institutional Investors, which characterized the constraints on investment activity as “a hidden tax,” and the National Association of State Retirement Administrators (NASRA) have also opposed the measure.    

The pension boards already have enacted ethical reforms since the State Teachers Retirement System became embroiled in controversy last year over questionable spending on employee bonuses, travel, and artwork (see  Ohio Pension Fund Hit for Lavish Spending Practices ).   The controversy wound up costing STRS Executive Director Herb Dyer his job (see  Dyer Steps down from Ohio STRS Post ).   Since then, however, most of the boards adopted travel policies and updated their ethics policies.

STRS Executive Director Damon Asbury said in a statement, “STRS Ohio has already voluntarily adopted most of these components, including implementing financial disclosure requirements for key staff members and new travel policies for our board and staff. We look forward to cooperating fully with Governor Taft’s request.”

The state’s pension funds control a combined $115 billion in assets.