Public-employee pension funds are big business in Ohio, providing a safety net for 1.75 million people.
There's a lot riding on them.
Collectively, Ohio's five public pension funds have $192 billion in assets and last year paid out more than $15 billion in pension benefits and $1.1 billion in health-care benefits. They are not required by law to provide health insurance, but all five do. Whether they will in the future is uncertain.
Although the funds have been mostly reliable and financially sound for decades, recent economic downturns, soaring health-care and prescription-drug costs, and the increased longevity of retirees have taken a toll. Several of the funds are reducing or eliminating cost-of-living adjustments, cutting subsidies and increasing health-care premiums.
The five funds are the Ohio Public Employees Retirement System (public workers); State Teachers Retirement System (teachers); School Employees Retirement System (school-bus drivers, cafeteria workers, janitors, secretaries); Ohio Police & Fire Pension Fund (municipal police officers and firefighters); and the Highway Patrol Retirement System (state troopers). The Ohio General Assembly has oversight of all five through the Ohio Retirement Study Council.
The big question: How long can the pension funds hold out financially in this economic climate? A study released in December by the Mercatus Center at George Mason University painted a gloomy picture.
"Ohio's four largest public pension plans are severely underfunded based on traditional metrics of pension solvency, and they are only guaranteed to be able to finance their promised obligations for roughly the next decade without additional taxpayer contributions," economists Erick Elder and David Mitchell wrote.
"However, the funding ratio does not take into consideration the investment risk associated with pension-plan assets; even if Ohio's pensions were fully funded today, they would still only have a fifty-fifty chance of being able to fulfill their promises in the year 2045."
The School Employees Retirement System
Members of this pension fund are the lowest-paid of the five, averaging about $24,000 a year, and the fund is under fire from members and the Ohio Association of Public School Employees, a labor union, because of proposed changes in cost-of-living adjustments.
Retirees receive a 3 percent COLA one year after retirement, but fund administrators propose eliminating the COLA from 2018 to 2020 and then capping it at 2.5 percent thereafter. Retirees would get no COLA until their fourth anniversary.
About 200 union members marched last week from the Statehouse to the fund headquarters at 300 E. Broad St. in protest. Some said they are worried that the proposed COLA changes signal bigger problems.
"The fear people have is not having a pension," said OAPSE President JoAnn Johntony, 76, head custodian in the Girard City Schools in Trumbull County, where she has worked for 50 years. "To try to solve these problems on the backs of school employees is wrong.
"We have to live and pay bills like everybody else," Johntony said. 'They're not seeing the human side of this. They're not seeing how this affects our daily lives."
Lois Carson, 57, the union's vice president and a secretary in the Columbus school district, said she will live on her late husband's small pension and her pension when she retires.
"I will probably be moving in with my kids to survive," she said. "I've very scared about it."
Facing increases in health-care costs, SERS retirees will be making less in retirement benefits than they did 30 years ago, Carson said.
The fund must get legislative approval for the COLA changes. Bills are pending in both the Ohio House and Senate. Administrators say the changes are needed to stabilize the fund and continue to provide health-care benefits that otherwise probably would run out in less than a decade.
The Ohio Retirement Study Council recommended last week that the legislature approve the COLA adjustment for the school-employees fund.
Ohio Public Employees Retirement System
With 1 million active members and retirees, this is the largest public pension fund in Ohio and the 12th-largest public retirement system in the nation. It affects about 1 in 12 Ohioans and has 3,680 public employers in the system.
Changes began in 2012 when the General Assembly approved cost-cutting measures.
OPERS spokesman Todd Hutchins said the changes keep the health-care package intact "for the foreseeable future." Hutchins said the fund is 80 percent funded for the future, falling within the 30-year requirement under state law for paying off pension liabilities.
Some of the changes, however, will make it harder for younger retirees and spouses of retirees. New retirees will pay about $219.33 in monthly health premiums, more than six times what retires paid last year. The fund is also ending both premium payments and reimbursement of some Medicare expenses for the spouses of members.
Ohio Police & Fire Pension Fund
The fund provides pension, disability and optional health-care benefits to full-time police officers and firefighters and their dependents.
"We continue to meet the state requirements as far as our funding level. That's something we have to look at every year," spokesman David Graham said. "We must be able to pay off our unfunded liabilities in a 30-year period, and we're at 29 years."
But changes are coming for fund members as trustees begin the process of providing stipends to retirees to seek their own health-care coverage rather than providing health insurance for them.
John Gallagher, the fund's executive director, told The Dispatch, "Our investment returns in 2016 were excellent, with a net 10.9 percent return for the year. Our current challenge is finding a way to sustain a health-care option for our retired population. While it is not a requirement that we provide a health-care plan, we realize it is a vital part of a secure retirement."
State Teachers Retirement System
Like other public employees, retired teachers face big changes in their benefits. As of July 1, the system will temporarily eliminate all new cost-of-living increases in pensions to "preserve the fiscal integrity of the system." Spokesman Nick Treneff said the situation will be re-evaluated in five years.
The system previously reduced the annual increase to 2 percent from 3 percent.
Treneff said the decision to eliminate the COLA resulted from three factors: lower-than-expected returns on investments, a larger-than-expected payout in pension benefits, and new mortality statistics showing that retirees are living longer, thus increasing the fund's financial liability.
"Health care isn't a requirement, but we know members value it," Treneff said "To have good coverage is essential to the life of retirees. We don't divert any money to health care from employee contributions."
Ohio Highway Patrol Retirement Fund
With 3,200 members, the fund is by far the smallest pension system, and it has had to increase health-care premiums annually to remain in the black.
Like the other funds, the patrol system is struggling to meeting costs, said Mark Atkeson, the executive director. "Health-care costs have skyrocketed. The collapse of 2008-2009 set everything back, and we're not completely recovered from that."
Last week, the retirement study council approved removing a provision allowing patrol members to retire at age 48 with unreduced benefits; it also approved some reductions in off-duty disability and survivor benefits. The changes need the approval of the legislature.
Although those adjustments will help, the system's health-care fund is projected to run out of money in less than a decade, Atkeson said.