Local governments, especially school districts, that soon will face increasing contributions to their employees' pension funds should be troubled by Ohio Treasurer Kevin Boyce's recent decision to allow State Street Corp. to manage $32 billion in pension assets.
All of Trumbull County's school districts and most of the county's local governments struggle to deal with contributions to the State Teachers Retirement System, Public Employees Retirement System and Police and Fire Pension Fund. Reports for the last couple of years indicate that they are not sustainable without even more contributions from taxpayers, who already contribute more than the employees.
Boyce hired State Street to manage those three funds. Here are the problems with State Street:
l California Attorney General Edmund G. ''Jerry'' Brown Jr. accused State Street of taking $56 million from two public pension funds there and the California state treasurer called State Street ''crooks.''
l Boyce hired State Street soon after State Street hired Noure Alo as a lobbyist in Ohio. Alo's wife works for Boyce and Alo's former business partner is Boyce's top deputy.
It is possible that California's lawsuit is a bunch of Democratic Party hype. Brown and California Treasurer Bill Lockyer are Democrats. Brown is running for governor.
It is possible that State Street will save Ohio pension plans more than $7 million in banking fees because of Boyce's practice of bidding out that work. State Street was the low bidder. The savings, of course, is contingent upon State Street not stealing any money.
Ohio's pension funds have already been mired in accusations of mismanagement and the need for reform. Police departments like Warren's that have officers making six figures and then collecting more than half a million dollars upon retirement because of DROP (deferred retirement option plan) pay and school districts like Champion that rehire retired administrators strain the system.
The Ohio Retirement Study Council recommends that public employees increase their pension contributions from 10 percent of their pay to 12.5 percent and that taxpayers increase their contributions from 14 percent of the worker's pay to 16.5 percent. That means more money from police, fire and school budgets that already have forced massive safety forces layoffs in Warren and reductions in force in many local school districts.
Even if State Street manages these pensions honestly, even a slight hiccup in their investments would put Boyce in a no-win situation of trying to defend his actions.