Ohio bills focus on public investments

Separate measures in the Senate and House could have an effect on OPERS

By Michael Pramik, Ohio Public Employees Retirement System

April 20, 2023 – A few months into the Ohio’s 135th General Assembly, two bills have surfaced that address OPERS’ investment and corporate governance fiduciary responsibilities.

The first of these bills, Senate Bill 6 (SB 6) is much further down the legislative process than House Bill 4 (HB 4). Sponsor of SB 6, Sen. Kirk Schuring (R-Canton), indicated in his sponsor testimony that he introduced the bill as a “preventative measure to make sure that the sole purpose of public investments in Ohio [is] to maximize the return on the investment and not primarily to influence social, governance, or environmental policies.”

He went on to say that SB 6 “reinforces” and “augments” the prudent investor standard” in the Ohio Revised Code. On its face, SB 6 should pose no threat to OPERS; however, OPERS weighed in as an interested party, recognizing that it already complies with the bill. Though we believe that SB 6 is unnecessary, the intent of the legislation is not inherently disruptive to how OPERS invests and votes its proxies.

OPERS invests with a long-term focus and, as the testimony states, we “do not subordinate our members’ interest in the security and sustainability of their retirement benefits to any other consideration.” In other words, OPERS’ primary purpose in making investment and corporate governance decisions is to maximize the returns on investments so that we can continue to pay retiree benefits.

SB 6 is expected to be voted out of the Senate Finance Committee soon, after which it will make its way to the Senate floor.

House Bill 4, as introduced, is a placeholder that simply declares “the General Assembly’s intention to enact legislation regarding financial institutions and other businesses that conduct economic boycotts or discriminate against certain companies or customers based on certain factors.”

Based on other states’ legislative efforts to address “socially responsible investing,” there exists a wide spectrum as to how far the Ohio House may go regarding placing restrictions on how OPERS invests and/or utilizes services to vote proxies of companies in which we hold ownership shares. From restrictions on what risk factors can be considered, to forced divestiture provisions, to proxy advisory firm usage, such proposals would negatively impact OPERS’ ability to fully realize investment earnings.

Accordingly, we have historically opposed such restrictions, maintaining an underlying focus of what’s in our members’ best interests.

House Bill 4 was referred to the House Financial Institutions Committee but has yet to receive a hearing. Legislators have been somewhat receptive to staff’s concerns, which breeds hope for a reasonable resolution.

For nearly 90 years, OPERS has delivered on its obligations, paying out more than $7 billion per year to benefit recipients. We have a proven record of prudent management of the system. Staff will continue to monitor these bills and others that could impact the system and urge retirees to familiarize themselves with legislation that could affect the sustainability of their pension fund.

Michael Pramik

Michael Pramik is communication strategist for the Ohio Public Employees Retirement System and editor of the PERSpective blog. As an experienced business journalist, he clarifies complex pension policies and helps members make smart choices to secure their retirement.