The Ohio Health Care Program, the agency of the Ohio State Teachers Retirement System (STRS) in Columbus, Ohio that provides access to medical coverage to retired faculty in the state’s public two and four-year colleges and universities is in trouble. According to the Report to Members, 2002, an annual summary of STRS benefits, between July 1, 2001 and June 30, 2002 the program received $460 million from public schools, colleges and universities and from premiums paid by retired faculty and spent $438 million on medical coverage.

A first glance, this looks like a gain of $22 million. However, during 2001-2002, the state’s investments in stocks, bonds and other securities lost $267 million, for a net deficit of $245 million. Worse, STRS’s investments have lost $8 billion during the last two years, says Laura Ecklar, Director of Communication Services at STRS. These deficits will drain the Ohio Health Care Program of money by 2008, warns the Report to Members, 2002.

One cannot charge the State Teachers Retirement Board with mismanaging investments. STRS losses come amid an economic malaise in which stocks in the Standard Poor 500 have lost since January 1, 2000 on average 48 percent of their value, writes John W. Rogers, Jr., Chairman, Chief Executive Officer and Chief Investment Officer of Ariel Mutual Funds in “Portfolio Manager Commentary—September 30, 2002.” These declines have exacerbated the plight of Ohio STRS, whose Retirement Board seeks an annual return of 7.75 percent on its investments to fund pensions and subsidize medical coverage. The pursuit of robust returns has led the Board to “be a somewhat aggressive investor,” says the Report to Members, 2002. Such investments tend to be volatile and have fallen precipitously with the stock market.

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