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  • STRS Ohio Watchdogs

How private equity firms are widening the income gap in the U.S.

By Terry Gross Fresh Air (NPR) April 26, 2023

GROSS: Can you talk about how investment in private equity firms backfired for teachers in Ohio?

MORGENSON: Yes. There's a great example of a case in Ohio, and this was the state teachers' retirement called STRS, Ohio STRS. And this was a situation very typical for a public pension where it had invested significantly in private equity. And, you know, a lot of public pensions, Terry, don't have employees who are especially sophisticated as far as financial instruments are concerned. And so this was a situation where the fund ended up - and the teachers who were relying on it - ended up paying enormous amounts to the private equity firms that were, you know, investing on their behalf, even as the pensioners themselves had to take a hit on their cost of living increases.

The Ohio teachers' pension fund stopped giving beneficiaries a cost-of-living increase, called a COLA. And so this became an issue. And there were complaints. The teachers went to the meetings. I mean, it was a kind of an interesting battle that raged between the beneficiaries, i.e., the retired teachers who had spent their life, you know, teaching children and assuming that their - at the end of the line, they would have enough money to live - where they ended up paying private equity firms very generous amounts, even as they took a hit to their benefits.

Those of you who followed us on our old website know that there was a lot of information there. We are in the process of moving older posts, that we want to preserve and share with new Watchdogs, from our old website to our new website. This is one of those posts.



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