In anticipation of the California State Senate hearing on Assembly Bill 20 on July 10, California members of Protect our Pensions sent a letter urging lawmakers to take politics out of pension decisions, and to reject this costly legislation.
The bill, introduced in late 2016, is designed to pressure the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to divest from businesses involved with the Dakota Access Pipeline (DAPL), a project that is already completed and operational.
In their letter, California labor and business leaders, and political officials, highlighted the fact that they are far from the only ones who have voiced opposition to the legislation:
This bill has seen opposition come both from pension board staff, as well as voices in the media. In February CalPERS staff issued a strong rebuke of AB 20 and the policy of divestment, asserting that “divesting is an ineffective strategy for achieving social or political goals.” Later, the CalPERS investment committee formally voted to reject using divestment as a policy for achieving social goals, explaining that “divesting appears to almost invariably harm investment performance.” The editorial board of The Los Angeles Times, which did not shy away from criticizing the Dakota Access Pipeline itself, called the bill “ill-considered,” “attention-getting,” “flawed,” and “dangerous.”
The letter also drew attention to the latest studies showing that divestment has huge financial risks for the funds undertaking such a practice:
If the funds lose money, this burden will be borne by the pensioners, taxpayers, and business owners of our state. A recent study conducted by Prof. Daniel Fischel of the University of Chicago Law School estimated that CalPERS could stand to lose between $210- $289 million every year if the fund were to divest, amounting to a staggering $2.3-$3.1 trillion over 50 years. California taxpayers should not have to shoulder this additional financial burden.
The California members of Protect our Pensions reminded lawmakers who the pension funds are ultimately accountable to:
Divestment activists may be forceful in stating their convictions, but they routinely overlook that fact that they are urging politicians to gamble with the money of hard-working retired civil servants, who put contributed for years into the funds with the expectation of a return. We believe that pension investments should not be politicized in any way. CalPERS and CalSTRS should be free to make investment decisions based on their fiduciary duty, not political influence. We believe that California’s public employee retirement systems should answer to the people that they serve, not activists or special interests.
Read the full letter here.