The Los Angeles Times editorial board took a strong stand against Assembly Bill 20, divestment legislation filed by freshman Assemblyman Ash Kalra, which the board described as “ill-considered” and “attention-getting.” Under the broad and overreaching bill, the state’s two largest employee pension funds, California State Teachers’ Retirement System (CalSTRS) and California Public Employees’ Retirement System (CalPERS), would be required to divest from companies involved in constructing the Dakota Access Pipeline.
The newspaper’s editorial board is not alone in this judgement. The staff of CalPERS publicly called on their board members to reject the proposal. The CalPERS estimated losses of “at least $4 billion” if the bill were to become law.
The Los Angeles Times concluded that Assembly Bill 20 would “blow a multibillion-dollar hole in the pension funds — and the public pocketbook, because state and local taxpayers would be left to fill that hole.”
The Los Angeles Times editorial board has correctly judged that politics and ideology should not take priority over the fiduciary responsibilities that pension fund managers have towards the beneficiaries of the funds that they are entrusted with. Several studies have reached the same conclusion, including one study by Professor Daniel Fischel of the University of Chicago which shows that portfolios engaging in the actions like the ones mandated in Assembly Bill 20 bring losses of 23 percent over 50 years. Legislation that proposes divestment action, like the bill proposed by Assemblyman Kalra, in reality just leaves pensioners worse off. In fact, divestment threatens the livelihoods of the pension fund’s beneficiaries by gambling their retirement. This irresponsible action is thankfully being foreseen by pensions and universities across the country, and even the media, like the Los Angeles Times. The future well-being of millions of California’s public workers cannot be left to the roll of a dice.
Read the full Los Angeles Times editorial here.