It is no secret that the state of Illinois and city of Chicago are in a tough spot financially. The state pension system is woefully underfunded, and Illinois cannot find the funds to pay the $9.1 billion in interest payments on the amount it already owes for pensions. Millions of retirees covered under these pensions are under threat of losing the benefits for which they worked so hard. This unfortunate development is happening while Chicago struggles to pay its teachers and continues to rack up huge amounts of debt.
With these facts in mind, it seems rather tone deaf to propose that the city’s pension system be used to make an ideological statement. And yet, that is exactly what some aldermen within Chicago’s City Council have considered doing, with some aldermen signing onto a divestment resolution pledging to divest the city’s pension funds and stock portfolio of fossil fuels. The effort was noted in Midwestern Energy News, though the news report admitted divestment would be “largely symbolic.”
The text and spirit of the resolution is not new, and the arguments against such a move are just as relevant in Chicago as they are anywhere else. In California, the staff of one of the largest state pensions funds in the county, CalPERS, rejected a divestment proposal before the state legislature, stating that “divesting is an ineffective strategy for achieving social or political goals.” In Vermont, the state treasurer released a study that rejected divestment of state pension funds and concluded that divestment “would not be good for pensioners, and it would really have no impact on climate change.”
Given that the finances of Chicago and Illinois are on such shaky ground, it seems downright cruel to exploit the financial well-being of pensioners in the name of “symbolic” actions that even by the proponents’ standards would not result in any concrete benefits. To argue that divestment would make financial sense just adds insult to injury. have shown that divestment results in losses to pensions and other portfolios. Just last month, the city of Santa Monica lost $120,000 of taxpayer money due to the decision to divest from Wells Fargo.
Here’s the simple truth is: there are more effective ways to make symbolic gestures without harming the financial well-being of pensioners in the process. Both CalPERS and the state of Vermont, along with many pension fund entities, have pursued the change they want to see through other effective means. CalPERS, for example, cited their ability to influence corporate behavior as a reason to decline divesting from Well Fargo. Vermont’s treasurer pushed for the state pension board to initiate “a continued dialogue with investment managers on the topic of climate change.”
Chicago’s pension funds should not be exploited as a means of sending a message. Protect our Pensions urges Chicago’s City Council and Mayor Emanuel to reject this misguided gesture.