Pipeline divestment is bad for state pensioners and taxpayers
The small but fevered movement to divest California public monies from companies involved with the Dakota Access Pipeline project is ill-conceived, and if successful, will prove injurious to pensioners, retirees and state taxpayers.
Just ask those responsible for investing and safeguarding the $300 billion California Public Employees’ Retirement System. CalPERS’ chief investment officer, in a document prepared for and reviewed at the investment committee’s February meeting, noted the intent of the divestment legislation, AB20, would be an “ineffective strategy for achieving social or political goals,” and would affect an estimated $4 billion in CalPERS holdings.
The Los Angeles Times, a vocal critic of the Dakota pipeline, was just as blunt in its condemnation of AB20, asserting the “flawed and dangerous bill” would “hurt Californians” by blowing “a multibillion-dollar hole in the pension funds.”
Taxpayers will have to pick up for the tab to meet promised pensions that the investments don’t cover. Additional pension-fund shortfalls that divestment would cause are precisely what businesses owners don’t need. San Francisco’s municipal pension-fund shortfalls alone amount to $5.5 billion, a significant taxpayer burden for our city’s residents, our customers. Heaping additional losses on the state level leaves less money in the pockets of Californians on whom we rely to sustain our businesses.
California businesses already labor under some of the most onerous tax and regulatory conditions in the country.
AB20 was preceded by similar actions by municipal governments around the state. San Francisco decided in March to divest itself from companies involved with the pipeline, and that decision has imperiled 14 percent of the city’s portfolio, representing roughly $1.2 billion. Other cities include Davis, Alameda and Santa Monica.
State representatives contemplating AB20 have plenty of examples that indicate that divestment is a bad idea. For example, Vermont’s Pension Investment Committee contemplated a similar divestment scheme. A feasibility study, however, concluded not only that divestment was not in the best interest of beneficiaries but disputed the idea that divestment reduces demand for fossil fuels — the purpose of the divestment.
As lawmakers contemplate divestment of public monies, they should be reminded that:
1. CalPERS is not an individual with any political views. It is quite simply an enormous public trust with one simple mission: to safeguard and hopefully grow the hardearned retirement of millions of Californians.
2. Lawmakers have been entrusted with the responsibility to represent the best interests of the public, to which they are accountable. They shirk that responsibility at their peril if they subject our state’s pensioners and retirees to unsound investment decisions.
3. It is in the interest of business owners that pension managers be left to make the best investment decisions and that investors enact change through corporate engagement, not divestment. Stockholders can, and have, successfully enacted business reforms.
Our elected officials must heed the advice of pension fund managers, respect the evidence and reject divestment of California public monies. Decisions affecting California’s pension funds must be guided solely by what is best for the monies under their management. Anything less will hurt retirees, taxpayers and businesses.