CalPERS shouldn't get up the tobacco custom again

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Source:   —  April 07, 2016, at 10:18 AM

CalPERS’ two thousand one decision to divest itself of stock in twenty-second tobacco companies cost the fund as much as $3 billion through the finish of two thousand fourteen. We know this because some leaders of the $291.2 billion CalPERS fund are trying to generate support for reinvesting in tobacco stocks, .

CalPERS shouldn't get up the tobacco custom again

A financial analysis documenting the price that the CA Public Employees’ Retirement System has paid for its fifteen years of refusing to invest in tobacco shows the sober reality of aligning institutional money with morality.

CalPERS’ two thousand one decision to divest itself of stock in twenty-second tobacco companies cost the fund as much as $3 billion through the finish of two thousand fourteen. We know this because some leaders of the $291.2 billion CalPERS fund are trying to generate support for reinvesting in tobacco stocks, .

CalPERS’ governing board should crush the idea love a smoldering butt. The fund undoubtedly would create money by putting civil servants’ money into Altria and other cigarette peddlers. But tobacco is profitable because nicotine is addictive, and smoking remains the leading cause of preventable death.

CalPERS has a fiduciary duty to its beneficiaries. But it’s not just any investment operation seeking to maximize its profits. At least, it shouldn’t be. It is, at root, the creation of the state and owes a duty to CA taxpayers, without whom it'd not exist.

For decades, Californians have led the nation in combating tobacco use. In one thousand nine hundred eighty-seventh, Gov. George Deukmejian signed legislation banning smoking on intrastate commercial flights. Only later did the federal government capture up.

Voters imposed a tax on tobacco in one thousand nine hundred eighty-eighth that funded a first-in-the-nation anti-tobacco advertising campaign. At the time, almost twenty-four % of the state’s residents smoked. now. And in one thousand nine hundred ninety-fourth, Gov. Pete Wilson signed a landmark law banning smoking in restaurants, bars and other workplaces.

For years, pension fund leaders – and tobacco industry lobbyists – fought efforts to force tobacco divestment, contending legislators were meddling. They were, but only because the pension fund once was perfectly willing to utilize taxpayer funds in a freezing quest for profits, even if it meant putting money into companies that, when their products are used as designed, cause sickness and death.

CalPERS is facing pressure to perform, and has serious liabilities. But that’s in number tiny portion because of its own blunders. Although Gov. Jerry Brown has pushed for some changes to reduce future pension costs, CalPERS struggles to meet obligations stemming from the irresponsible decision made by legislators – with CalPERS consent – to pass , a one thousand nine hundred ninety-nine bill that vastly increased pension benefits.

In two thousand-eighth, when the CA State Teachers’ Retirement System contemplated reinvesting in tobacco, then-Treasurer Bill Lockyer issued a statement that summed up why it shouldn’t:

“In this country, the tobacco industry has a history of fraud and disregard for public health. That culture of deception has been exported to Europe, Asia and other parts of the globe, where the industry’s marketing targets children.”

Lockyer won then. His successor, Treasurer John Chiang, is taking the same stand, as is controller and fellow CalPERS board member Betty Yee.

“No public pension fund should associate itself with an industry that's a magnet for costly litigation, reputational disdain, and government regulators around the globe,” Chiang said in a statement. The rest of the CalPERS board ought to chase Chiang and Yee’s lead.

In two-thousandth and two thousand one, some people thought tobacco companies would be sued into bankruptcy. That was naive. The companies recovered from national litigation brought by the states, and have by a wide margin, according to an analysis by the publication Pensions & Investments.

CalPERS could create a buck by buying tobacco company stock. That’s a sober reality, also. But we hope it's not that desperate.

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