Alright! So it's IRAN that they want to prevent these pension funds from being invested in. However, CalPERS and CalSTRS are against it themselves. You see, the rest of the world is not "libertarian theologists", and will not held back in this capitial, free-market global society, and will end up costing a lot of money, and isn't the best investment of the investment. It creates an unfair financial advantage. So you have to aks yourself, when investing money, the only thing that counts in a capitialist society is return on investment. And this hurts that.
REPORT OF THE CHIEF LEGISLATIVE ANALYST
June 20, 2007
TO: Honorable Members,
Intergovernental Relations Committee
FROM: Gerry F. Miller~
Chief Legislative Analyst
C.F. No. 07-0002-S134
Assignent No. 07-06-1116
AB 221: Prohibit Public Pension Investments in Iran
Adopt Resolution (Weiss - Garcetti) to include in the City's 2007-2008 State Legislative Program, SUPPORT of AB 221 (Anderson) that would prohibit the Californa Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) from investing public employee retirement fuds in companes that have specified energy or defense-related operations in Iran.
AB 221 was introduced on Januar 29, 2007 and passed the Assembly on June 5, 2007. This bill seeks to prohibit CalPERS and CalSTRS from investing public employee retirement funds in companies that have specified energy- or defense-related operations in Iran, including businesses that are involved in the development of Iranian petroleum resources. The provisions of this bill state that
the boards of CalPERS and CalSTRS will be required to determine companies that have business operations in Iran and review publicly available information regarding companies with business operations in Iran by March 30,2008.
AB 221 also provides that the provisions of the bill will be repealed once Iran has been removed from the U.S. Department of State's list of countries which have been determined to have repeatedly provided support for acts of international terrorism or when the President determines and certifies that Iran has ceased its efforts to design, develop, manufacture, or acquire nuclear explosive devices or related materials and technolgy.
Existing law does permit the Legislature to prohibit certain investments by a retirement board where it is in the public interest to do so, and provided that the prohibition satisfies the standards of fiduciary care and loyalty required of a retirement board.
Supporters of AB 221 state that the movement to divest public pension funds from foreign, publicly traded companies that have business ties to known terrorist-sponsoring countries has grown. Supporters also state that the national security of the United States could be threatened if the U.S. continues to support countries known to be involved in terrorist activities. The author of AB 221 stated that this bill "will protect state investments from profound risk and ensures that the milions
of Californians who depend on CalPERS and CalSTRS for their retirement income need not fear the risks to their portfolio associated with funding business in a terrorist regime."
However, CalPERS and CalSTRS are opposed to AB 221. These organizations are concerned that this bill will impose an investment mandate or restrction on the boards' investment opportunities authority and may create unreasonable costs or complexities for the administration of the systems. Both systems have stated that divestments negatively impact the systems by reducing investment options, increasing volatility, and reducing the earngs ofthe funds. CalPERS reports that potential costs ofthis bil include: 1) $350,000 in administrative costs to be used for researching which companies are involved with business operations in Iran, correspondence with these companies, and preparng the required report to the Legislature; 2) $20 milion in divestment costs; and 3) the potential to lose $66 milion in fud value over a five-year period because of an expected fall in the rate of retu on these investments. Similar to CalPERS, CalSTRS also opposes AB 221, however CalSTRS is also recommending that the bill be amended to conform to their recently adopted legislative divestment policy (Attachment C). CalSTRS reports that, as curently wrtten, AB 221 is inconsistent with their curent policies. CalSTRS also states that divesting will reduce their "investable unverse," which may negatively affect their performance and increase their risks.
CalSTRS reports that the cost of this bill could exceed $500 million and in the futue could exceed $1 billion.