In California, a state known for its ultra-liberal stance on environmental issues, even if it means raising gas prices or putting people on the unemployment line, a state legislator has introduced legislation that could have significant economic ramifications for the state’s largest pensions – the California Public Employees’ Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS).
A proposed bill in the California State Legislature aims to force these pension funds to divest an estimated $15 billion from oil and gas companies by 2031 and cease any new investments by 2024. While the bill has gained traction in the California State Senate, it still faces deliberation in the State Assembly.
The legislation has sparked debate regarding the intertwining of social issues with the financial well-being of retirement accounts.
Opponents argue that divestment could threaten the financial health of municipalities already burdened with substantial unfunded liabilities. Even the leaders of CalPERS and CalSTRS have voiced their opposition to the divestment legislation.
CalPERS CEO Marcie Frost expressed concern that the bill would not effectively combat climate change and could impede the necessary investment returns to fulfill promised benefits to members.
The proposed legislation has further divided California’s influential labor interests. Unions representing firefighters and construction trades have opposed the measure, citing potential negative impacts on jobs and the economy. On the other hand, the teacher’s union and the California Nurses Association support the legislation, aligning themselves with the environmental and social justice movements.
The introduction of divestment legislation could significantly impact the promised pensions for California’s retirees. As the bill proceeds to the California State Assembly, further discussions and deliberations should be discussed on the financial responsibilities of pension funds.