ALEC on NTD News: Politically motivated investment schemes hurt retirees
These politically based investing schemes are only making these unfunded liabilities that much worse. Ultimately, these schemes are hurting workers and retirees and hurting all of us as taxpayers who will be expected to pick up the tab when these bills come due.
ALEC Chief Economist Jonathan Williams was recently featured on NTD News talking about ALEC’s newest model policy STATE GOVERNMENT EMPLOYEE RETIREMENT PROTECTION ACT.
Host Paul Greaney: The American Legislative Exchange Council says state pension funds are investing your money not for financial reasons, but to advance political objectives. ALEC has come up with a new framework to protect state funds from engaging in so-called ESG investing. That stands for environmental, social and governance-based decision making. Joining me now is ALEC’s Jonathan Williams to explain.
Jonathan Williams, ALEC Chief Economist: We’ve seen a proliferation of many activist-type investor ideas go across many of the progressive leaning states, meaning that they’re taking people’s hard earned retirement dollars in public sector, a defined benefit pension for police and firefighters, and teachers. In many cases those funds are being used to divest or invest in politically based causes versus investments that would maximize long term rates of return and policies. You and I have talked many times about unfunded pension liabilities that have been building in the states for many, many years. We document that at ALEC every single year. These politically based investing schemes are only making these unfunded liabilities that much worse. Ultimately, these schemes are hurting workers and retirees and hurting all of us as taxpayers who will be expected to pick up the tab when these bills come due.
Host Paul Greaney: What are some of the standout examples of this politically motivated investing?
Jonathan Williams, ALEC Chief Economist: Going back to the 2000s, there was a move to divest from tobacco related stocks. The California pension system lost hundreds of millions if not billion from this type of investing. More recently, there’s been a push in states like New York, I believe Maine and Vermont and several others to look at divesting from oil and gas stocks, or coal or anything that is fossil fuel based.
Host Paul Greaney: This type of activist investing, you think it comes from ideologies within the funds themselves? Does it come from political pressure?
Jonathan Williams, ALEC Chief Economist: I think it’s it comes from many sources. In some cases, state lawmakers are promoting this type of investing in some of the states like New York and Maine. Also you have the scenario where you have states that have internal money managers and may be putting their personal political views. Or in some cases, states contract outcomes and pension investments and you may have the outside money managers who have a stated goal of reducing some sort of non-financial return politics in many cases into the scenario and they dictate that it will go on for forward and then take those strategies.
There are trillions of dollars at stake here that states have under management and their pension systems. And if somebody doesn’t address this, I think this problem only gets worse, not better.
Host Paul Greaney: Jonathan Williams, the American Legislative Exchange Council, appreciate it. Thank you.