The day he was sworn in to the California Assembly, freshman Bay Area Democrat Ash Kalra filed his first piece of legislation: Assembly Bill 20, which would force the state’s two largest public employee retirement funds, CalSTRS and CalPERS, to divest from companies involved in building the disputed Dakota Access pipeline.
The bill, if it were to become law (and it shouldn’t), wouldn’t stop the project from being completed. The Army Corps of Engineers has already given final approval to the remaining section of the pipeline. It would, however, blow a multibillion-dollar hole in the pension funds — and the public pocketbook, because state and local taxpayers would be left to fill that hole.
What was Kalra, a former San Jose City Council member who is no doubt familiar with how pensions are financed, thinking when he made this proposal? Perhaps about starting a discussion on a controversial topic that would establish that he, the first Indian American member of the California Legislature, wasn’t going to be a wallflower during his stint in Sacramento. Good for him. Welcome to the fight, there’s much work to be done. But here’s the first lesson: Ill-considered, attention-getting bills only detract from that mission.
Even those who opposed the Dakota Access pipeline, such as this editorial board, must recognize that AB 20 is a flawed and dangerous bill. For one thing, it is overly broad, requiring divestment from a company that operates multiple oil and natural gas lines as well as from major national banks that finance not just the pipeline’s construction, but also many of California’s businesses. California Public Employees’ Retirement System staff estimate that cutting investment in these companies would cost it at least $4 billion. California State Teachers’ Retirement System staff is still evaluating what divestment would cost that fund.
The bill did get attention: CalPERS staff recommended that the CalPERS board oppose the bill because of the financial damage it might do to the fund. It also contradicts the fund’s preferred method of affecting social change — which is to lobby the management of the companies in which it invests. And that’s exactly what the board did Friday when it joined other investors in calling on the banks involved to address the concerns of the Standing Rock Sioux tribe.
Divesting the considerable assets of the public pension funds can be a powerful tool to effect social change. Many people credit the global divestment in South Africa for helping to end apartheid. But given the potential cost, lawmakers should wield this power sparingly and in a precisely targeted way — and never when it would just be an empty gesture.