The Senate passed legislation Tuesday night ordering state pension officials to phase out retirement fund investments with companies doing business in South Africa.
The state now has about $10 billion invested in companies at which the measure is aimed.
Sponsored by Assemblywoman Maxine Waters (D-Los Angeles), the bill was approved on a 25-to-12 vote and returned to the Assembly for concurrence in amendments.
The action came one day after President Reagan issued an executive order containing a series of economic sanctions against the white-minority South African government. While the Reagan order would apply mainly to private trade, the California legislation would go in a different direction by restricting the investment of state funds in firms doing business in South Africa.
If approved by the Assembly, as expected, and signed by Gov. George Deukmejian, who has vetoed similar legislation, the measure would prohibit the new investment of state funds in stocks or bonds of any company doing business privately or with the government in South Africa, which has come under increasing criticism internationally for its policy of racial separation.
The bill would also prohibit investments or reinvestments in banks and financial institutions that make loans to South African corporations or to the government there.
Exempted from the prohibition would be businesses that agree to sever their ties with South Africa and banks that adopt policies aimed at halting loans made there. Banks that do not make such loans but do business in the country would also be exempted.
Company officials who violated required written pledges to comply with the law would be subject to criminal prosecution on felony perjury charges as well as civil penalties.
If enacted, the bill would take effect in January, 1987. It would not demand outright divestment of all state funds now held by companies doing business in South Africa but rather would have the effect of gradually reducing such investments in the future.
The bill represents the second attempt this year by Democratic lawmakers to phase out South African investments from the portfolios of the $24-billion Public Employees Retirement System, the $13-billion State Teachers’ Retirement System and the $6.3-billion University of California Retirement System. Almost one-fourth of those investments are in corporations that do business in South Africa.
Vetoed by Governor
In June, the Legislature added a similar provision to the state budget, but Deukmejian vetoed the restrictions. Earlier this week, Assembly Democrats tried to pressure the governor into agreeing to the South Africa sanctions by threatening to block passage of a bill he supports to repeal the state’s unitary tax.
Whether the tactic will work remained unclear, but Senate Democrats and Assemblywoman Waters said Tuesday they would rather move forward on their own than wait for the results of the negotiations with Deukmejian.