Both of us were trained as firefighters. Along with many other first responders across the country, we chose public service to help citizens in our communities. We knew our career choice would not make us rich, but like millions of public servants in this country, we count on our pensions for a secure retirement.
We’re alarmed because our fellow firefighters’ future is now at risk because of other people’s political and ideological preferences. For example in 2002, the board of CalPERS, the largest U.S. pension fund, divested its holdings in tobacco companies. Smoking is legal for adults and tightly controlled by regulation, but the board believed that owning tobacco stocks was, well, just wrong. It was a moral decision, not an investment decision.
It also turned out to be a costly decision for California’s state workers, who depend on CalPERS for their retirement security. An analysis in 2015 found that this divestment cost the fund $3 billion, and later calculations by Wilshire Associates show the “amount of foregone performance has continued to grow.” Despite the losses, the CalPERS board rejected the advice of its staff in 2016 to reinstate tobacco stocks.
CalPERS is not alone. More and more, the people who run public pension funds — which last year managed $3.4 trillion in retirement assets for America’s teachers, firefighters, police, and other government employees — are making investment decisions based on considerations other than achieving the best potential financial returns.
Read the full opinion piece here.