To: Senators Joan Fitz-Gerald and Ken Gordon,
It is with great dismay that I recently became aware that you are pushing for legislation that would force the PERA program to divest itself of all investments in companies that do business in Iran. As I read your piece in the paper recently, I wondered why state legislators are so focused on managing the investment policies of a Public Trust. I use to say, we can always trust the Democrats to do right by public employees. It seems to me that you step far beyond reasonable limits of good government to star t dictating investment strategies and policy for funds that do not belong to the state but are the contributions of 400,000 members.
I am sure that a vast majority of Colorado citizens recognize the problems that exist between our country and Iran. Would we knowingly invest today in a company that has major interests in Iran? Probably not. But the world we live in is made up of vast multi-national corporations with numerous subsidiaries that extend into virtually every country on our planet. And now you are ready to insist that my retirement program divest itself of any investment in a company that does even a small fraction of its business in Iran.! I am wondering what the names of these companies are. Surely that list is likely to include many of the Fortune 500 companies. This would be probable since many mega corporations have moved philosophically away from national loyalty and seem to be only concerned with profit and loss statements.
And then I am wondering what countries might be next on your “politically correct” list of divestment? Would Venezuela be a candidate? As a result, PERA could be forced to sell all stocks in major oil companies.
My last question to you is who will pay for this divestiture? If you choose to mandate this move it would seem that the contributing membership of PERA should not have to suffer the loss in revenue, since you have been very critical of funding status of the program. This would amount to an unfunded mandate. We know all too well that state legislators abhor unfunded mandates from the federal government. Instead, I think you should provide state funds to make up the difference for any loss in value to the PERA through the General Fund. This would be the fairest way of handling the cost of this misguided approach to “political correctness.”
It is my hope that our legislators will focus on the real problems facing our state and leave the PERA investment team to do their work and continue putting the fund on a strong financial path for its members.
Sincerely,
CR
Response:
From: Joan Fitz-Gerald <contactjoanfitzgerald@gmail.com>
To: chrokala@comcast.net
Subject: Re: PERA divestment
Date: Wed, 26 Sep 2007 21:20:16 +0000
As the 2007 session was ongoing and the issue of divestiture from the Sudan came to the fore, we were assured in writing of the PERA Board’s unanimous decision to endorse the actions of the Legislature.
We received On August 24th a letter from the PERA Board stating their understanding of the Legislature’s actions in requiring divestment from Sudan while outlining their opposition to any mandated divestment efforts that do not meet the genocide criteria and fail to account for the Board’s five stated concerns:
- PERA seeks to maximize long term, risk-adjusted investment returns and a central component in managing investment risk is diversification.
- The costs associated with divestment are high and include: costs to search for and identify qualified partners; transaction costs in selling or disposing of securities; costs associated with research and due diligence; and the costs of reduced investment return.
- Monies administered by PERA immediately become part of a trust fund and is therefore no longer “public money” or “state money.” Any divestment directive affects money that is not the property of the state or any public employer.
- PERA trustees have a fiduciary responsibility to invest and expend funds for the sole benefit of members and beneficiaries, and cannot allow financial decisions that will undermine the status of the plan.
- Divestment mandates impose economic hardships on the subject companies but there is no guarantee where the impact will be felt, potentially resulting in an array of unintended consequences for the very people we may be trying to help.
With divestment proposals now being discussed about Iran, Iraq, China and other areas, the points provided by PERA merit consideration. Please contact Khadija Haynes for a copy of the complete letter from the PERA Board.
