It’s Time for CalPERS to be Socially Responsible

Posted on 24 February 2010

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By Assemblymember Tom Ammiano

I have introduced the Socially Responsible Investment Act, AB 2337, to prohibit the use of public pension funds in predatory investment schemes. The legislation would require CalPERS and CalSTRS to disclose and divest from any investments in companies engaged in predatory business practices that rely, or result in, the displacement of residents in affordable housing in order to generate profits for investors.

Public pension funds have been a primary source of equity for what affordable housing advocates have termed “predatory equity”, a form of real estate speculation predicated on the displacement of low and middle-income renters from affordable housing.   

Tenants Together, California’s statewide organization for renters’ rights, has been urging CalPERS for over a year to voluntarily adopt “predator free” investment criteria, pointing to the large scale displacement of tenants in East Palo Alto and New York City fueled by CalPERS money. 

Over $600 million of public funds were invested in the Page Mill and Stuyvesant Town developments which have resulted in the harassment and displacement of tenants in rent-controlled units. To date, the pension fund board has not taken action to screen out real estate investments that are premised on evicting tenants.  

There is no excuse for public funds being used for predatory equity schemes. They are not only unethical but are unsound investments that pose serious financial risks.  The retirement funds of working people should not be used to evict working people and it is long overdue that the state ensures that public employee pension funds are not invested in predatory schemes that displace renters.

Previous divestment acts (Sudan and Iran) passed by the legislature have brought attention to the Legislature’s responsibility to prohibit CalPERS and CalSTRS from public employee pension fund investments that do not serve the public‘s interest. 

It is now time for CalPERS and CalSTRS to claim moral and social responsibility for their investments and continue to abide by their fiduciary responsibility by acting in the public’s best interest to end public pension fund investments in predatory equity schemes that displace renters.

It is unconscionable that hundreds of millions of dollars in public funds have been used in efforts to evict tenants from New York to California. Actions speak louder than words and CalPERS needs to make its claim of socially responsible investing a reality.

At its heart, this bill introduces greater transparency and accountability into California’s pension fund investment decisions, something that will benefit communities across the country.


Tom Ammiano is a California State Assemblyman representing the 13th District in the City of San Francisco.

Legislators should spend every minute of their time on the budget impasse. They should set aside all other legislation--no matter how worthy-- until that is done.Most legislators want to pass bills with their names on them to get re-elected.

You are worried about social responsibility?

How about fiscal responsibility.

California has an unfunded public pension liability of $60 billion.

That means we, the taxpayers are on the hook for $60 billion - roughly $1600 for every man, woman, and child, for the promises the legislature has made to the government employee unions that they haven't funded. Promises backed by our tax dollars.

Worrying about these funds being 'socially responsible' is like worrying about the arrangement of the deck chairs on the Titanic as it is going down by the stern and the band is playing 'Nearer my God to Thee....'

While President Obama was making his latest pitch for a brand new, even more unsustainable entitlement at the health care "summit," thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split screen - because they're part of the same story. It's just that Greece is a little further along in the plot: They're at the point where the canoe is about to plunge over the falls. America is further upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter 20 (total societal collapse): The Greeks are at Chapter 17 or 18.

What's happening in the developed world today isn't so very hard to understand: The 20th century Bismarckian welfare state has run out of people to stick it to. In America, the feckless insatiable boobs in Washington, Sacramento, Albany and elsewhere are screwing over our kids and grandkids. In Europe, they've reached the next stage in social democratic evolution: There are no kids or grandkids to screw over. The United States has a fertility rate of around 2.1, or just over two kids per couple. Greece has a fertility rate of about 1.3: 10 grandparents have six kids have four grandkids - i.e., the family tree is upside down. Demographers call 1.3 "lowest-low" fertility - the point from which no society has ever recovered. And compared to Spain and Italy, Greece has the least worst fertility rate in Mediterranean Europe.

So you can't borrow against the future because, in the most basic sense, you don't have one. Greeks in the public sector retire at 58, which sounds great. But, when 10 grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?

By the way, you don't have to go to Greece to experience Greek-style retirement: The Athenian "public service" of California has been metaphorically face-down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book "America Alone," I put the Social Security debate in a bit of perspective: On 2005 figures, projected public pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent. In other words, head for the hills, Armageddon, outta here, The End. Since then, the situation has worsened in both countries. And really the comparison is academic: Whereas America still has a choice, Greece isn't going to have a 2040 - not without a massive shot of Reality Juice.

Is that likely to happen? At such moments, I like to modify Gerald Ford. When seeking to ingratiate himself with conservative audiences, President Ford liked to say: "A government big enough to give you everything you want is big enough to take away everything you have." Which is true enough. But there's an intermediate stage: A government big enough to give you everything you want isn't big enough to get you to give any of it back. That's the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people's response is: Nuts to that. Public sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months' work - for many of them the workday ends at 2:30 p.m. When they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?

We hard-hearted, small-government guys are often damned as selfish types who care nothing for the general welfare. But, as the Greek protests make plain, nothing makes an individual more selfish than the socially equitable communitarianism of big government. Once a chap's enjoying the fruits of government health care, government-paid vacation, government-funded early retirement, and all the rest, he couldn't give a hoot about the general societal interest. He's got his, and to hell with everyone else. People's sense of entitlement endures long after the entitlement has ceased to make sense.

The perfect spokesman for the entitlement mentality is the deputy prime minister of Greece. The European Union has concluded that the Greek government's austerity measures are insufficient and, as a condition of bailout, has demanded something more robust. Greece is no longer a sovereign state: It's General Motors, and the EU is Washington, and the Greek electorate is happy to play the part of the United Auto Workers - everything's on the table except anything that would actually make a difference. In practice, because Spain, Portugal, Italy and Ireland are also on the brink of the abyss, a "European" bailout will be paid for by Germany. So the aforementioned Greek deputy prime minister, Theodoros Pangalos, has denounced the conditions of the EU deal on the grounds that the Germans stole all the bullion from the Bank of Greece during the Second World War. Welfare always breeds contempt, in nations as much as inner-city housing projects. How dare you tell us how to live! Just give us your money and push off.

Unfortunately, Germany is no longer an economic powerhouse. As Angela Merkel pointed out a year ago, for Germany, an Obama-sized stimulus was out of the question simply because its foreign creditors know there are not enough young Germans around ever to repay it. Over 30 percent of German women are childless; among German university graduates, it's over 40 percent. And for the ever dwindling band of young Germans who make it out of the maternity ward, there's precious little reason to stick around. Why be the last handsome blond lederhosen-clad Aryan lad working the late shift at the beer garden in order to prop up singlehandedly entire retirement homes? And that's before the EU decides to add the Greeks to your burdens. Germans, who retire at 67, are now expected to sustain the unsustainable 14 monthly payments per year for Greeks who retire at 58.

Think of Greece as California: Every year an irresponsible and corrupt bureaucracy awards itself higher pay and better benefits paid for by an ever-shrinking wealth-generating class. And think of Germany as one of the less profligate, still just about functioning corners of America such as my own state of New Hampshire: Responsibility doesn't pay. You'll wind up bailing out anyway. The problem is there are never enough of "the rich" to fund the entitlement state, because in the end, it disincentivizes everything from wealth creation to self-reliance to the basic survival instinct, as represented by the fertility rate. In Greece, they've run out Greeks, so they'll stick it to the Germans, like French farmers do. In Germany, the Germans have only been able to afford to subsidize French farming because they stick their defense tab to the Americans. And in America President Obama, Nancy Pelosi and Harry Reid are saying we need to paddle faster to catch up with the Greeks and Germans. What could go wrong?