Thanks to Assembly Bill 33, introduced by Assemblymember Rob Bonta, D-Alameda, the state Legislature will spend time and resources to codify an issue that California pensioners have spoken on before: divesting from high-performing funds for political purposes.
AB 33, as written, would require that state retirement systems, namely California Public Employees Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), divest of all investments in private corrections companies and disallow investing in those same companies in the future.
This is not a simple, one-size-fits-all issue that everyone should quickly come to agreement on, despite what the political establishment would like Californians to think.
In November 2018, CalSTRS voted to divest of these funds absent any legislation from the state. Specific numbers for the amount of money CalSTRS has lost through divesting from private corrections companies are not readily available but all CalSTRS divestment efforts from 2000 through 2018 have cost the fund’s retirees an accumulated $6 billion.
The most basic argument against this bill is one against divestment generally.
Divesting destabilizes an investment portfolio at the cost of public servants’ retirement and future stability. Divesting at the whim of politicians hoping to score cheap political points means selling off assets on the secondary market despite market performance and timing, which frequently means selling at a loss. Divesting also comes with significant opportunity costs when divesting from a fund that has seen excellent growth.
California pensioners have a reasonable expectation that retirement funds will be responsibly…
