PA House Votes to Amend Sudan-linked Divestment Bill

July 3, 2007 ( - The Pennsylvania House of Representatives has approved a bill making taxpayers pick up the tab for investment losses caused by legislation ordering the state's pension funds to divest holdings in companies with ties to Sudan, the Associated Press reported.

“If we’re going to conduct foreign policy with pension money that really doesn’t belong to us, we should be willing to reimburse (the) pension funds for any losses,” said Representative Steve Nickol, who sponsored the bill, according to the AP.

The amendment was approved 113-85 and means that the taxpayers, not the State Employees’ Retirement System and Public School Employees’ Retirement System, will be required to make up for losses. The bill includes a stop loss provision limiting the funds’ losses to $500 million. Together, they have almost $100 billion in assets.

The Sudan Divestment Act requires the sale of stock in companies that directly or indirectly help the Sudanese government perpetuate genocide if those companies do not change their behavior after being contacted about it.

The State Employees’ Retirement System estimates that it currently holds about $145 million in companies that have been identified as divestiture targets by the Sudan Divestment Task Force. A figure for the teachers’ pension was not immediately available, according to the AP.

One of the most recent to join efforts to ban Sudan-liked investments is by the Arkansas Teacher Retirement System (See AK Teacher Retirement System Votes to Avoid Sudan-linked Holdings ). The fund had initially resisted state legislative efforts to divest its holdings, because only two of the companies were identified as still having an interest in Sudan, with holdings amounting to less than $1 million.

The federal Thrift Savings Plan (TSP) board also voted at the end of last month to oppose current Congressional proposals that would pressure it to get rid of holdings in companies tied to Sudan and Iran, saying that it disapproved of measures that would “introduce political or social considerations into TSP investment policy.” (See TSP Board Approves Auto Enrollment, Default Option ).

The reasoning of the board falls in line with other critics of such divestment measures, who question whether investment decisions governed by social policy could put plan sponsors on the line for fiduciary breach allegations (See Doing the Right Thing? ).