Texas Public Pension Officials Wrestle with Divestment Issue

November 21, 2007 (PLANSPONSOR.COM) - Two Texas public pension funds have yet to supply Governor Rick Perry with a plan for divesting holdings in Iran-linked companies.

Not only that, according to a San Antonio Express-News story, a key official in one of the pension programs still isn’t sure a state executive such as Perry should be getting involved in where the fund invests its assets (See   Cover: Doing the Right Thing? ).

For his part, according to the news report, Perry apparently isn’t upset that the Lone Star State’s $112.1-billion Teacher Retirement System (TRS) or the $24.7 billion Employees Retirement System (ERS) haven’t yet responded to his September call for the Iran divestment plans within 30 days (See  TX Governor Asks Pension Funds to Divest Holdings in Iran-Linked Companies ). Perry spokeswoman Krista Moody told the newspaper that the Lone Star State chief executive believes progress is being made on the issue.

Concerns Expressed

However, echoing sentiments expressed by his fellow public pension executives around the country, ERS Chairman Bill Ceverha told the Express-News he is concerned where efforts like Perry’s might ultimately lead. “Obviously, Rick Perry is not going to be governor forever. You could have a governor who is a vegetarian … and decides that we shouldn’t be investing in companies that deal with meat,” Ceverha said, according to the report.

Ceverha, who despite his reservations said the board wants to work with Perry, also expressed concern over legislatures getting involved in affecting foreign issues. “From a personal standpoint, I don’t believe these actions belong in state legislatures,” Ceverha told the newspaper. “They belong in the United States Congress and the White House.”  Similar sentiments have recently been expressed by the U.S. State Department (see  Letter Voices Administration’s Sudan Divestment Proposal Opposition ).

Ceverha also asserted that Perry “doesn’t really have the legal status” to direct the board to make such changes. “I can tell you there is not a lot of enthusiasm for this effort,” Ceverha said. “Those funds don’t belong to the state. They belong to the employees and the retirees, and they want to see the best results.” (See  Public Pension Fund Divestment: A Fiduciary Risk? ).

Perry has argued that aid the action is warranted because Iran “is an epicenter for terrorist activity.” The Legislature also this year approved, and Perry signed, a measure directing the pension funds to get rid of holdings in companies doing business in Sudan (See  Texas House Approves Sudan Divestment Bill ).

Taking up the Issue

Ceverha’s reservations aside, that doesn’t mean divestment won’t happen, however. The ERS board is expected to take up the issue November. 27.  Ceverha didn’t have data on how much the ERS may have invested in companies that do business with Iran. Meanwhile, the TRS in a November 1 letter to Perry identified $778.8 million worth of holdings in 19 companies that other entities have identified as doing business with Iran.

According to the news report, the TRS board has asked staff to bring to a board meeting December 13 and 14 a list of companies that do business in Iran and criteria that could be used to develop a new investment policy, spokesman Howard Goldman told the newspaper.

TRS board member Dory A. Wiley of Dallas, a Perry appointee, told the newspaper, “Personally, I agree with the governor’s effort, and I think it’s the right thing to do. But we do have a fiduciary duty to the beneficiaries, the teachers and the members themselves, to first provide them a good diversified return.”