According to the President pro tempore of the state Senate in Sacramento, “Climate change is the top priority of the California state Senate.” As the vice-chair of the Senate Public Employment and Retirement Committee, I would like to share what my constituents tell me are their immediate concerns.
What I almost always hear is that their top expectation of the legislature is to be wise with the taxpayers’ money. That means keeping the state’s fiscal house in order to support priorities like making our communities safe, ensuring our children have access to a quality education, and creating a friendly business climate so our families can have jobs.
The reason the Senate leader made these remarks was to justify the proposal to force California’s pension caretakers, CalPERS and CalSTRS, to sell off their billions of dollars in coal, and coal-related assets. However, what might sound appealing is often bad for the pocketbook.
Consider that $118 billion has been spent over the last four decades cleaning up this industry and dropping emissions precipitously. With these efforts underway, there is little reason to single out CalPERS and CalSTRS’ investments as California’s being complicit in contributing to climate change.
What is more concerning is that California now faces $340 billion in unfunded pension liabilities when it comes to honoring its commitments to our public workforce. Therefore, we must work to make sure taxpayers are not asked to pay more than is necessary to meet this obligation. These commitments are so massive that they threaten to take away our ability to provide even the most basic government services we rely on like schools, roads, police, and fire protection. In our region, San Bernardino’s bankruptcy is a fresh reminder of this.
Some of these obligations can be paid down by investment returns, and that is a big part of what CalPERS and CalSTRS do. Payroll contributions are invested in diverse portfolios, with the gains from those investments counted on to reduce the burden to the public when making our required pension and health care payments.
Occasionally, there are those who succumb to the temptation to interfere with those CalPERS and CalSTRS investments in order to pursue a questionable policy objective. Such interference typically has not ended well. For example, in 2013, CalPERS invested $900 million in green energy projects with untested track records of positive returns, and saw a negative return of 9.7 percent. They waved it off by cavalierly stating it was “a noble way to lose money.” There is nothing noble about losing the public’s money!
CalPERS and CalSTRS are not financial laboratories for solving every ill. The great British Prime Minister Winston Churchill warned against the state becoming involved in shaping private enterprise and propping up favored industries. Too many families have too much at stake for such experiments. When the legislature injects itself in the process, it is everyday Californians who end up covering those losses, usually with higher taxes.
A clean environment is a worthy goal for us, but the Democrat-dominated legislature in California is pushing aggressive programs with a hefty new tax on gasoline and energy mandates, both of which are hitting families hard when filling our gas tanks and paying our utility bills. One estimate of the cost of the state’s environmental law AB 32 will be $2,500 annually per family. But there are limits on what we can do. Weakening our basic ability to operate government certainly defines those limits.
Previous generations have committed future generations to paying off costly decisions made in the past. It is now on us to ensure that the state remains invested in solid firms that will lessen the load that will be passed onto them. The legislature must refrain from dictating the terms of pension investments and wisely focus on paying down this wall of debt.