California Governor Signs Bill on Iran Divestiture

Daily News

Taking a stand against Iran's ties to terrorism, Gov. Arnold Schwarzenegger on Sunday signed a bill requiring the state's pension funds to divest from companies that do business with that country's energy and defense sectors.

Estimates vary on how much money state funds have invested in companies that do business with Iran, but it could run as high as $24 billion. Also, divesting that much stock could cost more than $120 million in expenses such as taxes and commissions.

The state's two major pension funds have vigorously opposed the bill, arguing that it runs counter to their constitutionally mandated financial responsibility to state employees and government agencies.

But Schwarzenegger said the state should make a strong statement against terrorism by exerting the financial influence of the nation's two largest public pension funds.

"California has a long history of leadership and doing what's right with our investment portfolio," Schwarzenegger said in a written statement earlier this month.

"I couldn't be more proud to sign this bill," Schwarzenegger said in a written statement. "Last year I signed legislation to show our defiance against the inhumane murder and genocide in Sudan.

"This year I am pleased to support additional efforts to further prevent terrorism by doing what's right with our investment portfolio and signing this legislation to divest from Iran."

The boards of the California Public

Employees' Retirement System and the California State Teachers' Retirement System opposed the bill, saying it could prevent them from making the best investments in the financial interest of state employees and government agencies.
The divestments could potentially lower the state's long-term return on investment in its pension funds, meaning state taxpayers might have to contribute more through the state general fund, according to analyses by staffers at the funds.

If the bill had been in place over the past five years, CalPERS estimates it would have reduced investment returns by at least $725 million.

In the past, state pension funds have been required to divest from South Africa in the 1980s and from the Sudan in a bill that took effect this year. Citing financial risk, CalPERS on its own decided to divest from tobacco companies.