CalPERS Postpones Tobacco Study; Raises Contribution Rates

CalPERS on Wednesday postponed a plan to study whether it should re-invest in tobacco-related assets after divesting from such assets 15 years ago.

On Thursday, the pension fund also approved a contribution rate increase for state government and school districts.

The Sacramento Bee reports on the postponement of the tobacco study:

The big California pension fund Wednesday unexpectedly postponed a plan, adopted two days earlier, to launch an extensive study of whether it should reinvest in tobacco company stocks. Instead, the CalPERS investment committee will discuss the issue again May 16, said CalPERS spokeswoman Rosanna Westmoreland.

On Monday, the investment committee voted to begin a 12- to 24-month study of the pluses and minuses of tobacco investments. The vote followed a consultant’s report saying the California Public Employees’ Retirement System had sacrificed $3 billion in profits by deciding in 2001 to dump its tobacco holdings.

The investment committee consists of every CalPERS board member. As a result, approval by the full board usually is a formality. But this time it wasn’t. The representative for State Treasurer John Chiang, who opposed Monday’s decision, asked investment committee chairman Henry Jones to hold off until next month. Jones, who is also vice president of the full board, agreed.

“No public pension fund should associate itself with an industry that is a magnet for costly litigation, reputational disdain and government regulators around the globe,” Chiang said later Wednesday in a prepared statement.

A different report from the Bee also outlines the rate increase:

The state’s contribution will increase by an estimated $602 million, to $5.4 billion a year. School districts will be charged an additional $342 million, to a total of nearly $1.7 billion a year. While teachers are covered by CalSTRS, other school employees get their pensions from CalPERS.

It’s the latest in a series of rate hikes implemented by the California Public Employees’ Retirement System in recent years, primarily to cover longer retiree lifespans, salary increases and the growing pool of state and school district employees. CalPERS is also dealing with lingering financial fallout from the 2008 financial crash, which cost the pension fund tens of billions of dollars.

The rate increase is smaller than initial projections, according to CalPERS.