Some politicians in Colorado, New York and other states want public pension funds to sell off their investments in oil, natural gas, coal and utility stocks – but at what cost? A new study shows that “divestment” spells big trouble for taxpayers and the public employees who are counting on their pensions.
The politicians involved in “divestment” say they want to make an environmental “statement.”
But the statement they’re making to the public employees and taxpayers is a frightening one.
According to a new study by Professor Daniel Fischel of the University of Chicago Law School, together with co-authors from the respected economic consulting firm Compass Lexecon, the cost of the politicians’ divestment scheme could reach trillions of dollars over the next 50 years.
The University of Chicago Law School study looked at two forms of divestment: a “narrow” divestment scheme that would restrict investments in oil, natural gas and coal; and a “broad” divestment that would also include utility stocks.
How much will the politicians’ environmental “statement” cost pensioners?
Using all available data on current holdings to calculate returns over the next half-century, Professor Fischel and his team determined that:
Colorado’s annual cost of divestment could range from $36 million for narrow divestment to $50 million for broad divestment. Over a 50-year timeframe, thed cost skyrockets to between $470 billion under the narrow policy and $646 billion, or a 10.12 percent loss, under the broad policy.
New York’s $190 million pension fund would take a divestment hit of from $136 million for narrow divestment to $198 million under the broad scheme. To put these numbers into perspective, the average pension for retirees in New York’s Employee’s Retirement System (ERS) was $23,026 in FY 2017. A $198 million loss due to divestment equals the yearly pension payments for 8,598 ERS retirees. Over 50 years, the costs of divestment for New York State add up to $1.1 trillion under the narrow approach and $1.5 trillion under the broad approach.
How will Colorado and New York – and any other states that join them on the “divestment” bandwagon – make up the shortfall?
Professor Fischel predicts that the states involved will either have to reduce pension payouts to retired cops, firefighters, EMTs and other public employees – or they will have to ask taxpayers to make up the difference.
Read more at Divestment Facts.