FLASHREPORT

Brown Calls on CalPERS and CalSTRS to Divest from Iran

Sacramento-Attorney General Edmund G. Brown Jr. today called on the nation's two largest public pension funds-the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS)-to "honor the state law" that requires them to divest from companies doing business in Iran.

"CalPERS and CalSTRS need to honor the state law requiring them to divest from companies doing business in Iran," Brown said. "It's time for our public pension funds to show some leadership and stop supporting companies that do business with a tyrannical regime."

The California Public Divest from Iran Act was signed into law in October 2007 after the state Senate and Assembly passed the bill by unanimous vote. The law requires CalPERS and CalSTRS to annually report holdings in companies doing business in the defense, nuclear, petroleum, and natural gas industries in Iran and to divest from any company that fails to take substantial action to cease or limit operations in Iran.

Although CalPERS and CalSTRS both filed annual reports at the end of 2009, these reports fail to:

- Explain whether investments in companies with ties to Iran have been reduced;
- Describe when the funds anticipate fully divesting from these companies;
- Summarize investments transferred to funds that exclude these companies; and
- Calculate divestment costs or losses.

The full text of the California Public Divest from Iran Act can be read at: http://leginfo.ca.gov/pub/07-08/bill/asm/ab_0201-0250/ab_221_bill_20071014_chaptered.pdf

According to the U.S. Department of State's "Country Reports on Terrorism 2008," Iran remains "the most significant state sponsor of terrorism."

CalPERS is the largest public pension fund in the nation with more than 1.6 million members and more than $200 billion in assets. CalSTRS is the largest teachers' retirement fund in the country with 833,000 members and more than $130 billion in assets.

Brown's letters, sent today to CalPERS and CalSTRS, are copied below:

Anne Stausboll
Chief Executive Officer
California Public Employees' Retirement System
Lincoln Plaza East
400 Q Street, Suite E4800
Sacramento, CA 95811

Re: Violations of Iran Act

Dear Ms. Stausboll:

We have reviewed the December 31, 2009 Iran Related Investments - Second Legislative Report issued by the California Public Employees' Retirement System (CalPERS). Unfortunately, in violation of state law, the report fails to explain why CalPERS continues to invest in companies that do business in Iran.

In 2007, the Legislature enacted the California Public Divest from Iran Act, declaring it "unconscionable for this state to invest in foreign companies with business activities benefiting foreign states such as Iran that commit egregious violations of human rights and sponsor terrorism." This law, commonly called the Iran Act, requires CalPERS to report annually on its holdings in companies that are doing business in the defense, nuclear, petroleum, and natural gas industries in Iran, and to divest from any company that fails to take substantial action to cease or limit its Iranian operations.

Although CalPERS has filed annual reports, these reports lack enough detail to enable the public and CalPERS members to know whether CalPERS is complying with the Iran Act. On page 3 of its most recent report, CalPERS declares that it decided "to not divest shares . . . as specified in the Iran Act." Apparently, this decision was based on a conclusion made by the Board almost a year ago that divestment would violate CalPERS' fiduciary duty to its members. But the report utterly fails to explain how and why this is the case.

In addition, the report fails to include many of the Iran Act's specific reporting requirements. The report merely lists 24 CalPERS holdings that do business in Iran (up four from the last report) and states-without analysis or elaboration-that "substantial progress has been made through the engagement process, in the curtailment and cessation of business operations in Iran." Nothing in these general comments complies with the Iran Act's requirements for CalPERS to explain whether it has reduced its investments in these companies, to describe when it anticipates fully divesting in these companies (or to explain the reasons for not divesting), to summarize investments transferred to funds that exclude these companies, or to calculate divestment costs or losses.

Please let us know as soon as possible what specific actions you plan to take to comply with the provisions of the Iran Act.

Sincerely,

EDMUND G. BROWN JR.

--------

Jack Ehnes
Chief Executive Officer
California State Teachers' Retirement System
100 Waterfront Place
Post Office Box 15275
Sacramento, CA 95851-0275

RE: Violation of Iran Act

Dear Mr. Ehnes:

We have reviewed the December 31, 2009 Response to Iran Risk Report issued by the California State Teachers Retirement System (CalSTRS). Unfortunately, in violation of state law, the report fails to explain why CalSTRS continues to invest in companies that do business in Iran.

In 2007, the Legislature enacted the California Public Divest from Iran Act, declaring it "unconscionable for this state to invest in foreign companies with business activities benefiting foreign states such as Iran that commit egregious violations of human rights and sponsor terrorism." This law, commonly called the Iran Act, requires CalSTRS to report annually on its holdings in companies that are doing business in the defense, nuclear, petroleum, and natural gas industries in Iran, and to divest from any company that fails to take substantial action to cease or limit its Iranian operations.

Although CalSTRS has filed annual reports, these reports lack enough detail to enable the public and CalSTRS members to know whether CalSTRS is complying with the Iran Act. The most recent report refers to several lists of companies with varying degrees of ties to Iran. The report neither identifies all of the companies nor states which ones are actually held by CalSTRS.

Nothing in the report complies with the Iran Act's requirements for CalSTRS to explain whether it has reduced its investments in companies with ties to Iran, to describe when it anticipates fully divesting in these companies (or to explain the reasons for not divesting), to summarize investments transferred to funds that exclude these companies, or to calculate divestment costs or losses.

Please let us know as soon as possible what specific actions you plan to take to comply with the provisions of the Iran Act.

Sincerely,

EDMUND G. BROWN JR.

In the face of the state's perpetual budget crisis, some Californians are beginning to regret their votes in favor of the $9.9 billion high-speed rail bond last year. Even though proponents of the train have now admitted the bond was only a down payment on the actual cost to build the system, the numbers that were projected are changing—and all in the wrong direction. 

The business plan released by the train's advocates last month show the dramatic differences in what the voters were told and what reality is. For example, the price of a ticket from San Francisco to Los Angeles is now projected at $105, up from the previous $55 estimate.  That new number changed the ridership predictions: now 41 million annual riders by 2035, down from last year's prediction of 55 million passengers by 2030. The cost for building the train system has also grown.  The proponents had been thinking $33.6 billion (2008 dollars) but have revised upward to $42.6 billion.  Recently, the Obama administration announced $2.25 billion in funding for the project. Proponents said federal money would be used to close the gap between the voter-approved bond and the ultimate cost, but this is a drop in the bucket and still will not work.

You can read the plan for yourself here:
http://www.cahighspeedrail.ca.gov/library.asp?p=8200

This is the train to nowhere and California could really use that $9.9 billion for more immediate, important and better projects.

    Drawing an iconic proposition number for sure, this Constitutional Amendment was put on the ballot by the Legislature and was sponsored by Republican State Senator Ray Ashburn.  It would ensure that new construction projects to comply with seismic safety requirements imposed by government will not result in an unwelcome higher property tax bill on the property, which is a pretty good idea.

Proposition 14

   Another Constitutional Amendment measure put on the ballot by the Legislature, this amendment, sponsored by Republican State Senator Abel Maldonado, would change the manner in which political parties choose their nominees in partisan races.  Instead of the current system, which is known as a "closed primary," Proposition 14 would establish a "top two primary" system, in which a voter could vote for any candidate without regard to political party registration.  The current law, which requires notice to voters on the ballot of the political party registration of nominees facing off in a general election, would also be changed to allow the candidate to "choose whether to have his or her political party preference indicated on the ballot..."  The two candidates receiving the highest votes in the primary election, regardless of party registration, would face off in the general election.  Nonpartisan races would not be changed under this amendment, and the Legislature would be directed to establish new rules for partisan elections for presidential candidates and central committees.  Under the new rules, it might be possible for the presidential elections to continue to be closed primary elections, which is favored by national party rules for those elections.

   There will plenty of time for comments pro-and-con on Proposition 14 and other measures on FlashReport as the election moves forward.  An observation I will make here is that under this measure, a Republican nominee for Congress running in San Francisco against Nancy Pelosi, where Republican registration is dismal, who was able to finish second in the primary, could chose to eliminate the word "Republican" from his/her ballot designation in the general election.  Likewise, a Democrat running for Congress against John Campbell in Orange County, in whose district Obama actually beat John McCain, but where Democrat registration is lower than Republican registration, could chose to eliminate the word "Democrat" underneath their name on the general election ballot.

Proposition 15

   Another measure put on the ballot by the Legislature, in this case a statute, sponsored by Democrat Assemblymember Loni Hancock of Berkeley, would address the inequities to "non-wealthy voters" of political campaign funds being spent on the election of California's Secretary of State.  (I am not kidding, the measure actually says this.)  It establishes a new tax on "lobbyists" with the money to be used, along with taxpayer "check-offs," to create a public campaign finance fund for all future elections for Secretary of State. 

   While my intention has been to be somewhat neutral in my presentation of the propositions herein, this measure is one of the biggest loads of manure I have ever seen out of Sacramento.  It is clearly an attempted first-step at public financing of campaigns, an old saw of liberal do-gooders, and it is completely out of step with U.S. Supreme Court decisions that stand for unrestrained free speech in elections, most notably, the recent Citizens United case.  This muddle-headed measure should be rejected out-of-hand.

Proposition 16

   Placed on the ballot with the support of Pacific Gas and Electric Company, this Initiative Constitutional Amendment requires local governments to obtain the approval of two-thirds of the voters before providing electricity to new customers or expanding such service to new territories if any public funds or bonds are involved.

Proposition 17

   This Initiative Statute, placed on the ballot with assistance of Mercury Insurance, allows auto insurance companies to base their prices in part on a driver's history of insurance coverage.  Changes current law to permit insurance companies to offer a discount to drivers who have continuously maintained their auto insurance coverage, even if they change their insurance company.

    This seems to me to be a good idea: it offers consumers more choices in the marketplace and FlashReport readers with good driving records, like Jon Fleischman and me, lower insurance rates.  I've done a small tad of legal work to help this initiative along.

------------

   The above is the lineup for the June 8, 2010 primary election, as January 28, 2010 was the last day the Secretary of State could certify a measure for the statewide ballot.

The Oceanside Analysis... Voters in the City of Oceanside recently turned back a labor-fed attempt to recall Councilmember Jerry Kern, who fueled the contempt of the unions for touting fiscal responsibility.  Now, the San Diego County Taxpayers Association has released an analysis of the fiscal problems in the city, concluding, "Generous increases in employee pension benefits coupled with lower than projected revenues are at the heart of the City of Oceanside's municipal budget quandary."  Read all the details and download the reports (link to the Oceanside item under News and Highlights)...

Taxpayers Association Analysis Pinpoints Cause of Oceanside Municipal Budget Deficit

Napping in the 77th Assembly District... A few readers didn't agree with my "ridicule" the other day of the lackluster fundraising by the field in Assemblyman Joel Anderson's seat (see prior post), responding to me that no one will be able to raise dollars until the incumbent officially says he'll be running for Senate.

The post was of course meant as "inspiration" to the candidates, not as a chastisement.  The three major contenders -- Brian Jones, Christine Rubin and Bill Wells -- each raised in the neighborhood of $25,000.  Each decided to announce and start campaigning prior to Anderson making his intentions formal, because none of them could afford to wait, needing to raise bucks in the interim. Anderson should have no problem with them fundraising, as they are all on record they won't be running if he were to seek re-election. So, that leaves the rightful assumption that no donor wants to appear to be contributing against a sitting incumbent. Thus, I understand some of the small bankroll, but not all of it. I would think that sitting officeholders would be doing better at this point....and, I am letting them know!

Yet, Does Money Matter so Much?... The blogs slay me, but there seems to be more of a contention in comments on various political blogs in recent months that money somehow isn't so important anymore, as the political climate has changed the landscape and candidates with little funding, but lots of concern for freedom-loving citizens will do well.  Puh-leaze.

The number of candidates over the years that told me that they weren't going to raise a lot of money because they didn't want to be beholden to anyone...I can place that number in the several dozen. The number of them that actually won...I can count on one hand. The political landscape is littered with the carcasses of those that "thought" they could win without having the resources to get a message to the voters. Yes, I know, the landscape has changed and candidates all over are going to win because of mass voter frustration and the tea party movement, right?  Those things are substantial, dependent on the race, but in most cases -- like always -- it will be those candidates helping themselves that will be further bolstered by sentiments and movements, not those doing little for themselves and expecting a movement to carry them to victory.

Waking Up in the 78th Assembly District... In Democratic Assemblyman Marty Block's district, previously held by Republican Shirley Horton, the incumbent may not be able to nap.  GOPers Rick Powell, a retired Army Colonel who served in Iraq, and La Mesa-Spring Valley School Board Member Emma Turner, have both taken out initial paperwork to vie for the seat.  Jim Sills has the news at San Diego Rostra...

No Free Ride for Martin Block

CalPERS Thumbing Its Nose at Legislature on Iran, Sudan Divestment... Many FlashReport readers will remember Assemblyman Anderson's AB 221 a couple of years ago that banned the State's two huge retirement systems, CalPERS and CalSTRS, from investments in Iran.  Now law, the legislation mirrored a previous Paul Koretz bill that similarly forced divestiture of the retirement systems in Sudan.  So, how is that all going, you may ask?

San Diego CityBeat says not so well.  CalPERS has said pound sand, even if not of the Iranian and Sudanese desert variety.  In a great piece, Dave Maass writes, "Now, California has more money tied to Sudan and Iran than it did before the legislation was enacted to curtail these investments."  This is really worth the read, especially as an example of how a large, virtually self-funded bureaucracy can defy the law and get away with it...

Trading the blame: CalPERS bucks the state Legislature by profiting off Iran and Sudan

Tweet of the Week... "Global warming rampage continues as Washington DC is buried in snow." -Ron Nehring

Have a super Sunday and a great week.  Go Saints!

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This just in from U.S. Senate candidate Carly Fiorina...

"Today we remember the birth of President Ronald Reagan, a leader whom I admire most because he was clear, because he was an optimist and because he knew that big government is the problem, not the solution.  He led our nation through stormy economic times with policies that encouraged the growth of small businesses and allowed entrepreneurs and innovators to do what they do best - create jobs. His leadership and vision also expanded the reach of democracy in the world and made Americans more secure. 

President Reagan was truly a pragmatic leader with a common-sense approach to politics who brought people together to carry the nation through difficult times. He held strongly to the values of limited government and individual responsibility. He was a great optimist who believed in the strength of the American people. He understood that the American Dream was something worth protecting. 

As conservative leaders we must look to the approach to leadership that President Reagan so strongly demonstrated as a guidepost for our own solutions to the challenges we face today. We can do this first by focusing on reducing the reach of government into our personal lives. We must also make the security of our nation our top priority. And our goal should be to make decisions based on the belief that when given the opportunity people will make better decisions for themselves and their families than the government will. In doing so, we can not only truly honor the memory of this great man, but also put our nation back on the right path."

Just received word that Ethie Radanovich, the wife of U.S. Representative George Radanovich, passed away last night. She had been fighting cancer for some time. Our prayers go out to the Congressman, his family and their close friends. Very sad news, indeed.