State Teachers’ Pension Fund Urged to Sell Tobacco Stocks

SACRAMENTO — Treasurer Phil Angelides announced Thursday that he is urging that the huge state teachers’ pension fund consider divesting itself of all tobacco stocks, joining the Los Angeles teachers union, which issued a similar call last month.

Angelides also said Thursday that he will not invest any of the $33 billion in state money he manages in tobacco stocks, continuing a trend. Since 1995, the treasurer’s office has not invested in tobacco stocks.

Angelides, one of 12 trustees of the $110-billion California State Teacher Retirement System pension fund, will probably face opposition from Controller Kathleen Connell, another trustee and, like Angelides, a Democrat.

In an interview Thursday, Connell pointed out that the teachers’ pension fund board considered the issue in 1998, and decided against selling tobacco holdings, currently valued at $323 million.

“I don’t think you sell off your holdings for political purposes, based on a political agenda,” Connell said. “. . . We have a fiduciary responsibility. This is a very slippery road when we make decisions on issues other than rate of return.”

However, in a letter to board Chairwoman Emma Zink, and in an interview, Angelides said the issue should be reconsidered given repeated lawsuits and regulatory pressure on the industry, as well as declines in tobacco stock prices.

“The nature of the product is now affecting its long-term prospects,” Angelides said. “. . . This is a financial discussion, but it is clearly being driven by the rejection of the product in American society.”

Angelides said he will urge that pension fund trustees agree to undertake a review at a Jan. 5 meeting. The earliest the board could vote on the issue is February.

Angelides said he is considering making the same request of the even larger California Public Employee Retirement System pension fund later next year. CalPERS, the nation’s largest pension fund at $170 billion, has $522 million in tobacco stocks.

In Angelides’ view, the public pension funds should “make solid investments and do it in a context of products that are good for society, that build society.”

With his action Thursday, Angelides becomes the highest-ranking state official to take such a stand.

Angelides’ announcement follows a decision by United Teachers-Los Angeles in November to urge that the teachers’ fund sell its tobacco holdings. UTLA represents the largest single group of teachers in the state.

State Schools Supt. Delaine Eastin said through a spokesman that she is “favorably inclined to divesting.”

In a statement Thursday, Philip Morris said it continues to “believe that our financial performance and commitment to improving shareholder value makes Philip Morris an attractive investment for the well-managed portfolio.”