April 1, 2008

Do Tennessee Tax Dollars Fund Terror?

Are Tennesseans' tax dollars helping fund terrorism? It's a question I first raised on this blog more than three and a half years ago, and one the legislature is now also asking. According to this report in yesterday's Tennessean, the legislature's Council on Pensions and Insurance wants to know if the state's pension funds are, in part, invested in countries that support terrorism - although the council isn't ready to recommend barring such investments.

A growing number of state legislatures have moved to divest their pension systems from companies doing business in places like the Sudan, where millions have fled the threat of genocide in Darfur province.

But the council on pensions has been reluctant to embrace specific divestment bills. Last week, the council rejected nine bills that would have blocked the pension fund from investing in the Sudan, Iran, Syria and several other countries suspected of sponsoring terrorism.

As a compromise, the council called on the state treasurer to report by Dec. 31 on holdings in companies that have operations in alleged terrorist-backing nations.

I first wrote about the issue of state pension funds being invested in terrorist-supporting countries more than three years ago in this post from August 14, 2004:

Does the state of Tennessee unwittingly help fund terrorist-supporting nations through the investments made by its public-employee retirement system's pension plan? The answer is, we don' t know - but it's a good bet the answer is yes.

We don't know for certain, however, because officials with the Tennessee Consolidated Retirement System refused to provide researchers with a Washington D.C. think tank, the Center for Security Policy, with any information about how it has invested Tennessee taxpayers' funds.

But in 2004 when the organization sought to collect data on investments of states' pension funds in terror-supporting countries, Tennessee officials refused to provide the information. Reports the CSP:

A representative of the Tennessee Consolidated Retirement System questioned why the portfolio holdings of public employees are relevant to the public and chose not to return subsequent phone calls.

"The Tennessee Consolidated Retirement System refused to provide records of the fund's investment portfolios, despite numerous phone calls and e-mails to several members of the fund's staff."

I continued to report on the issue in August 2004, with these posts:

Funding Terror - August 18, 2004
Funding Terror 2 - August 19, 2004.

In the August 19 post, I mentioned that state officials had promised to get me a list of the state's pension investments - information they had denied the Center for Security Policy. I reported in mid-September 2004 that the information was public record and state officials had used an incorrect justification for refusing the CSP's request. Essentially, the state refused to give the CSP the information because, A) the CSP aren't Tennesseans and, B) the state didn't know what the CSP was going to do with the information.

Neither justification is valid under state law.

I also promised to upload the document to this website. I've searched my site's archives and it appears that I never got around to doing that, for which I apologize. The good news is, the document that I got is a quarterly report, and it is available from the Tennessee Consolidated Retirement System. All you have to do is ask for it.

If I remember correctly, it was a list of companies in which the state holds stocks or bonds, and a listing of the number of shares and similar basic data. The document did not designate which companies on the list might do business in terror-supporting countries.

The more detailed report the legislature has just requested from the State Treasurer will be more useful.

Tennessee s current investment policy has the usual language about minimizing risk and maximizing ROI, and mandates that at least five percent and at most 25 percent of the state's stock holdings be in international companies, but the policy nothing about the issue of investment in companies that do business in terror-supporting countries.

Last October, California Gov. Arnold Schwarzenegger signed Assembly Bill 221 into law to divest California's public retirement funds from billions of dollars invested in key foreign companies that invest in Iran. California similarly divested from Sudan in 2006. I have a feeling Tennessee taxpayers would be happy if Tennessee did the same.