Pittsfield Democrat Senator Benjamin Downing has come up with a plan to send a message to fossil fuel companies who , in his judgment are destroying the earth and possibly killing babies too. Divestment of $1.3 billion dollars of the state’s $54 billion state pension fund which is by a large measure an unfunded liability for the taxpayers of Massachusetts. He along with activists ( mostly college students who many have their own unfunded liabilities) are prosecuting a public relations stunt by filing a bill to become the first state in the union to draw a black oil line in the sand. The rationale is to engineer social change by forcing local governments, universities and non-profit organizations to withdraw public funding through the form of stock ownership and thereby affect policy just as was attempted with re-directing attitudes towards tobacco and apartheid.
Of course, I am not quite connecting how such a divestment will foster a quantum leap into aligning substantial renewable energy resources to transform society. But perhaps that’s just me since neither wind, pedal power or solar energy will replace gasoline to aid my daily commute to work
What is astonishing is how respected Democratic leaders are paying lip service to this outrageous concept . Both Attorney General Martha Coakley and State Treasurer Steve Grossman have offered “qualified support” . Generally, their mantra is that they would support this if it didn’t affect state pensions and hurt taxpayers. But surely this is politicking of the highest order since both are candidates for governor this year.
Rather than pursuing a thesis here to rail against “Liberal Democrats” , let me instead not offend my friends in the Democratic party and subscribe to the theory that even in my party –of which I am a card -carrying-member of the Republican party- there is an extremist wing that doesn’t serve our society by any collective measure. Senator Downing’s idea is a disservice to the taxpayers of Massachusetts and in fairness to hard working public employees their pensions would be put at greater risk than already exists due to a looming unfunded level of obligations.
For argument’s sake I want to illustrate in simplistic terms how whole-sale divestment in dividend , growth stocks can affect a public pension fund. I’ll use 4 of the largest “fossil fuel” companies: BP , Conoco, Exxon-Mobil and Chevron as examples. These companies are leaders in efficient energy and each have substantial investments in renewable energies. But let’s not argue about that and instead focus on the fact they are all generous dividend producers. That is they pay cash dividends to holders of their stock. BP trades ( as of the time of this writing) at $48.10 per share and pays an estimated $2.28 per share annual dividend. Does anyone reading this have a bond or money market that pays 4.68%? Conoco pays $2.76 dividend, Exxon-Mobil $1.32 and Chevron $4.28. If I take the stock prices of all four companies and derive an average that comes out to $87.88. Now since $1.3 Billion dollars is invested in these “fossil fuel” companies , for this simplistic analysis, let’s assume that our state’s pension fund owns 14.7 million shares . If I take the average dividend from the same four companies at $2.66 annual dividend that’s $39.1 million dollars that will be “divested”. Bear in mind that all four companies have a consistent history, spanning decades, of dividend growth and stock price growth. So even if stock prices were to decline by this analysis there is some serious money to be added to help close the gap in the “unfunded” portion of the state pension fund
But to a liberal with a social engineering agenda, what difference does it make to make an unfunded taxpayer liability a little bit more unfunded? And to the individuals who present themselves as candidate’s for the highest office in the state, if they were more honest they would have made my choice more difficult.