2021 -- H 6026: RELATING TO PUBLIC FINANCE - DIVESTMENT OF STATE PENSION FUNDS FROM MILITARY CONTRACTORS

Introduced By: Representatives Morales, and Henries

2021 -- S 0578: DIVESTMENT OF STATE PENSION FUNDS FROM MILITARY CONTRACTORS

Introduced By: Senators Mack, Bell, Calkin, Anderson, Acosta, and Mendes

The major beneficiaries of military funding are weapons manufacturers 

In addition to the millions of weapons currently in America’s arsenal, including 5,800 nuclear warheads, the US spends approximately a third of its current $740 billion military budget on weapons systems.^[1] Additional spending primarily drives the global arms race, not improvements in security.  The major beneficiaries of these policies are the corporations that profit from weapons manufacture and development.

Weapons industry is a highly profitable business financed by our income tax dollars

The hundreds of billions of our tax dollars that are funneled to the primary 18  military corporations involved are then recycled to influence elected officials, academics, and the media (when the funds are not paying multi-million dollar CEO bonuses). Lobbying for more war and weapon sales re-enforces a continuing climate of insecurity, encourages overkill on military capacity, and warps the economy away from productive activity.

United States drives global growth in military spending^[2]

According to the State Department^[3], the sale of U.S. military weaponry around the world topped $175 billion during this current fiscal year.  The weapons sales most often have disastrous consequences, destabilizing entire regions, compromising human rights, and undermining human flourishing. For example, recent weapons sales to Saudia Arabia in support of their war on Yemen, resulted in the unconscionable and all too common targeting of civilians, including weddings, hospitals, and even a school bus full of children^[4][5][6][7].  Between 2015 and 2019, a total of 73 percent of Saudi Arabia’s arms imports came from America.^[8] In Mexico and numerous

countries in Central America, with high murder rates that exceed our own, the majority of these homicides are firearm-related, and 70 percent of guns seized from criminals in Mexico traced by the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) come from the US^[9]. Almost 41 percent of guns seized in the Northern Triangle originate in the US, including almost half the guns in El Salvador.^[10]

The value of this Act

By calling for divestment of pension funds from corporations manufacturing military weapons, this Act:

1. Allows us to redirect our investment dollars toward socially productive corporations addressing important social assets like climate resilience, health, and education, which aid economic growth;
2. Seeks to move money away from corporations whose output foments violence, death, destruction, and social chaos.
3. Educates the general public about the role of weapons manufacturers in the cycle of tax breaks, lobbying largesse, increasing military budgets and weapon sales.
4. Reduces the flow of scarce economic resources to military weapons manufacturers by reducing public investment;
5. Sends a message to the US Congress that we need to sharply reduce investment in military weapons where the costs are increasingly public (ever increasing health bills for traumatized and injured vets of the endless wars, reconstruction bills in foreign lands, ever increasing maintenance bills and graft on weapons systems) and the benefits are private (lobbying firm profits, huge weapons manufacturer bonuses and excessive CEO pay packages).

Q & A 

1. Q: Is there any precedent for the state divesting its pension investments from a class of investments?

A: Yes. Rhode Island has divested from civilian assault-style gun manufacturers and private for-profit prisons^[11] and from companies that do business with Iran.^[12]

2. Q: Isn’t divestment a form of unilateral disarmament?

A: No. This Act has no effect on the US arsenal of military weapons. It simply reduces the role and contribution of investment monies from RI public coffers to an industry that already consumes a disproportionate share of economic resources to often harmful and counterproductive ends.

3. Q: Will passage of this Act negatively affect Rhode Island’s investment returns?

A: No.  According to reports analyzing Morningstar data, notably by the Financial Times,^[13] “the long-term performance of a sample of 745 Europe-based sustainable funds shows that the majority of strategies have done better than non-ESG funds over one, three, five and 10 years” and “of the seven asset classes examined, US large-cap blend equity funds that invest sustainably were the best performers, with more than 80 per cent of funds in this category beating their traditional peers over 10 years.”

4. Q: Can divestment have positive societal impacts?

A: Yes. Diverting investment funds toward companies with positive environmental, social, and governance ratings can improve societal investment in sustainable energy, modernizing our crumbling infrastructure, and public transit. 

5. Q: Can the action of one State influence national policy?

A: Historically, the passage by one state legislature of groundbreaking legislation opened the way for other State Legislatures to act in a similar fashion, as was the case with tobacco divestment. These actions subsequently influenced the US Congress.