Indiana considers putting public employee retirement at risk

Now it’s Indiana’s turn to consider whether the state is going to go in the same direction as other states, like Texas and Oklahoma, that have adopted policies that have cost pension plans and taxpayers or if the Hoosier state is going to stand up for fiduciary duty and hold the line against an overly aggressively application of the state’s investment blacklist law.

Last year, the Indiana legislature passed a controversial law (HB 1008) that prohibits the Indiana Public Retirement System (INPRS) from contracting with investment firms that have made so called “ESG commitments”.

The law requires the state treasurer to develop a list of offending investment managers to be submitted to the INPRS board – which Treasurer Daniel Elliott is a member of. The list must include company names and actions that back up the decision to block them from doing business with the board.

When the Indiana legislature first considered an earlier draft of this bill, it came with a hefty price tag. The Indiana Legislative Services agency estimated the initial proposal had a potential to cut a staggering $6.7 billion from public pension returns. While subsequent versions of the bill lowered that incredible cost, it didn’t stop many politicians from pushing this expensive bill forward.

Just as politics was the catalyst for this law, political agendas will also likely influence which groups or institutions are placed on the list.

What will blacklisting investment professionals from overseeing retirement funds mean for Indiana’s public employees? As noted last week, the estimated cost in Louisiana was $6.27 billion, while in Arkansas it was $37-$47 million each year. In Kansas, the loss of returns to their pension plan was estimated to be $3.6 billion over 10 years. Oklahoma and Texas have already experienced real costs associated with their misguided legislation.

Oklahoma’s effort at blacklisting investment professionals was temporarily blocked by a judge on the grounds that such action is likely unconstitutional and would result in irreparable financial harm to the state’s taxpayers and pensioners. Other states may face the same pushback.

Political aspirations, however, know no bounds. Their eagerness to fight an imagined culture war over securing the retirement fund dedicated to first responders, teachers, and other public employees is unacceptable.

With this agenda item noted to be raised during the June INPRS Board meeting, the INPRS board needs to review this expected list through the lens as their roles as fiduciaries who are charged with maximizing and ensuring the state’s funds can be utilized to ensure that their member retirees are “able to realize their retirement dreams.”

Indiana’s employees, retirees, taxpayers, and businesses will be watching what comes next. For the benefit of all Hoosiers, let’s hope reason and fiduciary duty wins the day, and the best interests of Indiana retirees prevails.