Public Pension Plans Are the Wrong Place for Public Policy Experiments

AP Photo/Steve Helber

(The opinions expressed in guest op-eds are those of the writer and do not necessarily represent the views of

Public pension plans across the country continue to face challenges, more and more promises are made to employees and retirees, but the burden to make good on those promises gets heavier and heavier. Yet, public pension plans continue to be the sandbox for ideological castles. While employees and retirees are right to be concerned about the future of their pension, it is the taxpayers who will foot the bill for poor public policy decisions.


The Virginia Legislature is considering two bills (SB 213 and HB 640) that would authorize state and local retirement boards to divest from “fossil fuel companies.” According to the bills, this would include companies involved in coal, oil, and natural gas exploration, production, and distribution. The bills seem to be a test run, as they exempt the largest public pension plans in the state, but it is clear where this legislation is headed.

Maine was the first state to adopt a fossil fuel divestment policy last June when Gov. Mills signed off on the law. Now, de-carbonization advocates in state legislatures throughout the country see this as a golden opportunity to push their agenda. But is the cost of these policies worth the perceived benefit?

Fossil fuel divestment initiatives are just one aspect of the ESG movement. Environmental, social, and governance investing is not really new; social engineering using other people’s money has been around for decades. Yet, nowadays, proponents feel the wind in their sails (sorry).

Forcing public pension plans to divest from fossil fuel companies carries significantly more risk to the long-term health of public pension plans than prior divesture efforts like tobacco, nuclear weapons, and firearms. Those industries are niche sectors of our economy. On the other hand, the fossil fuel industry is large, and despite the wishes of many, will continue to be an important part of our economy for generations. Often overlooked is the fact that any transition to renewable energy sources requires fossil fuels as a backup. That is a fact whether one chooses to believe it or not.


Removing such a significant segment of our economy from public pension plans would make it that much harder to generate the investment return benchmarks our public pensions need to remain somewhat sustainable. Make no mistake, the vast majority of public pension plans are already substantially underfunded.

It is important to understand how public pension plans work. Unlike a 401(k) that most of us are familiar with, a public pension plan is a promise to public employees that once they retire, they will receive a set monthly pension benefit for the rest of their lives. This promise must be met regardless of whether there are enough assets in the plan or not. If the assets in the pension plan are not enough to meet those future promises, taxpayers are obligated to pick up the difference. To be clear, fossil fuel divestment only increases this risk for taxpayers.

Anti-carbon initiatives in the Northeast have already led to soaring electricity prices and home heating costs. Consumers are already paying the price this winter and fossil fuel divestment will only result in higher taxes when the bill to make good on the pension promises is delivered. Once again, the cost of fossil fuel divestment is far greater than any promised benefits.

Fossil fuel divestment and other efforts to de-carbonize our economy may warm the cockles of your heart, but they will not warm your home, they will instead cost you dearly with higher utility bills now, and higher taxes in the future.


Bette Grande ([email protected]) is a state government relations manager at The Heartland Institute.


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