Treasurer Josh Mandel wants voters in Ohio and other states to back constitutional amendments to block tax money, pension investments and other public funds from going to companies that do business in Iran and other state sponsors of terrorism.
Mandel, a Republican, is the national co-chairman of Defund Iran, a new organization formed in response to President Obama’s nuclear deal with Iran. The group is working in Ohio, Missouri, Colorado, Florida and Arizona to amend those state constitutions.
“We believe very strongly in the safety and security of the American people and we also believe very strongly in states’ rights,” Mandel said in a national press call on Tuesday.
It is likely to trigger a political battle with Ohio’s powerful and fiercely independent public pension systems, which have resisted controls on investments.
Ohio Public Employees Retirement System responded to Defund Iran with a statement that said in part: “Periodically we have received calls for social investing, such as Iran, South Africa or Northern Ireland. No matter how worthwhile the purpose, such actions set a dangerous precedent of using the system’s money to achieve political or social agendas. The pension system’s fiduciary duty to protect retiree pensions is undermined when pension assets are restricted.”
Defund Iran supporters say the nuclear deal includes a provision that requires the federal government to work to get states to rescind divestiture policies and laws already on the books.
As a state representative in 2007, Mandel failed to get a bill passed that would have prohibited public money from being invested in countries on the U.S. Department of State’s list of states that sponsor terrorism.
Ohio’s public pension systems opposed the bill, saying mandated divestiture could cost them a bundle and conflict with their fiduciary responsibilities to manage the investments for the best returns. Instead, lawmakers and the systems struck a compromise that called for voluntary, gradual divestment, and annual reports to the legislature.
Ohio has more than $220 billion invested in the state treasury, the five pension systems, bureau of workers’ compensation, tuition trust authority and other pools. It is unclear how much of that is invested in companies doing business in the energy and military sectors in countries on the U.S. terrorism list.
OPERS said the voluntary divestment policy is working. From $393 million invested in 24 “scrutinized” companies, the system now has $18.6 million invested in two such companies. The School Employees Retirement System of Ohio said its investments in scrutinized companies dropped 95 percent; the divestment policy works so well, it said, a constitutional amendment is unnecessary.
Mandel said the exact wording of the constitutional amendments will vary by state. But Defund Iran wants sanctions targeted at pension, treasury and other public tax money from being invested in companies doing business in strategic industries: military, mining, oil, and energy. Mandel said he will work through state lawmakers to place it on the Ohio ballot in November 2016. The divestiture mandates would be in place by Dec. 31, 2018, he said.
About 30 states have policies or laws discouraging public investments in companies that do business in countries that are on the state sponsors of terrorism list.
Defund Iran is organized as a 501(c)4, which means it is a non-profit “social welfare” group that cannot spend more than half of its money on politics. It does not have to disclose its donors.