Chicago Teachers to Divest Private Prisons, Immigration Detention Centers

The $10.8 billion Chicago Teachers’ Pension Fund Board of Trustees voted Friday to sell stocks in private prisons and immigrant detention centers worth more than $500,000.

The board also voted against any future investments in such businesses. The fund’s investment managers must unload these holdings as soon as “reasonably practical,” according to a statement.

Jay C. Rehak, the president of the CTPF Board of Trustees, said the prisons and detainment centers “deliberately outsource public services and foster unsafe working and living conditions.” The two companies targeted, CoreCivic (the teachers’ fund has 7,900 shares) and Geo Group (a heftier 13,825), house both domestic prisoners and immigrants.

The teachers’ pension plan has $548,000 invested in these companies, and indicated the money would be re-allocated to other stocks or bonds.

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“We know these institutions disproportionately incarcerate people of color and those who live below the poverty line, house immigrant children and perpetuate the separation of immigrant families,” Rehak said. Further, he added, they “put at risk unprotected, low-wage employees, while lacking fiscal and operational transparency.”

This comes at a time where public pension funds are beginning to remove themselves from correctional facilities. Last year, the $194 billion New York City Pension Funds became the first to divest completely from private prisons, with the rest of the state following the move last month. The $228 billion California State Teachers’ Retirement System (CalSTRS) is also currently evaluating its penitentiary holdings.

Public pensions funds “represent diverse memberships and the amount of assets can be used as leverage” against the likes of Core Civic and Geo, said Angela Miller May, Chicago Teachers’ chief investment officer.

Tags: Chicago Teachers’ Pension Fund, Detention Centers, Divestment, Pension, prisons

The recent federal tax cut has provided corporations with a windfall that many have used to bolster their defined benefit pension plans. But a new study warns them not to get too complacent because obligations are also set to mount.

The study by Cambridge Associates cautioned that “while the near-term result could be improved funded status for a given plan and company, it does not promise relaxed contribution obligations going forward.”

The tax law change, which sliced the corporate income levy to 21% from 35%, has allowed many companies to boost stock buybacks, increase capital spending, and beef up pension programs.

Compared to public pension plans, the defined benefit retirement programs for corporate America are well-funded. According to a study by consulting firm Mercer, the estimated aggregate funding level of pension plans sponsored by S&P 1500 companies reached 91% in July.

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So enter Cambridge with the bad news. Updated mortality tables from the Internal Revenue Service are expected soon, which could show retirees living even longer than before, thus raising pension liabilities, according to the consulting firm. And that, in turn, will put pressure on plans to contribute even more to their pension programs.

And that’s not all. The discount rates used to calculate future liabilities, long criticized as unrealistically high, are falling. In other words, expected investment returns are increasingly being reduced. So, Cambridge pointed out, higher corporate contributions will be called for to fill the gap.

Plus, the consultants added, there’s a looming end date for corporate plans that have been benefiting from “credit balances.” These credits stem from excess contributions made in previous years, and are used to offset the need for current contributions. But the credits are about used up.

At least, corporate plans can say they are far better funded than public ones, whose funding status is about half of the private sector’s.

Tags: corporate pension funds, discount rates, Pension Contributions