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Lawmakers should not politicize public pension investments

May 14, 2026

California taxpayers are on the hook for hundreds of billions of dollars of guaranteed pension benefits for the state’s public employees, which currently have $292 billion in unfunded liabilities.

And yet, in pursuit of their own political aims, labor unions and activists are seeking to influence how the state’s public pension systems invest the $1.2 trillion in funds they manage to pay for California’s pension obligations. Lawmakers and pension plan administrators must resist these attempts to hijack pension funds for political interests.

California is home to two of the nation’s largest public pensions, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). These systems depend on generating consistent returns over several decades from investing the contributions of employees and their government employers.

As of the latest reporting, CalPERS has only 75% of the funds needed to fulfill pension promises made to its members ($165 billion short), and CalSTRS is about 76% funded ($87 billion short). These shortfalls are driving up costs for state and local governments, and if investments fall short any more than they already have, taxpayers will be forced to cover the difference.

With assets exceeding a trillion dollars and investment decisions left to the discretion of politically appointed pension boards responsible for maximizing investment returns, progressive activists see these public funds as a potential lever of influence.

In the lead-up to the 2024 election, for example, an interest group urged the CalPERS board to divest from Tesla, citing a moral misalignment between founder Elon Musk and the plan’s members, as well as potential “brand issues” that could tank the investment. The board assessed the risks but ultimately declined to divest.

A 2023 legislative effort to force California’s pension systems to divest from the fossil fuel industry for environmental reasons, a bill that CalPERS opposed, was a bigger example of an attempt to use these funds to push a political agenda unrelated to providing retirement benefits to public workers and retirees. The bill ultimately fell short.

This year, a new bill backed by trade unions would require CalPERS and CalSTRS to examine the labor standards of construction companies in which they invest, an obvious attempt to leverage the funds’ financial influence to impose the union’s interests on the private sector.

The problem with these pressure campaigns is that they inappropriately assume a consensus or shared interest among plan members. Pension participants (both public employees and their government employers, via taxpayers) contribute these funds for the exclusive purpose of saving and growing their money for retirement, not for activism. As fiduciaries, pension system administrators make an ironclad commitment to employees to act with only this goal in mind. While other interests may at times overlap with the primary aim of these plans, to make any consideration based on political grounds is inappropriate.

Public pension plans must maintain this standard. In California, members are required to contribute to these funds, and there is naturally a great deal of diversity of opinion among the 2.4 million CalPERS and 1.1 million CalSTRS members. It would be impossible to shape a plan’s investment portfolio to match every member’s political and social preferences, so the objective from the start is to direct these funds in a way that maximizes investment returns and manages potential risks so that promised benefits are fully funded.

The funds belong to millions of California’s government employees and are backed by taxpayers under a strict agreement on how they will be used.

State policymakers need to see these influence campaigns for what they are: blatant attempts to hijack public retirement funds for political interests. With $292 billion in unfunded pension liabilities, California’s retirement funds must be managed to fund the pension and health care benefits promised to workers while minimizing risks and costs to taxpayers, not to push the political priorities of politicians, unions, or special interest groups.

Zachary Christensen is a managing director of Reason Foundation’s Pension Integrity Project.

Orange County Register

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Lawmakers should not politicize public pension investments

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