Keep ‘politics’ out of Kansas state retirements? That’s impossible — and lousy advice | Opinion

In a recent guest commentary for The Star, Derek Kreifels wrote that he and his fellow Kansas Public Employee Retirement System trustees should leave “politics” out of their investment decisions. That sounds reasonable, but it’s simply impossible.

Politics, rightly applied, involves using human values to allocate resources. Kriefel’s values are to set aside any concern, any value, any purpose of investment except profit alone. In doing so, oddly enough, what he proposes risks decreasing KPERS’ profits — and therefore his own retirement payout.

Kreifels tells us that the only responsibility of KPERS is to maximize returns — the most money, no matter how it is legally earned. He wants KPERS to have a “laser focus on fiduciary responsibility,” and that means if fossil fuels are profitable, it is KPERS’ duty to invest in them. If a corporation pollutes the water but offers a high return on investment, it is KPERS’ obligation to purchase their stock. If a corporation has a history of wage theft, or gender discrimination or sexual harassment, all that matters is the bottom line and anything else is “politics” that must be ignored.

Are these the values, the “politics,” of KPERS’ pensioners?

Even if one didn’t object on moral grounds, some investments involve hidden costs. Oil refineries release billions of pounds of heavy metals and nitrogen into waterways. Every year, furnaces and boilers release ozone, and diesel trucks emit fine particulates. These costs — called externalities — are imposed on other people and other corporations without compensation. The entities responsible for this real-world harm don’t assume these costs. Other companies, utilities and Kansas families do.

And so does KPERS, which invests $25 billion for its beneficiaries. When a fund is that large, it cannot specialize. Large pension funds invest in the entire market. They are “universal owners” that take on a piece of the entire economy, and they have all the benefits and all the risks of the economy in their portfolio. All those extra costs — pollution, rising insurance premiums, employee medical care, effects of climate change — don’t waft off into the sky or seep into the ground. They affect the bottom line of utilities and other corporations — which KPERS owns, too.

Universal owners might profit from the cost savings of an oil refinery cutting corners with pollution, but they end up paying for those costs elsewhere in their portfolios — in agriculture, insurance, real estate and other holdings — as these sectors attempt to cope with hotter temperatures.

Pension funds such as KPERS own about half of all the stocks in the United States. They assume an enormous risk from these externalized costs, which the United Nations estimates to be $2.15 trillion a year worldwide. They are a heavy burden that reduces shareholder value. Externalities make KPERS smaller.

The Kansas employees who rely on KPERS deserve leaders who look out for them. A good retirement for former state employees depends on income — the vast majority of which is generated from the returns of a healthy economy and society — but also breathable air, summer days that can be enjoyed outside, local rivers that don’t flood their homes and bright futures for their children and grandchildren.

Kreifels, a former secretary of the Kansas GOP, doesn’t really want to keep politics at bay. He wants KPERS to adhere to his values — values that former Kansas employees may not share, and that could harm his own retirement and the healthy economy on which it relies.