Cambridge, Mass.
A CENTRAL principle of American political life is that everyone gets to
choose which candidates to support. The idea that the government could
force us to support those we oppose is anathema. But this unacceptable
state of affairs is one of the unintended consequences of the Supreme
Court’s decision in the 2010 Citizens United case.
That’s because the vast majority of people who work in the public sector
— state, local and federal employees — are required to make
contributions to a pension plan. Nearly all states make participation in
a pension plan mandatory and a “condition of employment” for public
employees. To get and keep your job with the government, you have to
give some of your paycheck to the pension plan.
Public pensions, moreover, are so-called defined benefit plans, which
means that employees don’t have a say in how their mandatory
contributions are invested. The employees cannot request, for example,
that their money be used only to buy government bonds or that it be
invested only in certain mutual funds or only in select corporations.
Instead, the employees’ money is invested according to whatever
decisions the pension plan’s trustee makes. And, not surprisingly,
pension plans invest heavily in corporate securities: in 2008, public
pensions held about $1.15 trillion in corporate stock.
Here’s the problem. In its Citizens United decision, the Supreme Court
held that companies have a First Amendment right to make electoral
expenditures with general corporate treasuries. And they’ve done so,
with relish, pouring millions into the political system.
What Citizens United failed to account for, however, is that a
significant portion of the money that corporations are spending on
politics is financed by equity capital provided by public pension funds —
capital contributions that the government requires public employees to
finance with their paychecks.
This consequence of Citizens United is perverse: requiring public
employees to finance corporate electoral spending amounts to compelled
political speech and association, something the First Amendment flatly
forbids.
Contrast this situation with how the court treats political spending by
unions. In many states, public employees are required to pay dues to a
labor union. If the public employees union were to spend any of the
money raised through dues on politics, the court has ruled, the dues
requirement would amount to forced political speech and association. To
prevent this First Amendment violation, the court has held that no union may use an employee’s dues for political purposes if the employee objects.
The same should be true for pension funds and corporate politics. In a
world where corporations can use their general treasuries for political
spending, no government should be allowed to require employees to
finance the purchase of corporate securities through a pension plan,
unless the government provides those employees with a meaningful way to
object to financing corporate politics.
The good news is that the rules governing union dues and political
spending provide a road map for restructuring public pensions in order
to bring them back into conformity with the First Amendment.
Here’s one way it could work: Pension plans would determine the number
of employees that object to financing corporate political spending. They
would then negotiate “opt out” rights with the corporations in which
they invest. These corporations would calculate the percentage of their
annual expenditures that go to politics and promise to return to the
pension plan an amount equal to the objecting employee’s pro rata share
of the corporation’s political budget.
Whatever the route to reform, however, public pension plans need to
ensure that employees are not compelled to finance corporate political
speech. Until they do, these pension funds will be vulnerable to the
challenge that they are violating the First Amendment.