Pension planners attack Texas music investment legislation

Friday, February 27, 1998

Pension fund managers say a Texas state law barring state agencies from investing in companies that produce “offensive” music would force financial planners to become lyric censors.
“Rather than analyzing rates of return, pension investors will be sitting alongside a record player listening to song lyrics in an attempt to determine which songs are subject to the law,” said Paul Brown, a 15-year veteran firefighter and chairman of his department's pension fund. “Pensions should not be forced to create a committee of music monitors.”

Brown was among a handful of pension managers and lawyers testifying before a
the state House Subcommittee on Social Investing against the year-old law.

The law, slipped into the state's general budget bill last spring on a rider, prohibits state agencies, including state-run retirement programs, from investing in companies that produce or distribute “objectionable” music. It targets work that “explicitly describes, glamorizes or advocates” criminal gang activity; illegal drugs; violence; sex with the dead, animals or children; degrading women; and murder or assault of a police officer.

The law requires complete divestment by Sept. 1.

Last month, 11 public employees, representing Texas firefighters, teachers, law enforcement officers and other state workers, filed a lawsuit in state court. The suit contends that the law not only infringes on First Amendment rights, but prevents fund managers from maximizing investment returns.

“Objectionable lyrics may be a hot topic today, but what will the issue be tomorrow?” Brown asked the legislators. “If every legislator is successful in enacting a law based on his or her own political views, then the investment opportunities for Texas' public employee pensions will be severely limited.

“There is no room for politics when it comes to investing,” Brown said. “The experts should make those decisions.”

Ken Whalen, spokesman for committee chair Barry Telford, R-DeKalb, said the lawmakers held the hearing for information purposes only.

“We don't have the authority to strike down something that has already been passed in an appropriations bill,” Whalen said. “The only way to really negate it is a court ruling…. Either that or an attorney general's opinion.”

But Whalen said the legislators agreed the law might pose some First Amendment problems. He also said if someone disagrees with the lyrics, “then not being a stockholder in that company would not give them any say.”

“A better option would be to keep your option and go to stockholder meetings and complain,” said Whalen, who also noted that large companies won't notice the divestment as other investors buy the suddenly available shares.

He said the law might be “making a point but this it about all it's doing.”