Although many states have banned smoking in the workplace and/or have authorized state treasurers to sue tobacco companies, none has stopped state pension funds from investing in tobacco companies.
This year, 27 states passed some type of anti-tobacco legislation, according to the American Lung Association's Coalition on Smoking or Health, Washington. And while some state legislatures have tried to ban pension funds from investing in tobacco products, all efforts have failed.
In Washington, state Treasurer Dan Grimm promises to re-introduce a bill that would stop the $20 billion Washington State Retirement Board, Olympia, from making any future investments in tobacco products. A similar bill died in committee this year. The state banned smoking in all workplaces.
Currently, the board has a $462.3 million stake in RJR Nabisco Holdings, makers of Winston and Camel cigarettes, and possibly other tobacco holdings.
A spokesman for Mr. Grimm said it would be inconsistent with state policy to continue to allow the board to invest in tobacco when tobacco is responsible for 85% of the 2,600 state lung cancer deaths each year.
"You can draw the line,"said the Washington state treasury spokesman. "There are areas that merit examination."
In Maryland, state Attorney General J. Joseph Curran Jr. has asked the state's $16.6 billion pension fund to divest itself of its tobacco holdings. The pension board is conducting a study due in mid-November that will show the board's tobacco investments. It is estimated the board invests less than 1%, or $112.4 million, in tobacco products.
Peter Vaughn, executive director of the Maryland State Retirement System, Baltimore, is against a ban on tobacco investing.
"To put a political or social restraint would impede (trustees') ability to make a fiduciarily sound judgment."
Maryland's Assistant State Comptroller Marvin Bond said it's possible legislation to ban the pension fund from making future tobacco investments could be introduced when lawmakers return next session. Right now, though, the issue doesn't have much interest.
"The Legislature in Maryland is not interested in trying to manage the pension fund," Mr. Bond said.
Brad Krevor, executive director of the Tobacco Divestment Project, Boston, has been waging a tough campaign against institutional investment in tobacco companies.
"These companies are not only killing 435,000 people a year, they are under unparalleled legal assaults, and states are going after them," Mr. Krevor said.
According to the Tobacco Divestment Project, Mississippi, Minnesota and West Virginia all have filed suit against tobacco companies.
Luther Jones, manager of corporate affairs for the $38.5 billion Florida State Board of Administration, Tallahassee, said the board is suing Philip Morris Cos. Inc., New York, for allegedly causing the fund to lose shareholder value by withholding health information on nicotine. The lawsuit, he said, has no bearing on where the pension fund invests its money.
CDA Investment Technologies Inc., Rockville, Md., reports Florida holds 2.5 million shares in Philip Morris, 500,000 shares in RJR Nabisco, 60,000 shares in Loews Corp., 849,100 shares in American Brands Inc. and 416,000 shares in UST Inc.
"The funds currently being invested in tobacco is a market decision," Mr. Jones said.
The $5 billion Montana Board of Investments, Helena, decided to eliminate its 180,000 shares in Philip Morris last quarter. "It had nothing to do with tobacco divestment or a change in policy, it was just an investment decision," said James Penner, chief investment officer.
"We still retain under the prudent expert principle a prerogative to buy or not to buy tobacco stock," he said.
Mr. Penner added that Montana board was an investor in the Kohlberg Kravis Roberts & Co. fund that acquired RJR Nabisco in 1988.
Joseph P. Craven, deputy treasurer for the Massachusetts State Employees' & Teachers' Retirement System, Boston, said banning a pension fund from investing in "a section of the market limits the fund's ability to invest."
"Limits on tobacco investments may lead legislatures to restrict public pension funds from investing in other asset classes," Mr. Craven said.
The investment board "does not dictate social divestment policies, the Legislature does that," Mr. Craven said. "But it's one thing to tell someone you can't smoke in public places, it's another to tell a pension fund you can't invest in a company."
Mr. Krevor, the activist, said many pension board staff members are not receptive to restricting tobacco investments. They don't want to be bothered, he said. "When restrictions were placed on investing in South Africa, hundreds of companies were involved. With tobacco, we're looking at five to six."
Amy Vinroot, a social issues research analyst for the Investor Responsibility Research Center, Washington, said legislators are not ready to take on this issue. Tobacco is still a legal product, she said.
She noted banning pension funds from investing in South Africa was a more palatable social issue because legislators had a U.S. policy against the violence in South Africa to stand on to make a statewide decision to ban investment in South Africa.
"It may be - for legislators - a slipperier moral issue than what South Africa was," said Ms. Vinroot.
"South Africa was clearly a political issue.... I don't think legislators want to legislate the morality of this issue."