Tobacco stocks again tempt Florida
TALLAHASSEE -- Florida officials were poised Wednesday to begin buying lucrative tobacco stocks again, eyeing profits over the moral objections of anti-smoking and health groups.
The three elected Republicans who control Florida's $100 billion state pension fund said they are ready to begin pouring money into tobacco stocks, which have been dramatically outperforming other investments over the past year.
They said the state could be losing millions of dollars in investment returns over the ban, passed when the late Gov. Lawton Chiles was suing tobacco companies and rallying the state against their product, which kills an estimated 29,000 Floridians each year.
"In general, I don't think we should be using the state pension fund for political policy or social policy," said Gov. Jeb Bush, backed by Treasurer Tom Gallagher and Comptroller Bob Milligan.
Still, the three officials, sitting as the State Board of Administration, stopped short of dropping the tobacco ban. They said they want to see what impact the move could have on investments earned by the $1.3 billion Lawton Chiles Endowment Fund, named for the late Democrat who ultimately forced the tobacco companies into a $13 billion settlement.
The Chiles endowment is currently invested in the same stock index funds that money managers use to invest the much larger pension portfolio. If the pension money is moved out of these tobacco-free funds, those Chiles endowment investments could decline.
That's because investment companies have created special market funds for Florida to invest in that don't include tobacco. The cost of those investments is high because the funds are created just for Florida's no-tobacco requirement.
If the state were to take the pension money out of those funds and just leave the much smaller endowment money, the cost would go up even more.
Bush, Gallagher and Milligan agreed to postpone the move back into tobacco stocks, at least until after further reviewing its impact on the endowment, which helps fund medical research into tobacco-related diseases. That delay, however, did little to blunt criticism from the American Cancer Society, American Heart Association and American Lung Association, which say such investments send the "wrong message."
"Although the State Board of Administration has a fiduciary responsibility to maximize returns for the state pension fund, there are also moral and ethical responsibilities that rise above fiduciary responsibilities," said Brenda Olsen, spokesperson for the Florida Tri-Agency Coalition. "This is one of those times.
She told Bush and the board that at least 29,000 Floridians died last year from smoking-related illnesses.
"The state should not share in that responsibility by profiting from the destruction of those lives," Olsen added.
But it's hard for state officials to ignore the skyrocketing returns now yielded by tobacco stocks. Share prices for industry leader Philip Morris have nearly doubled in the past year -- in part because the companies have diversified their product lines.
And the ban prevents Florida from sharing in the profits of the myriad companies owned by these cigarette giants. Florida, for example, formerly held 14.2 million shares of Philip Morris, which not only produces cigarettes, but also owns Kraft Food, Inc. and Miller Brewing Co.