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Baltimore Business Journal: Franchot's proposed boycott of Alabama would impact $86M in Maryland

Franchot's proposed boycott of Alabama would impact $86M in Maryland's pension fund

June 25, 2019

By Holden Wilen – Reporter, Baltimore Business Journal

Maryland's pension fund would have to pull out of $86 million in investments in order to meet Comptroller Peter Franchot's call for the state to boycott Alabama over a controversial abortion law, according to a report obtained by the Business Journal.

The assets account for 1.5 percent of the total $52.7 billion fund. The Maryland State Retirement and Pension System produced the report at the request of its board of trustees after Franchot, who is vice chairman of the board, called on the pension fund to divest from Alabama because of the state's new law that punishes doctors who perform abortions with life in prison.

About $25 million is invested in public-traded stocks, including $17.5 million considered "active exposure." Active means a portfolio manager chose to invest in the company, rather than a passive investment that mirrors an index. The fund also has $26.3 million invested in private equity, $11 million in bonds and $25.6 million in real estate holdings.

Franchot could not be reached for comment. Maryland Treasurer Nancy Kopp, who chairs the board, and other board members could not be reached for comment.

The fund's largest holding is a $10 million stake in Birmingham, Alabama-based Regions Financial Corp. (NYSE: RF).

Birmingham-based Regions Financial is one of several Alabama-based public companies in which Maryland's pension fund is invested.

Other Alabama-based stocks include:

Encompass Health Corp. (NYSE: EHC), Birmingham — Maryland's pension fund has a $3.5 million holding.

Vulcan Materials Co. (NYSE: VMC), Birmingham — Maryland has a $3.1 million stake.

Hibbett Sports Inc. (NASDAQ: HIBB), Birmingham — The pension fund's holding is worth $420,308.

Computer Programs and Systems Inc. (NASDAQ: CPSI), Mobile — The fund has shares worth $299,757.

The retirement and pension system has contracts with one manager headquartered in Alabama and eight managers with offices in the state. Seven vendors have an office in Alabama.

Alabama's law is among the strictest in the U.S. The heavily Republican state's law also serves as a challenge to the long-standing Roe v. Wade decision in the Supreme Court that legalized abortion across the U.S.

In a strongly worded statement shortly after the bill was signed by Alabama Gov. Kay Ivey, Franchot, a Democrat, called the measure "radical" and said it represents a "malicious assault" on women's rights. He said it goes against Maryland values and he wanted to ensure the state's taxpayer dollars are not used "to subsidize extremism."

It remains to be seen if the system will end up divesting from Alabama. The state retirement and pension system board discussed the report in a closed session on June 18. Michael Golden, a spokesman for the system, said there was "little discussion" of the matter and no action was taken.

As one of three members of the Maryland Board of Public Works, Franchot voted to renew a $625,000 foster-care-placement contract with an Alabama-based company. He said he did not want to affect the services provided to the foster care children, the Washington Post reported.

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