AZ Republicans go after so-called conservative discrimination, diversity goals

Republican lawmakers seek to ban the adoption of so-called leftist ideologies in business and banking, despite warnings from industry representatives that doing so will result in unwarranted challenges and stunted success. 

Dianne McCallister, a lobbyist for the Public Safety Personnel Retirement System, which oversees the pension funds of elected officials and correctional officers, among others, told lawmakers on Wednesday that Senate Bill 1013 would be detrimental to its goal of maximizing returns for its members. The bill would prohibit fiduciary organizations, which manage assets such as a pension plan, from considering non-financial factors when making investments. Those non-financial factors are defined as any goal intended to advance a social or environmental agenda. 

“While we appreciate the intent of the legislation, of getting politics outside of the pension systems – we completely agree with that — we actually think that the language of the bill could result in the opposite,” McCallister said, during a Senate Government Committee meeting. 

And, she added, the system is already sufficiently regulated by other state laws and its own company policies. The Arizona Constitution directs public retirement systems to invest assets solely in the interests of their beneficiaries. In the end, codifying a specific prohibition on non-financial factors into law just opens up organizations to baseless challenges on their motives, McCallister said. 

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“For instance, if we invest in a company solely for a pecuniary purpose but they also have a desire to add more women to their board, it could be seen as a social purpose,” she said. “Somebody who doesn’t like the company we invested in can say that we invested for non-pecuniary purposes.” 

Committee Chair Jake Hoffman, a Queen Creek Republican and the bill’s author, dismissed McCallister’s concerns, saying the issue could be easily resolved by carefully documenting the reasoning behind each investment choice. 

“Which also then results in additional funds to then support all of those (decisions), which adds costs,” McCallister rebutted. “Which means that we’re not actually using those funds for the purposes of the pension system, which is for the beneficiaries.”

Hoffman responded by cutting McCallister off from further testimony, and criticizing the pension system for not voicing its concerns earlier, instead of her “coming in and grandstanding” on its behalf. The system, which is neutral on the bill, reached out with similar objections to the language in a near-identical version of the proposal run by Hoffman last year that died in the House. 

Sen. Priya Sundareshan, D-Tucson, warned that the bill, which also includes regulations on investments made by the state treasurer, is “unworkable” and would only serve to make business decisions unnecessarily fraught. 

“I think imposing additional hurdles and prohibitions that make investment strategies difficult and, in particular, targeting the important environmental and social goals that are important to consider in a modern society is backwards,” she said. “It ties the hands of these investments and perhaps forces bad decision making. And our state treasurer would have a problem trying to actually invest in anything, given that so many companies have adopted a lot of these modern goals.”

But Hoffman, who also heads the legislature’s far right Arizona Freedom Caucus and is a frequent critic of what he says is the infiltration of liberal ideologies in society, defended the bill as imperative to protect sound investment strategies. 

“This bill protects the pension holders. This bill protects the state investors. It ensures that we are maximizing the return on investment,” he said. “Right now, there is indeed a trend to invest in things that have lower returns for non-financial reasons. That is not in the best interests of anyone.”  

The bill was approved 5-3 by committee members, with only Democrats voting against. It will next go before the entire state Senate for consideration.

Also approved on Wednesday was Senate Bill 1014, which would forbid banks, insurance companies or credit reporting agencies from discriminating against someone for their political affiliation or social stances. The measure was also proposed last year but failed to pass out of the House.

“This is an anti-discrimination bill, that’s really as simple as it is,” Hoffman, the measure’s sponsor, said. 

Jay Kaprosy, speaking on behalf of the Arizona Bankers Association, disputed that claim, calling the bill’s basis a “significantly flawed assumption” that discrimination in the banking industry exists. 

“Banks are very well regulated and have many, many laws against actual discrimination,” he said. “What this bill seeks to do is not to end discrimination but to eliminate some of the legitimate tools used by banks and financial institutions to evaluate the investments, to evaluate the free market that they operate in as they do their job —  which is to yield the highest return for their clients and to meet the individual needs of their clients.”

Kaprosy added that restricting the business decisions of banks would ultimately affect their bottom line, since limiting their ability to invest could affect profits and banks would be forced to spend time and money fending off groundless allegations. 

“And when we increase costs and risks to the banks that both public institutions and individuals in the state rely on, that introduces new costs to the consumers as we price that risk,” he warned. 

Sundareshan lambasted the bill for advancing false claims of “woke” business practices, saying that banks and other companies are held in check via their corporate structures. 

“Again this is all supporting the made up concerns of ‘woke companies going wild in their decision making’ that are totally not based on the hard financials that we know, as regulated entities beholden to stakeholders, they are making,” she said. 

But Hoffman was unconvinced, reiterating his belief that discrimination against people because of their political beliefs does occur, citing the November 2021 news of JPMorgan Chase canceling a contract with a Missouri conservative group hosting Donald Trump Jr. at an event. The bank’s payment processor, WePay, rescinded its contract with The Defense of Liberty PAC for allegedly breaching its terms of service, which include an inability to process items or activities that encourage or promote “hate, violence, racial intolerance, terrorism, (or) the financial exploitation of crime”. JPMorgan Chase soon afterward reversed that decision and clarified that political affiliation plays no role in their decisions to close an account.

“To say that it doesn’t happen is to live in a mythical universe where you don’t pay attention to reality. This has happened,” Hoffman said heatedly. “You cannot de-bank people because you disagree with their political affiliation. That is wrong and it creates financial ghettos just like we saw in East Berlin and in Germany during World War II.”

The proposal passed with a 5-3 vote, once more with only Republican lawmakers in support. It’s unlikely that either bill will gain the signature of Gov. Katie Hobbs unless Democrats add their support. Hobbs has stated that bipartisanship is a key factor for her approval. And the bank discrimination prohibition is highly likely to meet with her veto stamp, as a bill sent to her last year that sought to forbid the state from working with companies and banks that “discriminate” against gun manufacturers was rejected, with the Democrat warning that it would have resulted in banks fleeing the state.

Another Hoffman bill greenlit by the Senate Government Committee on Wednesday would outlaw diversity training programs across the state. Senate Bill 1005 would prohibit public entities, like the state, its three public universities and community colleges and all of its agencies and boards, from requiring employees to take part in a diversity, equity and inclusion program. Employees who are forced to do so would be empowered to sue their company. Organizations would also be barred from enacting any policy that advances efforts to diversify their staff or adopting any social agenda theory, including of allyship, inclusive language, social justice or anti-racism. 

“DEI divides communities and dehumanizes human beings,” Hoffman said. “It is a bad practice and, especially with public monies, this is something that we should not be doing.”

Diversity, equity and inclusion training was developed to help employees feel respected and valued, and highlight issues related to discrimination and underrepresentation in the workplace. And studies show that a majority of U.S. workers are in favor of it: 56% of workers believe a focus on DEI is a good thing, and only about 16% of them are strongly opposed to it, according to a survey from the Pew Research Center.

“It’s misguided to go after these kind of very inclusive concepts that lead to business success and it ties the hands of government in a way that is unnecessary and counterproductive,” said Sundareshan, in explaining her vote against the measure. 

The bill was ultimately approved 5-3, with only Republicans in support. 

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