State Law Would Urge Cities to Divest

The Massachusetts legislature this fall will almost certainly pass a novel measure designed to encourage municipalities to divest their pension funds from American companies that do business in South Africa, according to several representatives.

If the bill passes it would augment Massachusetts' already tough economic sanctions against South Africa, in force since 1983, which divested more than $1 billion in state pension funds, said State Rep. Kevin P. Blanchette (D-Lawrence), who sponsored the latest measure.

The proposed bill offers inducements to municipal governments, which control more than $5 billion in local pension funds, to divest those holdings in return for increased flexibility to make other types of investments.

The measure also bars Massachusetts' 106 city and town pension funds from further investment in South Africa-related corporations.

It received unanimous approval in both state legislative chambers. A joint committee is now reconciling House and Senate versions of the bill, which is expected to reach the floor again in the first week of September.

Town pension funds that limit their investments, past and present, to an established list of corporations without South African ties, would be permitted to make riskier but more lucrative investments than those currently allowed by state guidelines if the bill passes, Blanchette said.

Governor Michael S. Dukakis joined Blanchette in filing the bill.

Blanchette said the bill made full divestment optional in order to avoid confrontation with the cities over the costs of selling South Africa-related stock. Proposition 2-1/2, a law limiting property taxes that passed as a referendum in 1982, requires the state to pay any costs its legislation imposes on municipalities.

The 1982 divestment bill's sponsor, Melvin H. King, calls this new one less than ambitious. King, now a candidate for Congress, then served as the state representative for Boston's South End.