A Bad Rap
Ratliff's rider ticks off music industry, civil servants.
By Robert Bryce
MARCH 23, 1998: Aiming to eradicate the scourge of rap music from the state's investments, a conservative white state senator from East Texas teamed up with a conservative black, Washington D.C.-based activist to do a bit of monkey wrenching with the state's budget bill during the last legislative session. But the senator and his ally accomplished far more than they intended. They pushed a budget rider through the Texas Legislature that could force the state to sell nearly $800 million worth of stock in a half-dozen companies owning interests in record labels that publish rap music by artists like Snoop Doggy Dogg and Tupac Shakur. The sale of the stock would effectively drain the state's pension and investment funds, the same nest egg that state firefighters, teachers, police officers, and other civil servants rely on for their retirement income.
The legislation - the first of its kind ever passed in the U.S. - goes far beyond rap music. In fact, it is so broadly written that it could be applied to country, rock, gospel, blues, even opera. The rider, spearheaded by Senator Bill Ratliff (R-Flower Mound), says the state cannot invest in companies that publish musical work which "describes, glamorizes or advocates" (note the key word "describes") a laundry list of activities that includes criminal violence, murder, and drug use. By that standard, Mozart's opera, Don Giovanni, which begins with a rape and includes an onstage murder, would be a prohibited musical work. So would Bob Marley's "I Shot the Sheriff" and Ray Charles' "Let's Go Get Stoned."
Slated to take effect September 1, the rap rider could force the state to sell its nearly $800 million worth of stock in companies like Walt Disney, Seagram, Time Warner, EMI, Sony, and Philips. And while the transaction costs on that amount would be relatively small - perhaps as little as $1 million to sell the stocks and purchase new ones - the opportunity cost of selling hot media stocks like Time Warner and Disney may total hundreds of million of dollars.
But a lawsuit filed Jan. 23 in Travis County District Court could overturn the legislation. The suit was filed by a dozen plaintiffs, including Paul R. Brown, a firefighter from the small West Texas town of Big Spring, who is concerned that the rider will cost his pension fund thousands of dollars. Other plaintiffs include police officers, a deputy sheriff, a state employee, and retired school teachers. The suit - being bankrolled by another plaintiff, the Recording Industry Association of America, a trade group that represents a half-dozen of the country's biggest record labels - is almost certain to prevail because the rider is unconstitutional about a dozen different ways.
Attempts to require states to adhere to a method of social investing are not new. The movement for divestiture of companies that did business with South Africa during the apartheid era was a hotly contested issue during the 1980s. More recently, there has been pressure for states to divest their tobacco holdings; and last May, the state of Florida took action to sell some $825 million worth of tobacco stocks that it owned. But Ratliff's rap rider has a far different purpose than the other divestiture movements, and it is arguably more pernicious. Why? Because the bill is aimed at limiting the First Amendment rights of a certain class of people - in this case, musicians.
"To have our people listening to song lyrics for their investment strategy is not a good business practice." -- Paul Brown (above), Big Spring firefighter.
photograph by Linds Choate
Tucker's zeal to silence rappers has earned her a great deal of enmity. In Shakur's All Eyez On Me album, the song, "How Do You Want it?" boldy declares: "Dolores Tucker, you's a muthafucker. Instead of tryin' to help a nigga, you destroy a brother." Last year, Tucker claimed the song ruined her sex life with her husband, and she sued Shakur's estate and 16 other entities for $10 million, alleging slander and invasion of privacy. Tucker did not return repeated telephone calls from the Chronicle.
After the lawsuit was filed challenging his rap rider, Ratliff told the Austin American-Statesman that he wasn't surprised the record industry would challenge his rider. "But it makes me sick at my stomach to think that there are teachers in Texas and that there are law enforcement officers in Texas or firefighters in Texas that would defend these people's actions so far as distributing lyrics that advocate rape, that advocate assault on police officers, that advocate assault on women, that advocate illegal drugs." And then Ratliff, who last year was named one of the 10 best legislators in the state by Texas Monthly, added, "It's hard to believe that any teacher in Texas would join this lawsuit simply in the name of more earnings for his or her retirement plan."
For Paul Brown, the Big Spring firefighter, it's all about money. "We are not arguing the morality of the issue," said Brown, who is the chairman of the Big Spring Fireman's Relief and Retirement Fund, a pension fund with about $5 million in total assets. "We have an obligation to provide the best benefits to our retirees. We have the fiduciary responsibility to invest prudently. To have our people listening to song lyrics for their investment strategy is not a good business practice." Brown said if the Ratliff rider ties the hands of the people making investments, "then we wind up cheating our pensioners."
Brown, 43, has been a firefighter for 15 years. In addition to his duties for the Big Spring pension fund, he chairs the pension committee of the Texas Association of Firefighters. He says the key issue in the fight over the Ratliff budget rider is the constitutionality of Ratliff's method. "It's clear that what Senator Ratliff did was unconstitutional," says Brown. "And he is on record as saying that the rider method is unconstitutional." Indeed, during the last legislative session, Ratliff worked to ban the addition of riders to the budget bill. He failed to do so. Asked later by reporters about the apparent contradiction between his actions to add the rap rider and his stance against riders in general, he said, "I don't see any reason to apply a different standard to myself than to anyone else."
But adding riders to the budget is a bad way to make policy. And the lawsuit against this rider claims that Ratliff's move violates the Texas Constitution because it seeks to enact a general law as part of the appropriations bill. The Texas Constitution, in an effort to prevent the passage of catch-all legislation, mandates that "no bill shall contain more than one subject." The lawsuit argues that the measure should be overturned because it is "unconstitutionally broad and vague and because it places unconstitutional conditions" on members of the recording industry.
Taking Stock Legal issues aside, the cost to the state of the rap rider could be enormous. Selling nearly $800 million worth of stock and replacing those holdings with other equities could be done for as little as $1 million, according to investment advisers at Able-Noser, a New York-based brokerage house. But the opportunity costs are where the real costs lie.
For a small pension fund like the one owned by the Big Spring firefighters, Brown estimates that only about 1%, or $50,000 worth of stock, would be affected. But Brown points out that the stock in question is Time Warner, which has risen from $45 last July to nearly $70 today, and may well continue to go up. Other state entities that own music-related stocks also point to potential opportunity costs. Estimates by the Employee Retirement System of Texas, which has $16 billion worth of investments, indicate that since September of last year, their holdings in six stocks - Walt Disney, Seagram, Time Warner, EMI, Sony, and Philips - have appreciated by $28.6 million. Over the past 10 years, those stocks have appreciated by $68 million.
At the Teachers Retirement System - the seventh largest public pension fund in the U.S. with assets totaling $67 billion - the losses could be even greater. TRS executive director Charles Dunlap estimates the fund's music-related stocks have appreciated by $242 million over the past three years. If the rap rider becomes law, TRS will be forced to sell $600 million worth of stock. And at a Feb. 23 House subcommittee hearing, Dunlap told legislators, "We know of no way to measure and identify the companies affected."
In addition to the ERS and TRS, the state's Permanent University Fund and Permanent School Funds would be forced to sell assets under the rap rider. Officials from those entities told the House subcommittee that not only would they have to sell individual stocks like Disney, they would have to sell any ownership in index funds. Index funds, which are designed to mimic the growth of market benchmarks like the Standard & Poor's 500, have become increasingly popular in recent years due to their steady growth and low fees. Selling the index funds could cost the Permanent University Fund $1 million a year in additional transaction costs, according to officials from the University of Texas. Of all the state officials who testified before the subcommittee, Dunlap may have summed up their sentiment most succinctly when he said, "We need more opportunities to invest, not fewer."
Perhaps the most troubling aspect of the rap rider and the controversy that it has ignited, however, is that so few people are talking about the First Amendment issues involved. At a Feb. 23 hearing at the Capitol, a lawyer representing the American Civil Liberties Union said the rider could have a chilling effect on free speech. "This type of law sets a precedent and opens the door to let other groups restrict the types of investments the state can make," said the attorney.
That didn't hold much sway with Rep. Barry Telford (D-DeKalb), who chairs the House Committee on Pensions and Investments. Telford launched into a speech in which he called rap lyrics "trash." Then Telford began a series of political pirouettes that left many in the room wondering just whose side he was on. Skating around the First Amendment issue, Telford said he doesn't care if the rap rider chills the free speech rights of rap musicians. "I hope it does chill that kind of trash," said Telford, though he quickly added, "I wish this lawsuit well." So Telford made it clear, or at least he tried to make it clear, that he doesn't like obscene rap lyrics, but he doesn't want to hurt pensioners, either. "My zeal to make these companies behave themselves is only exceeded by my desire to protect the taxpayers," he concluded.
For people like Brown, a civil servant who will have to rely on his pension when he retires, the key issues when investing hard earned dollars have to be about potential return, not about rap lyrics, free speech, segregation in South Africa, or the morality of tobacco company executives. Instead, he says, this fight is about control, and who will be allowed to decide what he and his fellow civil servants can purchase. "Our pensions are the only thing we have to fall back on," says Brown. "I don't care what Ratliff's agenda is. If he wants to raise a moral issue, then do it. But don't limit us on our pensions."
Meanwhile, Ratliff refuses to discuss his rider. Yet, if it somehow survives Brown's court challenge, it could cost the state's civil servants hundreds of millions of dollars in lost pension income. And if the state loses - which seems more likely - it will have to pay tens of thousands of dollars worth of legal bills to the lawyers representing the record industry. And yet, Ratliff remains silent. But then, perhaps silence is the best defense for a man on a crusade.
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