Tim Walz Celebrating Tesla’s Falling Stock Price Raises Deeper Questions About State Pensions

F ollowing President Trump’s “liberation day” tariffs, Tesla stock cratered to $210 early the following Monday, a decline of nearly 60 percent from its peak in December 2024. Though the stock has faced ups and downs in the days since, it remains below pre–liberation day values.

The decline must have been welcome news to Minnesota Governor Tim Walz (D.), who last month said he follows Tesla’s struggling stock on his iPhone to get a “little boost during the day.” Walz later claimed he was joking — but the joke, many noted, was on him.

Walz was cheering the collapse of Tesla even though Minnesota held, as of June, over 1.8 million shares of Tesla between its retirement fund and non-retirement fund, according to the Minnesota State Board of Investment (SBI) — of which Walz, as governor, is the chairman.

Using that number and some back-of-the-envelope math, the decline of Tesla’s share price cost Minnesota retirees (on paper at least) $462 million. While all of the state’s investments total $149.7 billion, seeing a steward of taxpayer money cheer a loss of hundreds of millions of dollars is cause for concern.

As in many states, investment funds in Minnesota are designed to help finance various state projects. The non-retirement accounts include funds for education, environmental protection, and health insurance for retired public employees. The retirement investment accounts fund pension benefits for public employees such as first responders and teachers.

If you think tanking state investments are a matter only for Minnesota’s current and future retirees, you’re mistaken. When investment returns come up short for long enough to hurt the state’s obligation to its pensioners, taxpayers must make up the difference.

Different states have different legal obligations with regard to their pensioners. State pensions in Minnesota are uniquely protected by promissory estoppel: the legal protection of a promise even in the absence of a formal contract. This precedent was set by the Minnesota Supreme Court case Christensen v. Minneapolis Municipal Employees’ Retirement Board in 1980. Since spending on public pension benefits takes priority over other budget areas, reduced returns mean taxpayers will see St. Paul take more of their money while the quantity and quality of public services decline. Everyone loses.

Transferring new hires from a traditional pension to a 401(k) plan, such as the defined-contribution plan of the state’s Public Employees Retirement Association (PERA), would be a good first step for Minnesota, since they could invest their retirement savings as they see fit.

Public employees currently enrolled in the traditional pension plan could also be offered a buyout to switch to the 401(k) plan, which would ensure the benefits they’ve already earned are protected in an individual retirement account. This option is currently offered in Indiana and has successfully given thousands of public employees control over their retirement savings.

Should some public employees opt to stay in the traditional pension plan, enrolling all new hires into a 401(k) would not threaten the plan’s solvency. Unlike Social Security, public pensions are designed to be pre-funded. They rely on current employees’ contributions, taxpayer contributions, and investment returns, not on new employees entering the system.

A greater threat to these pension funds is when politicians use them to push a political agenda. Whether it’s Walz making comments about Tesla stock values, or SBI using taxpayer dollars to push ESG, pushing political causes results in worse investment performance.

The SBI is legally bound by the prudent person rule, which mandates that all SBI members and advisers make investment decisions with the same prudence, discretion, and intelligence they would apply in managing their own investments. In other words, they cannot divest from a company simply because they do not like the company’s political affiliations.

By putting retirement savings in individual retirement accounts, the public employee saves and invests based on his or her investment goals. If Walz wants to align his retirement savings with his political preferences, he is free to do so. Others can invest to maximize investment returns without political constraints.

Research shows that pension reform would also save taxpayers money in every state, not just Minnesota. Managing individual retirement accounts, as well as matching a set percentage of employee contributions, still costs taxpayers less than managing a traditional pension.

It would also help prevent embarrassing gaffes by government officials who, despite chairing the investment fund, remain worryingly clueless about how funds are invested.

Thomas Savidge is a research fellow at the American Institute for Economic Research. Follow him on X: @thomas_savidge. Jonathan Miltimore is a senior editor at the American Institute for Economic Research. Follow him on Substack.