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A plan to sink millions of University of California investment funds into tobacco stocks stalled Wednesday as Lt. Gov. Cruz Bustamante vowed to push for a smoke-free portfolio. 

“These are the same companies that we just got through suing in order to recover health costs that the state has incurred over the last 10 years and then we turn around – the UC system, a state-funded system – and we put it into tobacco stock. I think it’s just outrageous,” he said. 

As of now, UC doesn’t own any tobacco stocks. But it soon could because of a decision to buy into an index fund of which tobacco stocks comprise about one-half of 1 percent. In UC’s case that would amount to a tobacco investment of $55 million. 

Regents could not vote on the issue Wednesday because no action had been scheduled. But they did discuss it for more than an hour in a closed-door session. 

There is currently a Dec. 31 deadline for deciding whether to instruct managers to stay away from tobacco stocks, and the regents don’t meet again until January. However, Bustamante said after the closed-door session that it was made clear to managers that they shouldn’t buy tobacco stock before January. 

Bustamante, an ex-officio member of the board, said he expects the board will vote on tobacco stocks in January – “I think we’re going to see a very spirited discussion take place.” 

Others on the board say shunning tobacco stocks could cost the university money and defeat the purpose of going into an index fund, a strategy of investing in a broad variety of stocks chosen by fund managers. 

“Personally, I think I would rather not be in tobacco stock. From the standpoint of the fund we made a decision to go to an index fund and it’s very difficult if you’ve made that decision to exclude stock,” Regent Judith Hopkinson said. “From that perspective, I think our responsibility is primarily financial. I think I tend to come down on the side that we should not exclude from the index fund.” 

The tobacco stock issue stems from UC’s recent decision to begin diversifying its $52.9 billion portfolio, investing $8.3 billion in the Russell 3000 and $3.3 billion in a Morgan Stanley index fund. 

A number of UC doctors, staff and medical students as well as other health organizations wrote to the regents asking them not to buy tobacco stocks. 

“It would be a major step backwards if the UC system would now start to invest in tobacco companies,” Dr. Frederick James, president of the American Heart Association, Western States Affiliate said in a statement to the board.