In early February, nearly 100 protesters who called for Pennsylvania to divest from Israel bonds were arrested at the state Capitol. “Israel is our greatest ally in the Middle East, and I will always stand with them,” Stacy Garrity, the state treasurer, said at the time. “Israel bonds are a smart, dependable investment with a proven track record, and it’s especially important to show our support at a time when the people of Israel are facing horrific terrorism.”
Pennsylvania invests some $56 million in Israel Bonds, including a $20 million investment since Oct. 7, according to an Oct. 12 press release from the state treasurer. That investment has been a frequent area in which Erin McClelland, Garrity’s Democratic challenger, has criticized the state treasurer.
McClelland, an Allegheny County Department of Human Services policy adviser, and a former substance abuse and mental-health counselor, has described Israel Bonds often as risky investments.
“Moody’s downgraded Israel’s credit rating citing concerns of foreign political instability, governance, debt/GDP ratio since March 2023,” she wrote in February. “The increasing risk in economic indicators is not a smart, stable investment for workers’ pensions or the Pennsylvania Treasury.”
“Hyper-polarization of economic data makes for bad policy. The downgrade of Israel’s credit rating is a setback,” she wrote in another February post, sharing a quote from Israeli finance minister Bezalel Smotrich, who said that Israel doesn’t judge its economic strength based on how the world evaluates it.
“This disproportionate and inflammatory response from their finance minister is very alarming,” she added. “This is not where we should invest workers’ pensions and Pennsylvania tax dollars.” (JNS sought comment from McClelland several times.)
McClelland has also said that investing in Israel Bonds could make Pennsylvania a potential terror target. “We’ve seen an increase in those attacks since October,” she told the Pittsburgh Jewish Chronicle. “We saw the Aliquippa Water Authority get hacked by Iran because they use an Israeli-made software system.”
Garrity, a 30-year Army Reserve veteran, told JNS the commonwealth’s longstanding holdings of Israel Bonds are evidence of its nonpartisan nature, and state treasurers must use the “prudent investor standard” in their decisions rather than playing partisan politics with taxpayer funds.
“On both sides of the aisle, regardless of your political party, Pennsylvania has been investing in these bonds,” she told JNS.
The Keystone State has held Israel Bonds since 1993, with a typical balance of $20 to $40 million, according to Garrity. The current balance represents about 2% of the state’s entire fixed-income allocation, and all purchases, including those after Oct. 7, fall within the state Treasury’s investment policy statement, she said.
“It’s one of the better-performing fixed-income investments that we have,” Garrity told JNS. “Israel Bonds have strong returns above market. They’re very reliable, and so they clearly meet the standard.”
Garrity added that her decision and that of her predecessors to invest in Israel Bonds goes beyond solid financial returns.
“With Israel being our greatest ally in the Middle East, I’m always going to stand with them, and that is why we invested the additional $20 million,” she told JNS. “It’s part of the reason state treasurers of both parties have invested in them for more than 30 years.”
“Investing in Israel Bonds is a great investment for the commonwealth, and it’s a great investment in democracy,” she added.
‘I don’t get so squishy’
Six months after Oct. 7, Israel Bonds said its global sales since the massacre had surpassed $3 billion, with more than 35 U.S. state and municipal bodies investing a total of $1.7 billion.
The total figure is nearly three times the company’s average annual sales volume in recent years.
McClelland has stated that Pennsylvania should focus on investing in American companies rather than foreign entities, insisting that her criticism of Garrity’s practices is not focused narrowly on Israel.
But Garrity told JNS that it is a best practice in investing to diversify internationally.
“Foreign markets and individual stocks are going to move in different circles in U.S. markets and reduce volatility in the portfolio,” she said.
“Some of the world’s best companies are domiciled outside of the United States,” she added, citing companies like Nestle, Samsung, Anheuser-Busch and Airbus.
In her visits to all 67 counties in Pennsylvania, Garrity has heard broad support for Israel Bonds, she told JNS.
“They applaud when I talk about investing in Israel Bonds,” she said.
She told JNS that she was protested twice—in February at the state Capitol and in March, when activists conducted a “die-in,” pretending to lie dead on the ground, in front of the state Treasury office building.
“The only die-in that happened was Oct. 7, so that really doesn’t bother me,” Garrity told JNS of the protest. “There’s just a lot of unfortunate death, but I’m former military, so I don’t get so squishy, and I think the thing to do is stand by our great ally.”
