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HARRISBURG — As protesters push Pennsylvania’s state treasurer to divest from Israel amid mounting Palestinian deaths, Stacy Garrity is defending her decision to send taxpayer money to the country and drawing flak from political opponents who question her motives.
Garrity announced a few days after the Oct. 7 attack by Hamas that she purchased an additional $20 million in Israel Bonds — an investment security that is backed by the country’s government and pitched as one of the “greatest opportunities to express support for the State of Israel.”
The Republican said it was “important to show our support at a time when the people of Israel are facing horrific terrorism” by increasing Pennsylvania’s existing investment.
Pro-Palestine activists protested the decision at the state Capitol in February, leading to dozens of people being detained and cited with trespassing. Protesters called for Garrity to divest from all Israeli investments due to the war’s rising death toll and invest in domestic priorities instead. They also demanded she consistently take into account environmental, social, and governance ethics when choosing investments.
“We're talking about a large percentage of money that we have invested in Israel Bonds that [isn’t] going towards our schools, [isn’t] going towards our roads,” said Omar Mussa, an organizer with the Pennsylvania Palestine Network.
As state treasurer, Garrity has the power to decide how the commonwealth should invest about $50 billion worth of its savings. Because the position is elected, Pennsylvania’s treasurer has considerable political independence when making those choices.
Garrity is running for reelection this year, and both of the Democratic candidates vying to run against her this fall questioned the political motivations behind her decision to make additional investments in Israel Bonds.
Erin McClelland, a former project manager for the Allegheny County Department of Human Services, said it’s important to take the reality of the war into account, citing Moody Investors Service’s decision to downgrade Israel’s credit rating — which measures investment risk.
“Fiscal policy, monetary policy, investment policy is incredibly complicated and dynamic, and we need thoughtful honest brokers doing this,” McClelland told Spotlight PA in an interview. “And if you're going to do it for a performance, because it's politically expedient and you need that to get reelected because it just so happens to be populist, I don’t buy into that.”
McClelland, who unsuccessfully ran for Congress, said if elected she would prioritize domestic investments. She said she would not make new investments in foreign holdings because the state lacks the “information for how they're financing this debt, how they're insuring it, [and] how they're securing it.”
“There's too many factors when you're dealing with a foreign country that you cannot control for,” McClelland said. “We have lots of secure investments that we can do here. I think it's a better bet.”
State Rep. Ryan Bizzarro (D., Erie), his party’s endorsed primary candidate, said in a statement he would support investing in Israel Bonds “because they contribute to the primary objective of advancing Pennsylvania’s financial objectives, while also having an added benefit of supporting a democracy.”
His campaign declined to say whether Bizzarro would support the investment at its current level or increase it. Instead, a spokesperson said Bizzarro would “first review and assess all investments” upon taking office.
In the statement, Bizzarro said Israel “absolutely had the right to protect and defend its people,” but added, “At this point, it is not possible to determine if Garrity’s new investments are sound, or if they are a knee-jerk reaction to score cheap political points.”
Pennsylvania’s investment in Israel goes back 30 years. The state Treasury also invests in other countries’ bonds, though only as part of index funds — portfolios of stocks and bonds. Israel Bonds are the only foreign-backed security the commonwealth has purchased independently.
The Treasury’s Israel Bond holding was its single largest foreign investment even before Garrity’s new $20 million. The investment now totals $56 million.
“[Pennsylvania treasurers] do have a set of political priorities that, in theory, [are] brought before the voters,” said Mike Connolly, who served as a spokesperson to former Treasurer Joe Torsella. “The treasurer, I believe, is in a unique position in that they have a lot more autonomy and power than treasurers normally do.”
However, Connolly said that the treasurer has generally stayed out of foreign policy. He said he hadn’t “heard of anything quite as striking” as Garrity’s decision to tie an investment to a political statement.
“[State treasurers] generally make … moves in terms of trying to get in the news for unclaimed property and things like that,” he said.
Garrity, who defeated Torsella in 2020, ran on a platform of returning unclaimed property to taxpayers and increasing transparency.
Since taking office, Garrity has not shied away from taking stands on flagship Republican policies, such as opposing the Regional Greenhouse Gas Initiative — an interstate program to reduce carbon emissions — and supporting Texas Gov. Greg Abbott’s standoff at the border.
She is a supporter of former President Donald Trump, recently endorsing him, and speaking at a January 2021 rally in Harrisburg organized to encourage state lawmakers to decertify the results of the 2020 election.
Garrity is also a member of the State Financial Officers Foundation, which has encouraged treasurers “to use their power to promote oil and gas interests and to stymie [President Joe] Biden’s climate agenda,” the New York Times reported.
In an interview, Garrity said investment decisions go through a “rigorous vetting process” and follow the prudent investor rule — “which requires the Treasurer to exercise a degree of judgment and care that experienced investors would employ,” according to her office.
“Geopolitical concerns are one of the factors that we look at when we're deciding what to invest in,” she said.
In 2022, she voluntarily divested about $3 million in Russian holdings when the country invaded Ukraine; the state legislature later passed a law that required the Treasury to do so. That same year, Garrity also sold off nearly all of the Treasury’s $394 million investments in Chinese-associated securities due to “geopolitical risks” and “human rights violations.”
Pennsylvania legally bars the Treasury from investing (and forces it to offload existing investments) in a few areas — namely, in “scrutinized companies” that have business in Iran or Sudan, along with the similar 2022 requirement for companies that are subject to U.S. sanctions or are based in Belarus or Russia.
In response to critics, Garrity noted the long history of both Democratic and Republican treasurers investing in Israel Bonds and said it is considered a safe holding.
“They pay on time, 100% of the time, and they have been since the ‘90s. So they have a perfect record,” Garrity said. “The team thoroughly vets every decision that we make. It's not like I'm doing this in a vacuum as a state treasurer.”
Garrity has no Republican primary challenger. Democrats will decide between Bizzarro and McClelland during the April 23 primary election, and the winner will face Garrity for the general election in November.
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