Colleges would face financial punishments for boycotting or divesting from Israel under new Pa. bill

HARRISBURG — Colleges and universities that boycott Israel or make financial decisions to penalize that country would be blocked from receiving state funding under a bill supported by a bipartisan group of Pennsylvania senators.

The legislation would also prevent any public fund, including those managed by the Pennsylvania Treasury, from taking similar action.

The state senators introduced the bill in response to protests at campuses across the commonwealth and the nation against Israel’s war in Gaza and the civilian death toll. Among their demands, students have pressed university administrations to sever financial ties with Israel, Israeli companies, and other companies that invest in Israel.

The bill defines boycott or divestment as “actions that are intended to financially penalize the government of Israel or commercial financial activity in Israel.” However, the entities covered by the bill would still be able to make financial decisions that involve Israel for other reasons, like poor investment performance.

State Sen. Steve Santarsiero (D., Bucks) first introduced a version of the bill in 2015 and decided to offer it again after campus protests broke out in the wake of the Oct. 7 attack by the militant Palestinian group Hamas, and Israel’s subsequent retaliation.

Santarsiero said he was shocked to see university administrations in other states express willingness to enter discussions with students demanding divestment.

“It became clear that there needed to be some safeguards in place to prevent these schools from doing this,” Santarsiero told Spotlight PA. “It is important for American foreign policy that Israel continues as a stable democratic country. And, for the Jewish people, it's important that there is a homeland.”

The bill’s reach is expansive. It would apply to state-funded universities in the Pennsylvania State System of Higher Education; community colleges, which received $261 million in last year’s budget; the four state-related universities that get an annual budget appropriation; and private universities, which receive state money including grants.

It would not apply to the Pennsylvania Higher Education Assistance Agency, which administers financial aid programs including hundreds of millions of dollars in state grants. That means students would still be able to use the aid for tuition and fees at schools that boycott or divest from Israel.

Many institutions of higher learning have endowments — some worth billions of dollars — that are typically invested. Schools including the University of Pennsylvania don’t disclose specific holdings, leading to calls for more transparency.

The bill would also prohibit any fund controlled by the state treasurer, including Pennsylvania's multibillion-dollar general fund, from divesting from or boycotting Israel. It would also apply to the state’s three big pension funds: the State Employees' Retirement Fund, the Public School Employees’ Retirement Fund, and the Pennsylvania Municipal Retirement Fund.

The bill excludes individual investment accounts for the participants of state pension plans, which total less than $5 billion.

A lack of disclosures or specifics makes it difficult to ascertain the scope of the state’s investments in Israel and related entities. The Treasury has invested $56 million in Israel Bonds, an investment security backed by the Israeli government. The State Employees’ Retirement System had invested about $91.1 million in Israel as of the end of last year, which is less than 1% of the total fund, a spokesperson said.

This isn’t the state's first attempt to deter private entities from divesting from Israel. A law passed in 2016 and signed by former Gov. Tom Wolf, a Democrat, prohibits state agencies from doing business with contractors that boycott or divest from Israeli companies or otherwise support the Boycott, Divestment, and Sanctions movement.

At least 37 other states have passed similar laws. Ohio’s was updated to add public universities.

The Pennsylvania chapter of the American Civil Liberties Union opposed the 2016 law and Santarsiero’s previous version of the university bill, saying both would have a chilling effect on political expression.

Solomon Furious Worlds, a staff attorney with the ACLU of Pennsylvania, said the organization has similar First Amendment and free speech concerns about the new bill. States can decide what they do with their funds, Worlds said, but they should not dictate what private entities can and cannot do.

Worlds added that boycotts qualify as protected speech under the First Amendment, affirmed by a U.S. Supreme Court decision. They questioned whether the state is constitutionally permitted to withhold funds based on a protected form of speech.

“The constitutional concerns are present, ” Worlds said. “Even if they are lawful, they’re certainly chilling and they go against democratic and First Amendment values.”

Santarsiero pushed back, saying that the bill wouldn’t prevent any individuals from protesting and that its focus is on university administrations.

“My bill does not regulate speech on college campuses. It doesn't regulate the ability of professors or anyone else in academia from expressing their views,” Santarsiero said. “It simply is tailored to the schools themselves as to whether it may take a certain action. And even then, they're free to take the action. There's just a consequence.”

Santarsiero’s bill has been referred to his chamber’s State Government Committee. Asked about the bill's prospects, Majority Leader Joe Pittman (R., Indiana) did not commit to calling it up for a floor vote but did voice support.

“The bipartisan effort on this bill magnifies the priority of this issue and likely lends it to being brought to the Senate floor for the entire membership to be heard,” Pittman said in a statement.

State House Democrats’ spokesperson declined to comment on the bill, saying leadership will review the legislation if it passes the state Senate.

A spokesperson for Democratic Gov. Josh Shapiro, meanwhile, said the governor supports the bill and will sign it into law if it reaches his desk.

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