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Divestment Legislation Could Be Faced With a Number of Roadblocks

November 22, 2007 By:
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Sen. Gibson Armstrong

For months, the Pennsylvania Jewish Coalition, which represents Jewish federations across the state, has lobbied on behalf of a bill that would mandate the Keystone state to utilize its economic leverage to punish Iran and other nations, including Sudan, that have been labeled by the U.S. State Department as sponsors of terrorism.

"Genocide and terrorism will not be tolerated by Pennsylvanians," said Hank Butler, executive director of the PJC, who has worked behind the scenes to get the issue on the legislative fast track in a General Assembly more known for its numerous slow lanes.

Advocates have worked to frame divestment, particularly when it comes to Iran, not as a parochial Jewish issue but one that affects the security of all Americans.

On Nov. 14, the issue finally had its day in Harrisburg. But, if anything, the State Senate Finance committee hearing on divestment may have illustrated just how difficult it could be to get any legislation passed.

Several divestment bills aim to chasten rogue regimes -- and companies doing business with them -- by requiring the State Treasurer's office, the Public School Employees Retirement System (PSERS) and the State Employees Retirement System (SERS) to unload sections of their portfolios.

Mirroring separate movements across the country, one bill is focused on punishing Sudan and halting genocide in Darfur; the other seeks to drain the financial resources of nations that sponsor international terrorism -- most notably, Iran.

Pension-fund managers have repeatedly voiced opposition to having any part of their investment strategies dictated by the Legislature. And in the State Senate Finance Committee hearing, one lawmaker expressed reservations about doing anything that could harm returns for retired teachers and state employees who depend on their pensions.

"The Legislature is trying to micromanage investments. As a group, we know nothing about investing," said State Sen. Gibson Armstrong (R-District 13), who sits on the finance committee and chairs the appropriations committee, which must sign off on any law affecting investment funds with ties to the state.

Armstrong, who voiced skepticism that divestment could change the practices of large corporations or rogue regimes, also sits on the board of SERS.

The Nov. 14 hearing ostensibly focused on a bill sponsored by State Rep. Babette Josephs (D-District 182) that would apply to funds invested in about two-dozen firms with business interests in Sudan, including PetroChina. The Sudan Divestment Task Force has labeled these firms the most egregious in facilitating state-sponsored genocide.

"It is not good business. It makes no fiscal sense to invest in genocide," Josephs told the committee, adding that the phrase "Never Again" does not apply only to the Holocaust, but to all genocide.

That bill passed the House in June -- albeit with an amendment requiring the state to reimburse pension-holders for any losses caused by portfolio divestment -- and must now be approved by the finance committee to move forward.

It would affect slightly more than $137 million, or about .2 percent of the PSERS' and SERS' total holdings, according to Alexa Malishchak, senior national field organizer for the Washington, D.C.-based Sudan Divestment Task Force.

But the committee also examined a series of bills sponsored by State Rep. Josh Shapiro (D-District 202) that would mandate the funds to unload billions invested in companies doing business in countries labeled by the U.S. State Department as sponsors of terrorism: Iran, Sudan, Syria, North Korea and Cuba. That would affect roughly $ 10 billion, or about 8 percent of the pension funds' total holdings.

Unlike the Josephs bill, Shapiro's legislation does not take into account the extent or nature of the business relationship.

Shapiro's bill has not yet passed the House: He said that he hopes it will receive a full vote in the next few months. The PJC officially supports any divestment legislation, but has pushed hard for a law that includes Iran.

Shapiro told the committee that, even without legislation, he had made some progress on the issue.

In a subsequent interview, the member of Beth Sholom Congregation in Elkins Park said that, "at my request, the leadership of PSERS and SERS have written to all of the companies they are investing in, that are doing business in terrorist sponsoring nations, to determine the extent of their business interests."

Shapiro added that "they have agreed to send follow-up letters to those companies encouraging them to change their business practices."

Action Needed Now, They Insist

Shapiro had asked the committee members not to move any divestment legislation that focused solely on Sudan.

Josephs and Philadelphia City Controller Alan Butkovitz -- who pushed Sudan divestment in the city -- said that the situation in Darfur is so dire that action is needed as soon as possible. They urged the committee not to conflate the Josephs and Shapiro bills.

James McAneny, acting executive director of the Public Employee Retirement Commission -- which does not directly control the funds of PSERS and SERS -- told the commission that a 2000 U.S. Supreme Court ruling that struck down a 1996 Massachusetts law calling for divestment in what was then known as Burma means that similar efforts may not withstand legal scrutiny.

Shapiro countered that by following the U.S. State Departments' own criteria, lawmakers in Harrisburg were not infringing on the federal government's realm of making foreign policy.

"I don't see anything that shows divestment has actually done anything," said McAneny. "These companies don't care who holds their stock."

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