A state House committee last week passed a bill that would divest state funds of companies with ties to Iran or Sudan, but added new language guiding how the state should reimburse any losses to those funds caused by the new investment strategy.
Meanwhile, a state Senator has introduced a companion bill.
The House bill, HB 1821, introduced at the start of the month by Rep. Josh Shapiro (D-Montgomery), passed the House State Government Committee on July 14 by a vote of 21-0 with five members of the committee not voting.
By the same vote, the committee also approved an amendment detailing how the state would reimburse public funds for any possible losses caused by the divestment. The amendment would also require the state to pay any costs incurred to implement the bill.
HB 1821 would restrict several state funds from investing in companies with certain business activities in Iran or Sudan, primarily oil development, which is believed to generate a substantial percentage of the revenue each country needs to operate.
The Pennsylvania bill and similar efforts around the country make a moral argument against investing in countries with a history of terror or genocide. But Shapiro also believes the bill makes economic sense, saying that Iran and Sudan are risky investments.
The House and Senate bills reflect that second argument in their shared title: the Protecting Pennsylvania’s Investments Act.
Nevertheless, the change in investment strategy could yield returns that are higher or lower than the earnings currently being realized by the investment portfolio of the State Employees Retirement Fund, the Public School Employees’ Retirement Fund, the Pennsylvania Municipal Retirement Fund and any fund managed by the State Treasurer.
The amendment requires the secretary of the budget to set up a “uniform method” for determining gains and losses. Using that method, each public fund would submit an itemized list of losses to the state each year by Nov. 1. Upon approval of the General Assembly, the state would then refund those losses to each public fund.
The divestment process also involves a process of notification and divestment, which could come with new costs. The amendment requires the state to pay for those additional costs, unless the new investment strategy under divestment leads to a net gain in returns.
HB 1821 is now before the House Rules Committee.
Meanwhile, Sen. Mike Stack, (D-Philadelphia), introduced SB 928 on July 17. The bill is a companion to HB 1821, with identical or nearly identical language.
Divestment legislation appears to be moving faster this session than it did last session.
HB 1821 received a committee vote two weeks after being introduced. A 2007 version of the bill took nearly two months to receive a vote from the same committee.
That divestment bill, also introduced by Shapiro, ultimately passed the House by a vote of 185 to 15 in June 2008, but failed to reach the Senate floor for a vote.
(Eric Lidji can be reached at email@example.com.)