Shapiro Renews Divestment From Iran, Sudan

By Bradley Vasoli, The Bulletin

Thursday, April 23, 2009

State Rep. Josh Shapiro, D-153rd, of Montgomery County, is renewing his effort to prevent state government from investing in international businesses with major commercial ties to either Iran or Sudan.

Pennsylvania’s Public School Employees’ Retirement System, its State Employees’ Retirement System and its treasury will not have the ability to invest in Iran- or Sudan-tied companies if Mr. Shapiro’s bill becomes law. The representative believes such a move could advance the U.S. government’s goal to dissuade the two nations from continuing to back terrorist organizations.

America’s ability to alter international politics in its favor through military might and diplomacy, Mr. Shapiro said, rests with the federal government. But its ability to do so through economic influence “can be waged at the state level and the federal level.”

Pennsylvania House Majority Leader Todd Eachus, D-116th, of Luzerne County, said Democrats in his chamber will work to move the bill through to the state Senate.

“It is our moral responsibility to ensure that hard-working Pennsylvanians’ pension investments and tax dollars are invested responsibly in companies that have no ties to terrorist regimes, such as Sudan and Iran,” he said. “That is why the House Democratic Caucus stands firmly in favor of this legislation. I commend Rep. Shapiro for his efforts on this issue, and I vow to move this legislation forward with the goal of swift passage in the House.”

A minority of state representatives opposed the legislation when it came up for a vote last June because they considered its focus on only Iran and Sudan too narrow. Some also said they were uncertain that the commonwealth could keep its investment returns as high as they have been if divestment went forward.

Beginning in 2001, the state took on the burden of paying substantially increased pension benefits to retirees, drawing on surplus investment returns taken in during the 1990s. But economic growth slumped later that year, causing a dearth of pension funds.

Matthew Brouillette, president of the Harrisburg-based Commonwealth Foundation, said divestments like the ones Mr. Shapiro wants should only be enacted if lawmakers are convinced they won’t saddle Pennsylvanians with greater public-pension costs.

“I think that it’s a legitimate concern to worry about cutting off any opportunities to make these unfunded liabilities and taxpayer albatrosses more viable,” he said. “A cost-benefit analysis would be prudent.”

Mr. Shapiro said he believes the legislation can actually improve the state’s investment returns, citing data from FTSE Group indicating that company funds excluding Iran- and Sudan-connected businesses outperformed twofold funds that include them.

“While it is a moral imperative that we divest from companies that do business with terror-sponsoring nations, during these tough economic times, we must do all we can to protect and strengthen our investments,” he said. “It makes practical sense that a company’s association with terrorism and human rights abuses creates risk and could undermine the value of the commonwealth’s investment in such a company.”

State Treasurer Rob McCord, D, endorsed Mr. Shapiro’s bill, saying investment in companies with terror-financing states carries an economic hazard.

“I am proud to stand with Rep. Shapiro to help raise awareness of the terror that still reigns over many regions of the world,” the treasurer said. “No one should deny the financial risk associated with investing in these regions. Indeed, as we use economic power to fight terrorism, we are also serving as prudent investors.”

Earlier efforts by Mr. Shapiro impelled the state Tobacco Settlement Investment Board to adopt a similar divestment policy regarding funds the state acquired through an out-of-court settlement with several big tobacco companies in 1997.

Bradley Vasoli can be reached at bvasoli@thebulletin.us