© 2025 Palestine Center for Public Policy
While federal misuse of tax dollars to support Israel’s military operations in Gaza has received attention, less focus has been placed on how local and state public funds—such as property taxes and pension funds—are also invested in Israel through mechanisms like Israel Bonds. This brief explains how public funds are invested at the local and state level in ways that support the Occupation of Palestine, evaluates the legality of such investments, and proposes pathways for divestment and legal accountability.
A public fund is money that is typically collected through taxes and that is used by federal, state, or local governments. The intention of a public fund is to fund governments to provide goods and services to the public.
This policy brief will focus on two types of public funds on the local and state level: property taxes and public pension funds.
While the federal government has been using income taxes to fund weapons to Israel, the taxes that are being used to finance Israel on the local level are property taxes. Property taxes are a tax administered on the local level (i.e. city governments and county governments, not state governments). Property taxes only apply to owners of property (i.e. homeowners, condo owners, business owners, not renters). Local governments utilize property taxes to fund social services on the local level, such as libraries, road repairs, and public schools.
Public pension funds are funds that finance the retirement of public employees (employees for federal, state, and local government). Public pension funds are funded through three sources: 1) Employees’ paychecks, 2) Government Contributions (which are contributions from agency budgets or taxpayer dollars), and 3) the investment of pension funds in sources that will generate returns that creates an increase in the amount of money in the pension fund. A variety of government agencies, staff members, and boards are involved with investing pension funds, and who exactly manages the investment of pension funds is dependent on the city, county, or state investing the funds.
On the local and state level, property taxes and public pension funds are meant to finance local needs and public employees’ retirement. However, many local and state governments have used local property taxes and state pension funds to purchase Israel Bonds. Israel Bonds are a loan to Israel that Israel pays back to the investor with interest in a certain number of years that is dependent on which type of bond was purchased. Israel Bonds finance Israel to continue its Occupation of Palestine, purchase weapons, and commit land grabs and home demolitions in Palestine.
Governments tout their investment in Israel Bonds as an investment that is an overall benefit to their constituents. For example, when government officials invest property taxes or pension funds in Israel Bonds, they will receive the amount they invested plus interest back in a few years. So, if a government official invests 20 million dollars in three-year Israel Bonds, they will receive the 20 million dollars back in three years to their bank account plus interest. Government officials tend to state that their investments are making the county money that can be used to fund their constituents' needs, and in the case of pension funds, government officials argue that this is making more money to fund public employees’ retirement funds. However, most governments simply reinvest the returned funds with interest back into Israel Bonds or spend it on things that don’t directly benefit constituents most pressing local needs.
U.S. local governments and treasuries have collectively invested more than 1.6 billion dollars in Israel Bonds, and this money is sourced directly from property taxes and public pension funds. The world’s largest investor in Israel Bonds, more than any government or private investor, is the government of Palm Beach County. Palm Beach County’s Comptroller has invested 700 million dollars of Palm Beach County constituents’ property taxes in Israel Bonds.
The Development Corporation of Israel (DCI) is the U.S. underwriter of debt securities issued by the State of Israel, more commonly known as Israel Bonds. DCI was launched on May 10, 1951. According to DCI’s own public materials, DCI has raised over 40 billion USD in bond investments for the State of Israel between 1951-2017.
The Israeli government uses proceeds from Israel Bonds to subsidize its normal operating budget, and DCI often markets Israel Bonds as a way to directly support Israeli military campaigns. The Bank of Israel has stated that Israel Bonds serve as a source of economic stability for the country, especially in periods when the government experiences difficulty borrowing from external sources. During the 1973 Yom Kippur War, Israel Bonds raised $500 million USD. In 1982, during the First Lebanon War, ISrael Bonds ran a campaign in the U.S. explicitly aimed at offsetting war-time expenditures. During Operation Desert Storm in 1991, an Israel bonds emergency campaign raised $127 million USD in just two weeks. After the Hamas-led offensive of October 7, 2023, DCI stated that Israel Bonds would go towards funding the Israel war effort. As part of its latest campaign following the October 7, 2023 attacks, DCIS has surpassed $3 billion in bond sales in the U.S., as of May 8, 2024 (this timeline is sourced from Israel Bonds’ virtual museum).
There is reason to believe that the Israeli government uses funds raised through Israel Bonds to directly fund violations of international humanitarian and human rights law, and to perpetuate international crimes in Palestine. Because these funds go to the general budget of the State of Israel, the government allocates such funds at its discretion. Furthermore, DCI imposes no restrictions on how the Israeli government distributes the revenues from the sale of Israel Bonds. The DCI also does not require the Israeli government to ensure that these revenues are not used in violation of the law and regulation in the countries.
As a result, U.S. local and state governments invested in Israel Bonds are in violation of multiple international human rights laws and domestic civil rights laws.
Investments in Israel Bonds by local and state governments are likely in violation of a law regulating financial investments made by public officials with public funds, called The Prudent Investor Standard. The Prudent Investor Standard requires fiduciaries (individuals who mange funds) to “invest and manage investment assets as a prudent investor would, considering the purposes, terms, distribution requirements, and other circumstances of the trust.” This law exists in all 50 states. This law states that public officials investing public funds must invest public funds responsibly. Legal analysis reveals that investments made in Israel Bonds, particularly those made after October 7, 2023, qualify as imprudent investments.
Also, many states in the U.S. have anti-Environmental, Social, and Governance laws that prevent public officials from making investments for social, political, or ideological reasons. This law is violated by state and local governments investing public funds in Israel Bonds.
Furthermore, investments in Israel Bonds by local and state governments violate local city and/or county investment policies. The legal risk of a government official violating a local investment policy is dependent on the locality’s rules, but can range from administrative discipline to criminal penalties. These policies state that investments made with public funds should have certain credit and liquidity requirements to ensure that public funds are only invested in stable investment sources. Israel Bonds, due to Israel’s weakening economy, do not meet the credit and liquidity requirements in the majority of states in the U.S. For example, Palm Beach County’s Investment Policy Ordinance requires that investments can only be made in foreign bonds with a credit rating of AA. Israel Bonds have lost their AA status and are now rated Baa1 by Moody’s and A by S&P. Further analysis on how multiple localities' investments in Israel Bonds are violating local investment policies can be found here.
History has shown that when local government officials don’t comply with local investment policies, it results in devastating effects for the budgets and welfare of local communities. Orange County, California is a prime example of this. In 1994, Orange County, California declared bankruptcy after the county Comptroller made risky investments with constituents’ property taxes that violated local investment standards. The bankruptcy caused a financial crisis for Orange County California that resulted in thousands of workers being laid off and budget cuts.
Finally, if a state or locality has any laws or investment policies stating that public funds cannot be invested in human rights violations, those laws would be violated by local and state governments' investments in Israel Bonds.
International Law Violations
As a result of Israel Bonds likely funding the Israeli military, either directly or by off-setting wartime costs, the ISrael Bonds program has likely aided and abetted the crimes and other violations of international law attributed to Israel since October 7, 2023 such as: The Genocide Convention, in particular the obligations provided under Article I, read in conjunction with Article II, and Articles III(a), III(b), III(c), III(d), III(e), IV, V, and VI, Articles 3, 8, and 9 of the Universal Declaration of Human Rights, Articles 6-27 of The International Covenant on Civil and Political Rights, Articles 33, 42, 49, and 78 of the Fourth Geneva Convention, and Articles 2-27 of The International Convention on the Elimination of Racial Discrimination.
DCI has also likely contributed to both the U.S. and ISrael’s violation of the Arm Trade Treaty (violation of Article 7 for the U.S. and violation of ARticle 6(3) for Israel), of which Israel is a signatory. When soliciting U.S. government officials, DCI has stated that the proceeds from Israel Bonds are utilized to reimburse U.S. exports of weapons to Israel. These weapons are used to commit serious violations of international humanitarian law and international human rights law.
DCI’s funding of Israel’s military campaign in Gaza places the corporation in direct violation of Articles II(A), II(12-24) of the UN Guiding Principles on Business and Human Rights.
The Break the Bonds-Palm Beach County campaign is a direct example of how accountability can be created for local and state governments violating civil and international law through their investment in Israel Bonds.
Break the Bonds-Palm Beach County is a part of the National Break the Bonds Campaign housed within The Internationalist Law Center. The Break the Bonds-Palm Beach County campaign has filed a lawsuit against the Comptroller of Palm Beach County for investing 700 million dollars of constituents’ property taxes in Israel Bonds. The lawsuit alleges that the Comptroller of Palm Beach County has violated the Prudent Investor Standard, a law prohibiting investments for social and political reasons, and Palm Beach County’s local investment policy.
The Break the Bonds Palm Beach County campaign organized a press release on May 15, 2024, the date the lawsuit was filed, to announce the lawsuit to the public. One of the organizers of the campaign stated “I used to be an elementary school teacher over a decade ago. Many old colleagues now have to work at least two jobs to make ends meet. I haven’t had proper health insurance in over three years, because I can’t afford the coverage and my rent is over $2,000 for a one-bedroom apartment and it continues to rise each year. Nobody can afford to live in Florida anymore. Why are we sending our tax dollars to fund Israel’s genocide when we can’t even take care of our own in this country, let alone our state?” This quote perfectly encapsulates the tension that exists in Palm Beach County, and the dual concerns that the campaign adresses: 1) Ending financial support to Israel’s Genocide and 2) Ensuring that the funding that is divested from Israel’s Genocide is invested in Palm Beach County constituents’ needs. These dual needs identify one of the many reasons why supporting the liberation of Palestine supports justice in communities everywhere.
The Break the Bonds-Palm Beach County campaign also engages in policy advocacy that aims to create more accountability for public officials investing public funds and in community organizing that mobilizes residents and educates them on how their budget works.
A large amount of local and state public funds are funnelled into financing the Israeli Occupation of Palestine. THerefore, creating laws that regulate how public officials can invest public funds is essential to stopping the flow of public funds into the Occupation of Palestine.
The following policy recommendations are needed to ensure that public officials cannot funnel public funds into the Occupation of Palestine, or any other human rights violation:
4. Target State Investment Committees for Accountability: Various states have state investment committees. Organizers and policy advocates should place more attention on these state investment committees to create consequences for local and state politicians who invest public funds in human rights violations.
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