Florida Removes Risk Standards for Local Governments Purchasing Israeli Bonds

TALLAHASSEE — Beginning July 1, financial-risk standards for local governments in Florida using public money to invest in bonds funding Israel's government will be removed. The change comes just months after a major credit rating agency warned that the bonds were at high risk of default and a potential "junk" rating.

Palm Beach County is facing a lawsuit from its residents after investing 15 percent of its savings portfolio in Israeli bonds, making the county the world's largest investor in Israeli bonds. The only foreign bonds that Florida governments are allowed to invest in by law are those from Israel.

Bond purchases have become a key means for Israel to raise funds for its war efforts through U.S. states and localities, utilizing U.S. taxpayer dollars, in addition to the billions in aid the nation receives from the United States at the federal level.

The introduction of the bill followed Moody's rating agency downgrading Israel's bonds from an "A" to a "Baa" rating, citing the nation's geopolitical turmoil and long-term financial risk, which is "much higher than is typical" due to its war efforts. Two other major U.S. credit rating agencies slightly downgraded Israel last year.

The law, which passed unanimously through the Florida legislature in April and was recently signed by Gov. Ron DeSantis, eliminates "A" rating requirements for such bond investments. Israel has received $5 billion in financing from public and private U.S. investors since the start of the Israel-Hamas war. State and local governments make up $1.7 billion of that overall figure.

Bonds are fixed-income securities purchased by investors to lend the government money, which is repaid at a set interest rate over a specified period. Proceeds from the bonds return to Israel as a surplus budgetary fund that can be used to offset the costs of its military campaigns.