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Divestment and Public Universities

In recent pro-Palestinian protests at college campuses around the country, including at the University of Utah, protester demands have centered on the issue of divesting from Israel—in other words, selling off the U’s endowment fund investments from companies that do business with Israel. These demands echo protests at campuses in the 1970s and 1980s when students called for universities to divest from companies doing business with South Africa in light of the country’s apartheid policies.

For academic institutions, divestment can be complicated. Furthermore, the recent conversations around divestment have strategically been aimed at private universities, which have sole control over their investment portfolios. In contrast, elected officials and state law govern public entities, like the University of Utah. In Utah, state law specifies two broad investment principles: institutional neutrality and prudent money management. Both principles limit the U’s ability to divest for geopolitical reasons.

How the university manages investments

  • The U must follow state laws about the investment of public funds:
    • According to Marlo Oaks, the Utah State Treasurer, public funds, including endowments, must be invested in accordance with the Prudent Investor Rule.
    • “Public investment decisions must be made only for the purpose of maximizing the return on investments, per Utah Code 51-7-14,” Oaks said. “In other words, public funds managers are required to make decisions that are in the financial best interest of beneficiaries—not to drive a political agenda, whatever that agenda might be.”
  • The university invests in funds, bonds and the Utah Public Treasurer’s Investment Fund per the State Money Management Act and the Uniform Prudent Management of Institutional Funds Act (Utah Code § 51-8) to maximize assets and returns. Again, investment decisions are required to be in the best financial interest of the organization, not to accommodate or drive a political agenda.
  • Less than 1% of the U’s portfolio is invested directly in common stock and none of these investments include the stocks pro-Palestinian demonstrators target for disinvestment. Instead, the U invests in a complex portfolio, including the Utah Public Treasurers’ Investment Fund, U.S. Treasury bills and bonds, U.S. Government-Sponsored Enterprises (GSE) investments, U.S. real estate, and mutual funds managed by outside advisors.
  • The U has no say in how the federal government and GSE use money secured through bond purchases and limited influence over the broad investment decisions made by fund managers.

Law against boycotting Israel

Utah law explicitly prohibits government organizations from entering into a contract with businesses that boycott Israel (Utah Code § 63G-27-201). This includes investment contracts and contracts with fund managers. This law is one of more than 30 similar laws and executive orders in states around the U.S.

Resolution about institutional neutrality

The University of Utah is under an obligation to maintain institutional neutrality, according to the Utah Board of Higher Education’s resolution establishing expectations for implementing principles of free expression on campus:

Institutions, as governmental entities, or employees acting in their official capacities as representatives of the institution must refrain from taking public positions on political, social, or unsettled issues that do not directly relate to the institution’s mission, role, or pedagogical objectives.

This does not mean faculty, staff, or students must remain neutral; indeed, institutions should promote a culture that encourages and celebrates forums in which faculty, students, staff, and community members may express conflicting, controversial, or unpopular viewpoints.

A fundamental mission of higher education is to promote the exchange of knowledge and ideas through teaching, research, critical evaluation, civil discourse, and debate. Neutrality as an entity allows the institution to protect this mission by supporting those who engage in open, rigorous debate without disaffecting segments of its faculty, staff, and students whose sincerely held beliefs conflict with others. 

The institution can thereby fulfill its responsibility to be an impartial steward of the marketplace of ideas in which sincerely held viewpoints are subject to rigorous scrutiny and must withstand the challenge of open debate and critical examination on their own merits, not the institution’s endorsement.