sealLetter from the President

August, 1996

One of the decisions Hoosier voters will be asked to make when they go to the polls on Nov. 5 involves a constitutional amendment that would allow public employee pension funds to diversify their investments. Under current Indiana law, the retirement funds of state and local employees may be invested only in government and corporate bonds. Only one other state has such a restriction. The amendment -- to Section 12, Article 11 of the state Constitution -- would allow the funds to invest in stocks and other securities.

The proposed change is one that is overdue, and I hope voters will approve the amendment. This constitutional provision was enacted in 1851 with the good intention of protecting retirement funds from dangerous speculation. However, its effect today is to limit unnecessarily the earnings of the funds. These lost earnings ultimately require increased state spending and cost taxpayers money. A study by the Indiana Fiscal Policy Institute indicates that diversifying the pension fund investments would save taxpayers $43 billion over the next 30 years.

While investments in stocks and securities are never risk-free, experienced money managers know that a carefully handled portfolio of holdings from sound companies can be both safe and profitable. Purdue has followed this policy with its endowment investments for many years, and the result has been steady growth.

In addition to employees of the state and the various municipal units, public school teachers and some university employees are affected by the restriction. While the majority of Purdue employees are covered by TIAA-CREF -- a privately managed fund, not covered by the restriction -- the pensions of more than 4,000 of our clerical and service staff members are deposited in the Public Employees' Retirement Fund. These people deserve to have their money grow as much as possible.

The pension fund amendment is one of those rare changes that appear to be good for everyone involved. I hope our citizens will vote "yes."

Fall enrollment has soared for the Purdue system. The final total on the West Lafayette campus is 35,176, an increase of 471 students. While the totals for the regional campuses are not complete, we expect to have more than 64,000 students enrolled, a significant increase.

Enrollment increases are the exception, rather than the rule, at a time when the number of high school graduates is relatively low. I think Purdue has been one of the exceptions for several reasons:


Steven C. Beering

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