Long Thompson calls for common sense investment strategies

$1 billion in Major Moves money invested in troubled Wall Street funds, junk bonds

INDIANAPOLIS - Questioning the security of the more than $1 billion of public funds invested on Wall Street, today Democratic gubernatorial candidate Jill Long Thompson proposed a series of new measures to protect the Hoosier taxpayer's investments.

According to the state's most recent Comprehensive Annual Financial Report, of the $3.8 billion generated from the 75-year lease of the Indiana Toll Road, more than $700 million has been invested in risky funds. A total of $388,662,985 was invested in Fannie Mae and another $332,046,023 was invested in Freddie Mac.

Records also show that the state invested nearly $300 million in junk bonds; bonds with ratings of BB, B, CCC, or below because of their high risk of default.

"When Mitch Daniels ran for Governor four years ago, he said he'd operate Indiana like a business - but he didn't tell us it would be a high-risk brokerage," said Long Thompson. "From the information we have been able to gather, it appears that Governor Daniels has engaged in a very risky strategy, and, given the current crisis on Wall Street, that raises serious concerns about safety of our investments."

"Because the Governor sold off the Toll Road for 75-years, we have to make that money last a long, long time and gambling it on Wall Street doesn't seem to be the most prudent, fiscally responsible option available," added Long Thompson.

Of additional concern is that, according to the state Treasurer's Office, no Investment Policy Statement exists to direct how Major Moves funds are invested. Large state funds typically have detailed, formal rules specifically outlining how the funds can be invested.

"The Major Moves funds contain an enormous amount of money. Comparable funds, like the Public Employees Retirement Fund, have 75-page documents outlining specifically how those funds can be invested," said Long Thompson. "However, there appears to be no such investment policy for the Major Moves funds and, in fact, the Treasurer's General Counsel has stated there is not one.

"Last night the Governor claimed there was one, but if it exists it's apparently not available to the public," added Long Thompson. "If the Governor is correct, then he needs to produce the formal Investment Policy Statement for Major Moves funds immediately so the public can get a better idea of where this money is and how the market shifts are impacting Indiana's transportation funding."

In addition to raising these concerns, Long Thompson is calling for new safeguards to ensure the Indiana State government is investing public funds appropriately. As Governor, Long Thompson said she would enact policies to:

Revise Indiana Code to require that Major Moves management be supervised by a board of directors whose meetings' minutes are made public, and require the board to issue a public Investment Policy Statement.
Create an Investment Policy Statement that will direct managers of the Major Moves Construction Fund and Next Generation Trust Fund to invest only in investment grade bonds (BBB or higher), not speculative or junk bonds.
Work with the State Treasurer to review all mortgage-backed investments and deliver a finding on whether undue risk has been taken with the Major Moves funds given both current and long-term realities in the housing market.
Appoint to the boards of the Public Employee Retirement Fund, Teacher Retirement Fund and other major state funds, members who have demonstrated an understanding of the caution required when investing public funds.
"If nothing else, the crisis we've seen on Wall Street these last few weeks should remind all public leaders of the responsibility that they have to ensure that all public funds are invested wisely and securely," said Long Thompson. "Can you imagine what would have happened to the Major Moves money had the federal government not bailed out Freddie Mac and Fannie Mae?"

Hoosiers could have lost a substantial sum of money - and that's why I think these reforms are necessary and why I think this is such an important issue in this campaign," added Long Thompson.

Following several weeks of research, Long Thompson first raised the issue in Tuesday's night gubernatorial debate in Bloomington. While Governor Daniels' did not dispute the information, he claimed that it was up to the State Treasurer to invest the money.

"What was most disappointing about all of this is how Governor Daniels is now is trying to distance himself from these investments and blame the State Treasurer," added Long Thompson. "Hoosiers know better. Mitch Daniels is responsible for Major Moves. He thought it up. He named it. He pushed it through the state legislature and up until recently, he has campaigned on what a great deal it was."

"For better or worse, Major Moves is Mitch Daniels' signature issue and he has to take responsibility for it," said Long Thompson. "This highlights to the difference between him and me. Governor Daniels is willing to risk public funds and gamble on the state's future, and I am not."