BY MARTHA STODDARD
WORLD-HERALD BUREAU
LINCOLN — Public endowments could spread their financial eggs to several baskets if Nebraska voters approve a proposed constitutional amendment May 13.
That would mean better returns and the safety provided by a greater diversity of investments, leaders of the Yes on 1 campaign said Tuesday.
In turn, that would produce more money for services the endowments support — services such as medication assistance and health clinics for Lincoln's poor, supported by the city's Community Health Endowment, or park improvements in North Platte, supported by John Newburn's gift to the city.
"Communities are very limited in the range of investments they can make with public endowments, putting those funds at risk from the ups and downs of financial markets," said Alice Dittman, chairman emeritus of Cornhusker Bank.
"Amendment 1 allows for greater diversification and safer public monies," she said.
The proposed amendment would change a restriction placed in the Nebraska Constitution in 1875. The restriction limits investments of cities, counties and other government subdivisions to bonds and other fixed-income securities.
The amendment would allow public endowments, but not other public funds, to be invested in a wider variety of options, including stocks.
Public endowments are created to hold funds given to cities and other public entities. The funds may come from gifts, bequests or from the sale of public assets. Lincoln created the Community Health Endowment with proceeds from the sale of city-owned Lincoln General Hospital.
Attorney General Jon Bruning said the investment restriction was placed in the constitution at a time when some people were peddling shady stocks.
He said Amendment 1 would safeguard public endowments by requiring that investments be made under a "prudent investor" standard. That means trustees would have a legal duty to invest wisely and protect the funds.
The same standard is used for investing the state pension funds for teachers, the Nebraska State Patrol and judges, Bruning said.
Under current investment options, the average annual rate of return is 5 percent, Dittman said. The average for a mix of stocks and bonds is 9 percent, she said. That adds up to a difference of 80 percent over two decades.
"That is money we simply can't turn down," she said.
But State Sen. Chris Langemeier of Schuyler voted against putting the measure on the ballot because he questioned whether the net returns would be better.
Over the long run, he said, he thinks fund management costs and the potential risks would offset potential short-term gains.
Voters rejected a similar amendment in 2006.
Bruning said the issue was overshadowed that year by other controversial ballot measures, including ones to allow gambling, cap state spending and repeal a school merger law.
As the co-chairman of the Yes on 1 campaign, he said he hopes voters will have more time to consider the merits of Amendment 1 this time. The other co-chairman is U.S. Sen. Ben Nelson, D-Neb.
The amendment has been endorsed by groups ranging from the Omaha Chamber of Commerce to the Human Services Federation of Lincoln.
"My opinion was that Amendment 1 failed because of the company it kept," Bruning said. "I believe it will pass handily when voters think about it."
