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Teachers, County, City Workers Will Be Paid

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By MICHAEL D. BATES Hernando Today

Published: December 1, 2007

BROOKSVILLE - School, county and city officials rushed Friday to assure their employees they will be able to cover payroll checks despite a freeze on a state-run investment pool fund.

Speculation has surfaced recently the fund may be in trouble. That fear worsened Thursday when Gov. Charlie Crist and other top state officials froze the fund, preventing local governments from withdrawing money. It also raised questions whether the county, city and school district would have problems meeting payroll and other employee obligations.

Crist made the move after investors made a run on the state-run investment pool.

Deborah Bruggink, chief financial officer for the Hernando County School District, said she deposited a $30 million property tax distribution check Wednesday. The district now has $42 million on deposit, which should help in the short-term.

If not for that, the district could be scrambling right now, she said.

"We're good for awhile," Bruggink said.

County Circuit Court Clerk Karen Nicolai fired off an e-mail to all county employees Friday assuring them their state retirement and pensions are safe.

The state manages an investment fund used by Hernando County and other municipal governments.

"This will not affect Hernando County's ability to meet any financial obligations," she said.

Brooksville Finance Director Steve Baumgartner said the city has about $2.7 million in two reserve accounts, including $1.7 million with SunTrust.

"As far as liquidity for the city, we don't have any problems in the short run, by far," Baumgartner said.

Crist, who chairs the State Board of Administration (SBA), called an emergency meeting Thursday after local governments withdrew almost $10 billion, or 40 percent of the pool's assets during the past two weeks.

The freeze stays in effect until Tuesday, when the administration board members meet to consider options of shoring up and restoring confidence in the pool.

Withdrawals to the pool began after about $900 million of investments were downgraded below purchase credit rating guidelines.

Nicolai told all government employees Friday she is following the matter and "would like to put any concerns you might have to rest."

"Our office had an indication of the problem early on and withdrew over $30 million at the beginning of November," Nicolai said.

That $30 million represents almost all the money invested in the state fund.

The county's portfolio of over $200 million is invested in "strong conservative investment instruments," she added.

"Our primary goal is, and always has been, to protect the county's assets," she said.

To hedge against any problems with the county's retirement and pension funds, the state considered 'assisting' the investment pool with pension funds. However, the state's chief financial officer, Alex Sink, advised against that idea.

Even if does happen, Nicolai said she is confident the state will enact safeguards to prevent putting pension funds at risk.

Nicolai said she believes the freeze will prevent a "run on the bank" mentality.

"I think it gives them time to get back trust in the fund and level it off," she said.

Nicolai said she believes only about 4 percent of the state's assets are undervalued right now.
Bruggink said the fund acts as a money market fund, which allows the district to receive a good return on investment.

"School districts are going to have to be allowed to have access to their money to cover payrolls and principal and interest on outstanding debt," she said.

Also, vendors and contractors must get paid, she said.
Bruggink said she will be watching closely what happens Tuesday when Crist, Sink and State Attorney General Bill McCollum - who make up the state board of administration - meet to consider to options.

"I have faith that, in one sense, the powers-that-be are going to be educated in how school districts use that investment pool," she said. "You can't freeze a pool for very long."

The city of Brooksville has about $8 million in the SBA pool, according to Baumgartner.

While the city decided not to pull that money, it is holding off on making further deposits to the pool until it's back on surer footing, Baumgartner said. Instead, the city has diverted those deposits to other accounts.

Information from the Associated Press was used in this report. Hernando Today staff writer Tony Marrero also contributed to this report. Reporter Michael D. Bates can be reached at 352-544-5290 or mbates@hernandotoday.com.

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