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Schools, County Face Fund Problem

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By ANTHONY McCARTNEY and MARILYN BROWN, The Tampa Tribune

Published: December 6, 2007

TAMPA - A day after state leaders tried to repair a state investment fund decimated by uncertainty and massive withdrawals, its shareholders were still sorting out the results.

Hillsborough County and Hillsborough schools combined hold more than $1.4 billion in the pool, administered by the State Board of Administration. Although they are two of the largest shareholders remaining in the $14 billion pool, Hillsborough officials are not alone in their angst and anger.

School superintendents, board members and other district officials from across the state gathered in Tampa at a semiannual meeting on Wednesday, and the fund's rapid decline in credibility and assets was a key topic.

The fund's woes are "as huge an issue affecting every single one of you as I've seen in 32 years," Florida School Boards Association executive director Wayne Blanton told those at the conference.

For 25 years, the SBA fund has been a place where local governments sent large pools of their money and got even more in return. Recently, concerns about mortgage-backed securities led many governments to withdraw their shares from the fund. The governments removed $10 billion within two weeks, prompting state officials to halt withdrawals Nov. 29.

Transactions will be allowed again today, although state leaders on Tuesday placed a cap on how much governments can remove.

While 86 percent of the $14 billion in investments is considered safe, neither state nor local leaders yet can say how much, if anything, they will lose from the remaining, tainted 14 percent of investments.

Hillsborough's school district, with $573 million invested - the largest amount of any school district in the pool - is concerned it could lose money after so much was pulled out, said Connie Milito, the district's lobbyist. The district is investing its new influx of property tax money elsewhere and can meet payrolls until late February, she said.

Commission, Others Not Reassured

Hillsborough County commissioners, who have nearly $872 million still locked up in the pool, voted 6-0 on Wednesday to re-examine their investment policy, which allows up to 100 percent of its investments to be placed in funds like the troubled state investment pool.

The county has nearly half of its $1.8 billion in overall investments in the SBA-run fund, Chief Deputy Clerk Dan Klein told commissioners.

Until recently, the fund was lucrative for local governments, which prompted Hillsborough to remain in the pool. While treasury investments would have returned about 3.8 percent, the state investments returned 5.2 percent, clerk officials said.

Clerk of Court Pat Frank reassured commissioners about the fund's stability. "Nobody's ever lost money in it," she said. But about $114 million of Hillsborough's share is now in a separate part of the state investment pool that is considered questionable.

Lingering questions about how state officials handled the account, and how it will recover, left many officials doubting whether they would invest more taxpayer money.

"I haven't talked to one superintendent who's going to put money back in the pool," Blanton said.

One key reason: The state still hasn't guaranteed school districts won't lose money because of recent budget problems. Another is that districts would be charged a fee if they withdrew more of their money than the cap imposed on Tuesday allowed.

Frank and Blanton said they also were concerned that state officials weren't forthcoming about investments or that there was a problem, even though governments were making a "run on the bank," withdrawing billions.

"The state board staff were telling us and your financial officers, 'everything's fine,'" Blanton said. "They told them, 'There's no run.'"

Hillsborough County officials said had they participated in the massive withdrawals the state fund could have collapsed entirely.

Sink To Address School Officials

Florida Chief Financial Officer Alex Sink, who along with Gov. Charlie Crist and Attorney General Bill McCollum oversee the SBA, plans to address school officials in Tampa on Friday.

She has established an advisory committee of officials from across the state, including Frank and Blanton, to discuss problems and fixes.

Until then, many local governments are debating what to do with millions of dollars in property tax collections. Both Hillsborough County and Hillsborough schools are keeping the money in local bank accounts.

Other approaches, however, were suggested Wednesday.

"We'll put it under a mattress," County Administrator Pat Bean joked.

Reporter Marilyn Brown can be reached at (813) 259-8069 or mbrown@tampatrib.com. Reporter Anthony McCartney can be reached at (813) 259-7616 or amccartney@tampatrib.com.

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