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Sink Seeks To Boost Troubled State-Run Investment Pool

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By MARILYN BROWN, The Tampa Tribune

Published: December 8, 2007

TAMPA - Uncertainty over a state investment fund left government officials with little definitive information Friday, even after face-to-face meetings here with the state's chief financial officer.

On Friday, the state-run investment pool's investments totaled about $10.3 billion after investors - including Hillsborough County - drew more of their money.

Hillsborough retrieved $15 million, far less than it could have without penalty. When the fund was frozen at $14 billion last week, the county's share was more than $871 million, making it the pool's second-largest investor.

The county may take more, if needed, said Chief Deputy Clerk of Court Dan Klein, but has no plans to invest more.

The Local Government Investment Pool run by the State Board of Administration grabbed national attention Nov. 29 when it was frozen by state officials after a two-week run by investors, who panicked over news of risky mortgage investments. They pulled $10 billion from the fund of more than $25 billion.

On Thursday, the pool reopened with restrictions on withdrawals, and $1.2 billion was retrieved, including Hillsborough County schools' $76.6 million, the maximum it could take without penalty.

On Friday, CFO Alex Sink traveled to Tampa to face state education officials and then Hillsborough leaders.

Meeting with hundreds of school board members and superintendents at Tampa's Grand Hyatt, Sink had no guarantees and had questions of her own.

Asked whether the state can guarantee all principal and interest in the fund, Sink said she didn't know.

"My thought is we are not going to know if there are any losses until we get further down the road," she said, estimating that will be 12 to 18 months from now because of maturity rates.

"The thing that brought this down was a lack of confidence in the fund and a lack of access on the type of information available," she said.

The SBA staff "had no communications capacity." she said. The board's trustees are Sink, Gov. Charlie Crist and Attorney General Bill McCollum, but Sink said even she was left out of the loop.

Sink, a former bank executive, said she returned to Tallahassee from meetings with New York bankers in late October with questions about state investments. Then, at a Nov. 14 Cabinet meeting, the SBA executive director "led us to believe everything was OK, everything was fine," she said.

Now, said Sink, it's up to the cities, counties, school districts and other government agencies that invested to save the fund, Sink said.

"This is your fund," she said. "Your ability to withdraw will continue to be limited unless we're able to get more new funds in there. ... It's totally up to you."

As more money is invested, "the withdrawal penalties will go away," Sink said. If not, "Then it just will be an orderly wind down."

Sink said the SBA is working with two banks to offer investors another way of accessing cash rather than taking the penalty for exceeding a new cap for withdrawing from the fund. The question of what to do with investor interest earned in November is a legal one, she said.

She also said she is seeking further legal advice on whether it is possible to invest other state funds in the dwindling state pool to shore it up.

"I would be quite willing to split some of the treasury money into the fund," Sink said.

If that answer remains no, she was asked if she was willing to ask the governor and Legislature for a special legislative session to allow her to do that.

"I want to get the legal question answered first," Sink said.

Sink also pledged Friday to ask the SBA's auditing committee to "answer a number of questions" about "how we got to this point." She would not list her questions, saying that she plans to submit them in a letter to the committee Monday. "We are still in kind of a crisis mode up there," Sink said.

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

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