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Withdrawals From State Investment Pool Frozen

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By BILL KACZOR, The Associated Press

Published: November 30, 2007

TALLAHASSEE - Gov. Charlie Crist and two other top state officials suspended withdrawals from a state-operated investment pool Thursday, abruptly halting a run by local governments spooked over the downgrade of its mortgage-related holdings.

The State Board of Administration, chaired by Crist, acted during an emergency meeting after local governments had taken out nearly $10 billion, or 40 percent of the pool's assets, in the past two weeks. That included $3.5 billion Thursday morning.

The investment pool is similar to a private money-market fund. Cities, counties, school districts and other local entities invest money on a short-term basis and withdraw cash when needed to make payrolls and pay other operating costs.

The suspension will remain in effect at least until Tuesday, when the board will meet again to consider proposals for shoring up and restoring confidence in the pool.

The pool had about $25 billion in assets when the run that began after more than $700 million in asset-backed commercial paper had been downgraded below purchase credit rating guidelines.

Hillsborough County's school district has more than $500 million in the pool, and needs about $40 million from the fund to meet each biweekly payroll.

The district does not have to issue its next paychecks until Dec. 7, and has an $80 million line of credit as a backup.

Schools spokesman Steve Hegarty said the district had not made any extraordinary withdrawals before Thursday's freeze.

"We're assuming this is going to be resolved soon," he said.

Tampa does not have any money in the investment pool.

Hillsborough County has nearly $900 million of investments, but has no plans to make any withdrawals, said Dan Klein, chief deputy of the Clerk of the Circuit Court, which handles the county's investment portfolio. The county, however, won't make any new investments in the account.

He said Hillsborough uses a conservative investment policy and that some money that would have been placed in the account may be steered toward longer-term options.

The county and school district will start receiving millions in local taxes in the coming weeks. The school system has traditionally deposited the collections in the state-run investment pool, but could change that policy with approval from the school board if necessary, Hegarty said.

"Participants are scared to death," said Coleman Stipanovich, the board's executive director. "If we don't do something quickly, we're not going to have an investment pool."

Tribune reporters Anthony McCartney and Marilyn Brown contributed to this report.

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