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State Must Cover Local Losses To Restore Confidence In Risk Pool

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The Tampa Tribune

Published: January 4, 2008

The sundry rules that control the ebb and flow of funds in the state-run investment pool for local governments fail to answer an unexpected question: If investments lose money, whose money is lost?

Clearly it should not be Hillsborough taxpayers who lose. Their leaders were right to resist the panic of withdrawals that forced the Local Government Investment Pool to temporarily suspend all withdrawals in late November.

A few bad investments based on sub-prime mortgages started the run on the otherwise-healthy fund.

At this point, confidence is shaky and getting shakier. That's because the state's plan seems to be to penalize counties such as Hillsborough who helped head off the financial stampede.

Gov. Charlie Crist should restore confidence by promising to demand that the Legislature allow no county, city, school board or taxing authority to lose a dime.

It would be a reasonable assurance considering it's a state pool run by state employees and managed at the highest levels of state government. It falls under the Board of Administration, which is Crist, Attorney General Bill McCollum and Chief Financial Officer Alex Sink.

The fund should not have been making risky investments, and why it did is under investigation.

But no matter what the probe uncovers, Hillsborough Clerk of Court Pat Frank is in a tough spot. With no guarantee that losses won't grow if more governments pull their money out, she must be tempted to advise Hillsborough to go ahead and cash out too, then try to recoup any unfair losses and withdrawal penalties in court.

Frank testified Thursday before the Local Government Investment Pool Advisory Committee in Tallahassee. She complained that the state's current plan seems to be to stick Hillsborough with an unfair share of the bad investments.

After the meeting, she talked with other local officials with money in the pool. She told us "no one feels secure."

One reason is because no one knows what the ultimate losses will be. Local agencies with investments include Hillsborough's county government, the school board, sheriff and four authorities: aviation, sports, housing and transit.

For the local boards, the losses could be noticeable. But the bigger problem is confidence. For 25 years, no one has lost money in the pool.

If losses are now possible, that changes everything. Officials like Frank aren't supposed to take risks with public money. Making risky bets defeats the whole purpose of the fund.

If Hillsborough had been hit by a terrible fire, flood or windstorm, Crist would be on the scene in an instant promising emergency help.

This too is an emergency with statewide implications. Crist should show leadership by promising that no local government will have to eat the state's mistakes.

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