State cuts access to billions

Nov 30, 2007

From the Tallahassee Democrat

School boards and local governments demand access to $14 billion of their money, frozen Thursday by state officials attempting to stop a financial panic.
Local governments, skittish about the quality of state-managed investments, withdrew more than $16 billion from the fund before its doors were temporary slammed shut Thursday by Gov. Charlie Crist and the State Board of Administration. ‘I think its time to suspend withdrawals and have a workout . . . so the pain can be shared,’ said CFO Alex Sink, who proposed the emergency shutdown during a hastily called meeting of the State Board of Administration. The unprecedented freeze plunges some of Florida’s smaller local governments into peril.
Wayne Blanton, executive director of the Florida School Boards Association, said he’s told state money managers he and his members expect to come out unscathed. He said he’ll insist on it in a conference call today. ‘We’ve got every dime of our cash in that pool,’ said Hal Wilson, chief financial officer for Jefferson County schools. ‘What were they thinking?’ He is now short $850,000 for today’s payroll and spent Thursday afternoon alternately pleading with state officials for relief and negotiating with a local bank to cover the overdraft.
Wilson’s only other option: leave the small county’s 220 teachers and staff without money to pay their own bills.
Blanton said other small school districts, including Taylor County, are in a similar bind. He said school districts, along with cities and counties, intend to use a conference call with state financial administrators today to demand a financial guarantee from the state.
Others have already acted. ‘This is a disaster,’ said Leon County Court Clerk Bob Inzer, who pulled more than $80 million of county deposits earlier this month out of fear of the run that took place. ‘The risk I saw was what has actually happened today,’ Inzer said. Leon County is among scores of panicky local governments who since Nov. 1 have withdrawn more than $16.5 billion from Florida’s Local Government Investment Pool.
The short-term fund lets local governments earn interest on their tax collections until they need cash to pay bills. It provides those earnings with management fees much lower than charged by private money managers.
Local governments are reacting to escalating qualms over the fund’s $2.4 billion stake in mortgage-backed