State froze investment account

This morning the Sun-Sentinel ran an article about the State Board of Administration (SBA) headed up by Governor Charlie Crist, CFO Alex Sink and Bill McCollum, Attorney General. The article described how the SBA froze state investment accounts used by local governments. This action was taken in an effort to halt what one official called "an investment world version of a run on the bank". Nearly half the $27 billion investment fund has been drained over the past two weeks after the state notified local finance directors that some investments were exposed to sub-prime risk. Some of the public revenues were backed by residential mortgages that were downgraded by the credit rating service Standard and Poor's. A "run of the bank' was created with the sub-prime meltdown.

After reading this article, I emailed the Hernando County Budget Director to ask if Hernando County was at risk with their funds. Mr. Zoettlein forwarded an email released from Karen Nicolai's office this afternoon which I have enclosed below:

From: Karen Nicolai

Sent: Fri 11/30/2007 2:34 PM

To: All_Network_Users

Subject: State of Florida Investment Fund

As you may know, the State of Florida manages an investment fund for use by local governments. Recently, there have been articles regarding the stability of that fund. Yesterday, the State froze the fund, preventing local governments from withdrawing money. Local governments that are invested in the fund might experience liquidity problems in meeting payroll and other obligations.

As Chief Financial Officer, my office is on top of this and would like to put any concerns you might have to rest. Our office had an indication of the problem early on and withdrew over $30 million (almost all of the money invested with the fund) at the beginning of November. The County's portfolio of over $200 million is invested in strong conservative investment instruments. Our primary goal is, and always has been, to protect the County's assets.

There has also been concern expressed regarding the possibility that this will affect the County's retirement/pension funds with the State. Although the State considered 'assisting' the investment pool with pension funds during their meeting yesterday, the State's Chief Financial Officer advised against it. If it does however happen in the future, I'm sure they'll put in safeguards to prevent putting pension funds at risk.

In summary, this will not affect Hernando County's ability to meet any financial obligations. Thankfully, the Clerk's Office responded very timely to avoid any negative impact on the County. If you have any questions, please contact me.

Thank you.
Karen Nicolai, Clerk of Circuit Court