Florida Schools Struggle to Pay Teachers After Investments Frozen by State

[Purveyor]

Source: Bloomberg News

Florida Schools Struggle to Pay Teachers as Investments Frozen

By David Evans

Nov. 30 (Bloomberg) -- School districts, counties and cities across Florida are scrambling to raise cash after being denied access to their deposits in a $15 billion state-run investment fund.

Florida's State Board of Administration, manager of the Local Government Investment Pool, halted withdrawals yesterday at an emergency meeting after $12 billion was pulled out this month from participants. Governments from Orange County, home of Disney World, to Pompano Beach asked for their money back following disclosures that the fund held $1.5 billion of downgraded and defaulted debt.

``The unthinkable and the unimaginable have just happened here in Florida,'' said Hal Wilson, chief financial officer of the Jefferson County school district, which kept its entire $2.7 million of cash in the fund. ``What we just experienced here is a classic run-on-the bank meltdown.''

Thousands of school districts, towns and fire departments across the U.S. keep their cash in state- and county-run pools. These public accounts, modeled after private money-market funds, are supposed to invest in safe, liquid, short-term debt such as Treasuries and certificates of deposit from highly rated banks.

--
No Money

Just 30 miles (48 kilometers) east of the state capitol in Tallahassee, there was no money to pay the 220 teachers and other employees in Wilson's Jefferson County school district today. Wilson said he trusted the State Board of Administration's assurances that the money was safe even as other pool participants withdrew billions of dollars.



Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aHR5KklFq4X0&refer=us

[salin]

1. Very ominous...

per the public investment sector (eg govts, universities, etc.,) and yet the stock market rebounds... Why do I have the awful feeling that billions of dollars of "on paper" (eg investments and promised returns) are going to go "poof" in the coming years. :cry:

[bluesmail]

2. poof is right

don't forget about people's pensions, etc.

[salin]

4. IMO this is ALL about pension funds... in terms of the potential upcoming

devastation. Institutional investors (like TIA-CREF, and state pension plans) are huge players in markets. One would have hoped that those funds would have started getting wise per due diligence after many got burned by ENRON. The difference is the size of investments in ENRON to the entire portfolios were relatively small. Looking back, it was as if the ENRON, Worldcom implosions should have been object lessions. Reading this story sounds as if there could be a run on the money by such entities to get their money out before a bottom is reached - what will disappear is the money for retirement/pensions... not due to the actual losses per the subprime bundled investments (that alone would be a hit) but due to a proverbial run on the bank to pull money out of the funds and depeleting the funds. I hope I am wrong.

[Sancho]

3. Florida invested state retirement funds heavily in ENRON under Jeb...

and cut taxes to his friends every chance he got.

[salin]

5. and in Edison Schools - while that company had not

earned a profit since its inception years earlier - the company then went private (so the info of their performance was even harder to follow.) Cronyism in investments in public funds is a very dangerous thing.

When I was following the story in Ohio about the cointrader Tom Noe ... there were mentions that the state teacher retirement fund investments had even worse "pay to play" problems (in terms of investments... and it was a significantly larger pot of money than that which Noe tapped into (which escapes me at the minute - but it was a public investment fund - perhaps workers comp?. As the Noe story faded (he is now in jail serving time), the other alluded to, but never explored story, went off the radar. I expect that it will reappear. The top dude in the investment fund that eased the way for the second multi-million investment in Noes fund (eased = put down concerns that were raised at the time) moved over to be a top investment advisor with the teachers/public investment fund in Ohio. Keep an eye on that.

[JCMach1]

6. de ja vu with the ENRON mess in FL

Obviously, nothing changed in terms of the management of the fund.

[flashl]

7. Another Florida sinkhole

Facing South

The freeze on withdrawals may be partly in reaction to a Bloomberg report yesterday that said the fund had invested $2 billion in "sub-prime tainted debt" and that $900 million (5%) of the fund's asset-backed securities were in default. The article noted that Orange County (Orlando) had withdrawn its entire $370 million from the fund. Pinellas County (St. Petersburg/Clearwater) withdrew its entire $300 million, and Miami-Dade County and Pompano Beach have also withdrawn funds.

[Rebellious Republican]

8. We will be feeling the effects of Hurricane Jeb

for a very long time. One good thing that came out of his arrogant administration, was how well he recruited for the Democratic party! He was the final straw for me and a few others I know as well. Charlie C. you have inherited a really big fucked up mess, this is just one of the many things that are coming and will continue to come to the surface. We are in for a very long and dark period ahead us here in Floriduh.

:mad:

[Lochloosa]

11. I agree. brother bush's legacy will be felt for a long time.

[Zorra]

9. Hey, republicans want to privatize social security.

Yeh. That'll work.
:crazy:

[spooked]

10. HOLY BUSH! Jeb appears to have been involved...

http://www.forbes.com/business/2007/11/30/florida-bush-lehman-biz-beltway-cx_mb_1130florida.html

Where Was Jeb?
by Megha Bahree

A government money market debacle unfolding in Florida is raising questions about former governor and presidential brother Jeb Bush's possible involvement in the mess...

The run on the fund was triggered by worries that a percentage of the portfolio contained debt that had defaulted...

A majority of this paper was sold to SBA by Lehman Brothers (nyse: LEH - news - people ). Bush, as the state's top elected official, served on a three-member board that oversaw the SBA until he retired as governor in January. In August, Bush was hired as a consultant to the bank. Lehman spokesperson Kerrie Cohen, speaking on behalf of Bush, said they had no comment and would not say when the bank had sold Florida the paper. SBA did not return calls.

While SBA wouldn't confirm, Bloomberg reported the amount of debt in default is around $900 million.

.

[1932]

12. These are the same funds that helped out Enron insiders by buying Enron stock

when it started to tank (and while Enron employees were locked out of trading from their 401k's).

These pools are managed by appointees of the governor.

Do I need to connect dots?

[sarcasmo]

13. This will happen more and more frequently. The Shell game called the stock market will continue to

Evaporate. It says you have millions on paper, but do you really have millions in cash? Ask Enron and these Teachers.

[mbperrin]

14. OK, so did the teachers get paid or not?

They need to be straight up in the air on this one. Teaching on a contract means you do A, you get B. Not getting B - no groceries, electricity, and a lot of other nice things.

[PassingFair]

15. Ru-Roh.

Not good when there's a run on the bank....

by the STATE!