Lee school district shifts its funds
Although Wall Street markets spent the week on a downward trajectory, the Lee County School District’s funds are being transferred from the State Board of Administration’s local government investment pool.
The investment pool was designed to house local funds for more than 800 of Florida’s cities, counties, school districts and other entities, but after it was frozen last December — because of the sub-prime loan crisis — many of the depositors were left without access to their money.
The school district reported losing access to millions of dollars mixed in with a number of sub-prime loans deemed dangerous by SBA overseers Gov. Charlie Crist and Chief Financial Officer Alex Sink.
District officials have been working all year to free up some of the funds in the account which was split into funds A and B, one still immersed in sub-prime loans and the other beginning to slowly release funds.
On Friday Superintendent James Browder contacted school board members and notified them that some of the district’s investment pool funds were being shifted. He said that $13.9 million was being transferred from fund A to Bank of America, a more secure organization that purchased financial lender Merrill Lynch this week.
“The amount transferred from SBA Pool A represents the total amount of our available balance for transfer at the State Board of Administration,” said Browder.
More than $114 million was also moved from a Reserve Money Market Fund to Bank of America.
According to the school district, there is $15.9 million in fund B which continues to be frozen.
After what happened in financial markets this week some were concerned that the SBA would be negatively effected. Lehman Brothers, which filed for bankruptcy this week, had issued approximately half a billion stocks and bonds to the SBA, Florida Treasury and the state-run property insurance corporation.
According to Dennis MacKee, spokesperson for the SBA, what happened this week in the stock market hasn’t affected the liquidity or the ability of funds to be withdrawn from the local government investment pool.
“The bottom line is that what is happening in the market hasn’t affected the liquidity,” said MacKee. “The market itself is a different nature, they are short term and very liquid.”
In fact, the SBA announced on Sept. 12 that funds will be returned to full liquidity by the end of this year.
“This announcement will illustrate that a lot of our securities are maturing in LGIP and we are increasing availability of cash for local governments,” said MacKee.
On Sept. 25 the liquidity ceiling will be raised from 50 to 65 percent, according to the SBA announcement, which would release $1.4 billion for transactions statewide. And in October that percent is expected to increase to 70 percent, providing an additional $570 million.
Economists were also concerned with the Florida Retirement System — the pension plan shared by public employees — which also had investments in failing lenders. SBA officials stated recently that the FRS is unscathed.
Because of federal government intervention on Thursday night, the Dow Jones bounced back 400 points on Friday bringing some confidence back to the market.