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School officials consider reinvesting funds in SBA

By Staff | Mar 11, 2009

One year ago, local governments and school districts rushed to free millions of dollars worth of funds stashed away in the State Board of Administration’s Local Government Investment Pool after it was discovered that many of the investments were tied in with the sub-prime crisis.
Lee County Superintendent James Browder said Tuesday night that his finance department is considering the reinvestment of funds back into the SBA account.
“The SBA has gotten to the point where people are putting money back in,” he said. “I feel in today’s economy it is as safe there as anywhere.”
The school district currently has $460 million invested locally in Bank of America, which yields an interest rate of 0.16 percent, said Browder. Yet rates in the SBA account are as high as 0.75 percent.
He is recommending that $200 million be shifted into the SBA to accumulate approximately $100,000 worth of interest, as opposed to $20,000 currently earned in Bank of America.
“The SBA at this point is paying more interest and is a state organization that now has very clear rules and regulations in how they can and can’t invest their money,” said Browder.
He discussed the option with the board Tuesday to reach a consensus, and the board’s response was to wait until all five members were present.
At the beginning of the meeting, Chairman Jane Kuckel announced that board member Jeanne Dozier was absent because of an injury.
“I would hesitate making that decision without all five of us here,” she said.
Numerous investment firms and banks have shut their doors over the last year because of the economy, although Bank of America continues to be considered a secure institution.
After assets in the SBA were frozen last year, the pool was split in fund A and B and state officials have worked through a grueling process of separating the sub-prime loans.
The district currently has $13 million frozen in fund B and more than $100 million in fund A. The money in fund A can be withdrawn, but only gradually.
Board member Robert Chilmonik said he is concerned about whether it would be wise for the district to place its money back into the SBA.
“The only concern I have about it is that a lot of banks are now loosening up and paying higher interest rates because of federal stimulus money,” he said. “Is there any reason to keep all of our eggs in one basket?”
Other school districts in Florida are reconsidering the SBA for their investments and others never left it.
According to Browder, Hillsborough County Superintendent Mary Ellen Elia is asking districts to put their money back in the account. It reportedly kept $573 million in the fund when other districts and municipalities were feverishly withdrawing.
Some districts prefer instant access to their funds as opposed to locking it in the SBA, according to a report by the International Property Investment. Officials from other counties and school districts said they lacked confidence in the fund, even though many of the bad loans have been isolated.
Browder said the school district would only tie up half of the total $460 million worth of liquid funds in the SBA, leaving the other half accessible in Bank of America.