The nation's subprime-mortgage crisis is prompting Florida cities, counties and agencies to pull billions of dollars out of a state-run investment fund. They fear they could have lost their money because a state agency invested it in funds backed by loans to homeowners with questionable credit -- the same loans that have triggered an international credit crunch.
Governments and agencies typically take money intended to pay for such basics as teacher salaries or road repairs and invest it in the short-term state fund so they earn interest before the bills come due.
So far, at least $8 billion has been withdrawn -- almost a third of the fund's assets -- since the run began in late October.
"We don't really know for sure what is going on, and we can't risk our money," said John Pavelchak, director of finance and budgeting for Seminole County schools.
Pavelchak said he has withdrawn about $100 million from the state. He left $1,000 to keep the account open.
The agency that made the investments, the State Board of Administration, released a statement late Wednesday saying the fund was safe and continues to pay interest. The agency also promised to produce a plan to make the fund safer.
The subprime investments, which total as much as $6 billion, are part of an overall fund that stood at $27 billion before the withdrawals began.
'It could result in a loss'
The run on the fund quickened during recent weeks after Bloomberg News broke a story about the possibly precarious nature of the investments. Orlando, for example, yanked all of its money, $50 million, Wednesday.
"As more and more agencies pull out, it could result in a loss, so we needed to pull out," Orlando spokeswoman Heather Allebaugh said.
Gov. Charlie Crist said Wednesday that he was aware of the run and added that he might have "more of the full faith and credit of the state support it [the account] to stem these concerns."
That could mean the state would be asked to cover any possible losses suffered by those in the so-called local-government investment pool.
Agencies that have pulled money include Orange schools, $438 million; Orange County, $370 million; Polk County, $300 million; Seminole County, $200 million; Osceola County schools, $160 million; Volusia County, $152 million; and the Greater Orlando Aviation Authority, $57 million.
About 1,000 cities, counties, school districts and assorted agencies across Florida have placed their money in accounts that SBA invests and manages on their behalf. The agency was not able to provide information Wednesday about how much each agency has remaining in the fund.
Orange County Deputy Comptroller Jim Moye said his office took its money because the state was evasive when questioned about how much was invested in subprime funds and how stable those accounts were.
"One of the problems is transparency," Moye said. "We haven't been satisfied with the answers we've been given."
Added Orange Comptroller Martha Haynie: "I finally learned that lesson that is so difficult for women. You have to take care of yourself first. I decided to take care of Orange County first."
Orange County and other agencies invested with the state because the account paid a good return -- generally exceeding 5 percent -- while allowing them to easily withdraw money when bills came due.
It was that rate of return that prompted the Palm Beach County School District to withdraw $307 million earlier this month. They figured it was too high, meaning the money was being placed in accounts that were not as safe as the board wanted.
