Run on investment fund leaves Fla. cities cash-poor
School districts, counties, and cities in 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 Thursday after $12 billion was pulled out this month from participants. Governments from Orange County 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 United States keep their cash in state- and county-run pools. These public accounts are supposed to invest in safe, liquid, short-term debt such as Treasuries and certificates of deposit from highly rated banks.
By freezing the Florida fund, officials left governments without ready access to cash they draw upon for routine expenditures. The pool was the largest of its kind in the United States, at $27 billion before the withdrawals.
