School District May Push For Legislation

BROOKSVILLE - After the "freezing" of a state-run investment pool set off a statewide panic last month, local school officials are looking to area legislators for backup.

Deborah Bruggink, chief financial officer for the Hernando County School District, plans to recommend to school board members at their Jan. 15 meeting that they sign a draft letter to pressure state officials to provide assurance that the district's money in Florida's restructured local government investment pool will be "held harmless."

As of Thursday, the district had about $130 million in the pool.

The action will likely mirror that of many other districts and government entities vested in the pool, which were encouraged by interim director Gen. Bob Milligan during a conference call Wednesday to push for legislative action from state officials to sponsor - or use state money - to formally ensure security and liquidity for participants.

"(Doing so) will go a long way to build confidence back into the program," Bruggink said. "Let's hope that the state of Florida does the right thing."

The fund, which acts as a money market account, allows towns, counties, school boards and other government investors to pool their money and receive a good return on investment.

However, they must also be allowed to access their money to cover payrolls and principal and interest on outstanding debt, as well as pay vendors and contractors.

"I think some of those folks that pulled (their money) out felt that if there was some reassurance from the state ensuring the liquidity of the program, they might come back," Bruggink said. "And those of us still in the pool would appreciate (that) support from the state that no one looses a penny."

Last month, many investors withdrew their money after learning the fund held millions of dollars in securities backed by unstable mortgages.

The pool, which once stood at $30 billion, reopened in early December with a new $12 billion account, created after $2 billion in troublesome, mortgage-backed securities were moved into a separate pool.

Because December is when property tax collections come in, the school district had enough money to pay bills during the freeze.

While Hernando has remained committed to the fund - with millions in Florida Education Finance Program automatic deposits flowing into the pool - board members discussed a desire to examine other options at a December meeting.

"We don't have a liquidity issue, but we still like to think of it like a checking account," Bruggink said. "When you put money in, you expect to be able to get it out whenever you need it. And now you can only get a certain amount out without (financial penalties), which is a restriction that didn't exist before."

The district's financial adviser has spent the past several weeks investigating other options for the district to consider, such as a private money market program with more penalty-free liquidity.

"We'll probably continue with the pool, but the district is going to continue to evaluate having some diversification," Bruggink said. "While I'm confident that state assurance of being held harmless will (help), all of us will still probably look at other options, due to that little bit of uncertainty."

Under an agreement reached last month, local governments now only have access to 86 percent of their money. The remaining 14 percent - consisting of investments tied to mortgages - is being held separate.

While the investment's funds are currently being managed by New York-based financial firm BlackRock Inc. on a 90-day contract, a state consultant is searching for a replacement firm to manage its funds for the next three years.

"Things are changing as a result of this," Bruggink said. "(State officials) are trying to move forward quickly, but with due diligence. There's a layer of supervision to the program that didn't exist until now."

The school board is expected to discuss possible changes, including the possible addition of another pool, at an upcoming workshop or meeting.

However, there are some types of accounts the district won't be going near.

"Anyone who says they have a high level of mortgage-backed securities, I don't want to have anything to do with," Bruggink said.