FL Short-Term Investments Better Off in Private Hands?

December 19, 2007 (PLANSPONSOR.com) - The interim director of Florida's State Board of Administration (SBA) has recommended to members of the state cabinet that all of the Sunshine State's short-term investments be farmed out to private money managers.

Bob Milligan made that assertion this week regarding everything from the state’s hurricane insurance fund to operating cash for the state’s pre-paid college funding program, according to a Tallahassee Democrat news report. Milligan is also lobbying cabinet members to institute a significant salary bump for the person hired as permanent SBA director to manage all of the state’s $175 billion in investments, including the state’s public pension fund.

Milligan told cabinet officials the new SBA chief should be paid $300,000 to $350,000 – a significant increase from the $182,000 paid to former director Coleman Stipanovich who left as a result of a crisis in the state’s Local Government Investment Pool centered around its subprime mortgage related investments.   

Floridais already moving to privatize management of what remains of the $12 billion local government pool, after revelations it contained defaulted securities that caused its near collapse (See Florida OKs Local Govt. Pool Restructuring ).

Private management has already come at a cost. BlackRock, the fund’s new interim managers, charges up to $39 for every $10,000 invested, compared to $1.50 formerly charged by the state.

An independent audit committee is looking at the state’s purchase of mortgage-related securities as it prepares to hire consultants to investigate the SBA.