A Tallahassee Democrat news report said the state officials decided to make the move in the hope that, in time, those investments will rebound to their original value.
The local government fund has been frozen in an
attempt to ward off a panic caused by concern over the
mortgage-backed securities in light of the continuing
subprime mortgage crisis roiling the financial markets.
The Democrat report said that, while the fund is being reopened, local government officials won’t have unrestricted access to the remaining $12 billion.
Local governments will have access to no more than
$2 million each or — for the bigger depositors – 15% of
their remaining balances. If they need more than that,
they’ll have to arrange loans or pay a 2% withdrawal
surcharge. That is less than what nearly a third of them
say they need to withdraw to meet expenses, the news
Distance from Government
According to the Democrat, the state also is trying to rebuild trust in the pool by distancing it from state government. The state has tapped its financial advisers — BlackRock — to manage the pool for the next three months while a search for a permanent fund manager is conducted.
Approving the plan were Governor Charlie Crist, CFO Alex Sink, and Attorney General Bill McCollum.
The Democrat report said local officials weren’t happy with the reform package. For example, the newspaper pointed out that the state refuses to guarantee the safety of money put into the investment pool.
Leon County Court Clerk Bob Inzer was among those
who pulled billions out of the pool in November. Without
a state guarantee the money is safe, he said he doubts
he’ll put his money back in anytime soon. “The state
showed less support of its local governments than private
corporations do their investors,” Inzer told the
newspaper. “We trusted them and they want to say to
continue to trust them? Would you?”
The uproar over the fund also led to the recent resignation of the State Board of Administration Executive Director Coleman Stipanovich. “It’s time to move forward,” Stipanovich told reporters.”Some people have reservations about my leadership on this issue.”