Volume 4 Number 49
December 7, 2007


After the first morning’s activity in the Local Government Investment Pool, Governor Charlie Crist, Attorney General Bill McCollum and Chief Financial Officer Alex Sink released the following statement:

“We are pleased to see the Local Government Investment Pool opened on time today and we are encouraged by the fact that new deposits were made into the fund. Withdrawal activity in the fund this morning was below expected levels, which continues to demonstrate cooperation among the fund’s investors and an interest in preserving the fund. We hope to see continued deposits from fund investors and remind local governments that all new subscriptions are fully available for withdrawal under the new plan.”


• GOV. Charlie Crist, Chief Financial Officer Alex Sink and Attorney General Bill McCollum serve as trustees for the State Board of Administration, which handles investment and trust management services for the state. They issued this statement collectively on Thursday:

A decline in the real-estate market and the growing subprime mortgage lending crisis have impacted the U.S. financial market. In Florida, we are keeping a watchful eye over the state's investment funds, particularly our model pension fund.

As part of this oversight, the three of us, sitting together as the State Board of Administration's (SBA) Board of Trustees, took steps this week to address a lack of investor confidence in one of the investment pools.

The Local Government Investment Pool (LGIP) is a short-term investment pool used by a number of counties, school boards and other government entities in Florida. Withdrawals escalated at a significant pace over the past few weeks, decreasing the pool's original balance of $27 billion to $14 billion. Whether or not this "run on the bank was fueled by legitimate concerns, we immediately acted to temporarily suspend withdrawals and hire a world-renowned asset management firm to conduct a thorough review of the LGIP and recommend a proposal with the best chance at preserving investors' principal.

After reviewing the pool's assets, the firm issued a report with several recommendations that we, as the SBA Board of
Trustees, enacted Tuesday. In the simplest terms, we supported a plan to isolate any distressed assets into a secure fund that will be allowed to mature and increase in value over time. The rest of the assets are of a high-grade money-market quality and will be placed in a fund that is open to current and new investors. We also voted to create
relationships with financial institutions to provide loans to investors seeking immediate access to capital.

In passing this reform, we had three guiding principles. Our primary goal was to adopt a plan that would provide the
best opportunity for investors to ultimately retrieve every cent they originally placed in the fund. We also knew that it
was essential for investors to have access to their assets as soon as possible, so that local entities could cover immediate needs such as issuing payroll for teachers and other public servants. Additionally, we understood the
importance of restoring confidence in the new fund, which will be managed by independent financial asset managers
and rated like many other money-market funds.

We believe the actions taken this week will best protect the investments of hundreds of local governments in a manner that is fair and secure to all investors. Above all, we
commend the local-government entities that have worked with us over the past week to help craft an innovative and
sensible solution.

As trustees, we will work to increase transparency in the state's investment funds and require the SBA to increase its
communications with local governments and other investors as well as the Florida League of Cities, Florida Association of Counties, Florida Tax Collectors Association, Florida Sheriffs Association and others. Together, we can overcome the current crisis and provide a model to other states facing similar circumstances.