SBA Audit Committee Meets Dec. 12; General Milligan Named Interim SBA Director Today

 

SBA Audit Committee To Meet Dec. 12 

On Wednesday, December 12, the State Board of Administration (“SBA”) Audit Committee will hold a special meeting at 10:30 a.m..  The meeting, which takes place in Tallahassee, is open to the public.

 

Today, December 11, 2007, the SBA Local Government Investment Pool Advisory Committee met in Tallahassee, Florida.  Following that meeting, the SBA met for the purpose of naming an Interim Executive Director. 

Following are reports on each meeting:

Local Government Investment Pool Advisory Committee

James Francis with the SBA called the roll and opened the meeting.  Next, representatives from BlackRock provided a review of the current marketplace and a recap of the Local Government Investment Pool (“Pool”) activities that occurred last week. 

There have been relatively small redemption from the Pool, which was split in two upon its re-opening last Thursday.  The balance at the time of this meeting is over $10 Billion in Fund A.  He stressed that liquidity needs have been met and the Fund is stabilizing, but the process is not over.

BlackRock representatives also provided a market outlook.  They noted that the value of asset backed commercial paper has dropped about 33 percent recently and, as a result, that scarcity of money is causing some liquidity problems.  Over the past 5 months, prices are adjusting to ration the available money.  These problems began with subprime issues and turned into a “fear issue,” which has remained the current market mindset, according to the BlackRock representatives.      

Next, the Pool participants and BlackRock representatives engaged in significant dialogue regarding the current make-up of Fund A and Fund B.  Fund A has gone down $1.7 billion, from $12 billion to $10.2 billion, which equates to approximately 14 percent.

Representatives of tax collectors suggested that a plan be developed for withdrawals from Fund B because those funds will be needed shortly.  BlackRock noted that staff is aware of the issue, but they will take direction from the trustees.

It was noted that new deposits are not subject to fees and will not impact liquidity of existing funds.

One major concern raised by the pool participants was that some Fund B securities have an uncertain maturity date.  Also, there were concerns because November interest earnings form Fund A will be transferred to Fund B (approximately $95 million).  However, going forward, interest will remain within the same fund.  Finally, the pool participants stated that they would like the state to add liquidity to the pool.  Representatives from BlackRock stated that issue was within the purview of the legislature.  When asked whether Blackrock would recommend that the State of Florida add money into the pool, they stated that they will not tell the State what to do.

 

State Board of Administration

As reported earlier today by this office, the SBA appointed Florida’s Insurance Consumer Advocate, General Bob Milligan as its Interim Executive Director.  Also at the meeting, Chief Financial Officer Sink made a motion that was approved to begin the search for a full-time Executive Director and begin the public bidding for a private firm to oversee the Pool activities. 

Representatives from BlackRock provided testimony regarding the pool.  They stated that some money is beginning to flow into the pool and that the track record of redemption is good.  They are also looking at a loan program.  Wacovia Bank has indicated a willingness to serve those needs.  BlackRock Representatives closed by noting that calm is restored to the pool, however confidence has not yet joined it.

Governor Charlie Crist issued the following statement regarding the appointment of General Bob Milligan:

“I thank Chief Financial Officer Alex Sink on her motion to name General Bob Milligan as the interim executive director of the State Board of Administration.  The General’s vast experience, integrity and honor will be certain to restore confidence in the management of the state’s investment funds.”

 

 

The above information is a brief summary of the activities that took place during the meetings.  It is not intended to be a comprehensive analysis of the item contained therein.  Should you have additional question, please feel free to contact this office.