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Troubled Fund Reopens

December 6th, 2007 by Mike Vasilinda

Local governments got access to some of your tax dollars invested in a troubled state fund today, but not all of their investments. And as Mike Vasilinda tells us, they may not have access to the rest of the investments for months.

Hear it Here: Troubled Fund Re-opens

The state is trying to help local governments borrow cash from banks to meet payroll and other expenses, but it is not offering to cover the increased costs when they have to borrow.

Hal Wilson was at his computer at 7:30 Thursday morning only to find the state investment website down. When it did open an hour and a half late, he asked the state to send 2 million of Jefferson County school money to a local bank.

By midday, the money had still not shown up in the countys account.

I think it would be foolish to [put more money in the fund] right now. The folks Ive talked to, theyve stopped deposits.

Local governments were allowed to take up to 2 million out of their accounts for the first time in a week. The state CFOs office says that just over a billion was pulled out of the fund.

We didnt have a run on the fund, CFO spokesperson Tara Klimek said. We had investors who are staying in the fund, who are depositing new money into the fund.

The big if in all of this is something called Plan B. It has 1. 8 billion in the riskiest investments. And theyre now worth only a fraction of their original costs.

The state will use interest from the money it still has frozen in the safe fund to try and rescue the failed investments. But it comes at a cost. Every depositor will lose access to about 15 percent of their deposit for as long as a year and maybe forever. For Jefferson schools, it is not good news.

If we cant get access to that money fairly quickly, were going to have to cancel construction projects, Wilson said.

Just over Ten billion of local taxpayers money remains frozen. There is no timetable for the state to give governments access to their cash.

The state is trying to help local governments borrow cash from banks to meet payroll and other expenses, but it is not offering to cover the increased costs when they have to borrow.

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