September Nets Mostly Losses for State Investments
TALLAHASSEE — A tumultuous September brought significant financial losses for Florida as the country saw several financial giants crash and burn in a flailing economy.
The state invests portions of several funds in the stock market through a diverse portfolio. But as the market continued to tank over the past month, investments have declined significantly in value.
A controversial $700 billion Wall Street bailout passed Congress last week, but the market has shown little improvement since then and market analysts are sitting and hoping for a turnaround. On Wednesday, the Fed said it would reduce interest rates to try to jumpstart the economy, but the market response was tepid, with the Dow closing down nearly 200 points.
“Eventually the numbers will go up,” said Dennis MacKee, a spokesman for the State Board of Administration, which handles the investments of the state's Hurricane Catastrophe fund, pension fund and other state money.
The SBA has investments in Lehman Brothers, AIG, Wachovia and Washington Mutual, all companies that have come under the microscope in recent weeks.
At the end of August, the Florida Hurricane Catastrophe Fund, which backs up insurance companies when they can't pay for hurricane damaged property, had investments in Lehman Brothers at $88.9 million. By the end of September, the value had sunk to $11.8 million. The CAT Fund's investments in Washington Mutual, valued at $92.8 million at the end of August, were valued at just $41.5 million at the end of September.
The losses in the CAT Fund are only on paper at the moment though. According to numbers provided by the SBA, no CAT Fund holdings were sold during that time period. So, the value will increase if the economy improves.
The Chiles Endowment Fund, a trust fund of money the state won in a settlement with cigarette makers, which could be used in part to plug a $795 million hole in the state budget, has seen actual losses though. Because of sales, the state lost more than $1 million from the Chiles Endowment.
SBA interim executive director Bob Milligan and state Chief Financial Officer Alex Sink have said at Cabinet meetings over the past month that the state's diversified portfolio has essentially saved Florida, as an investor, from experiencing dire financial consequences from the failures of several investment banks.
But the downward spiral of the market has politicians, financial analysts and investors nervously watching the state's pocketbook.
The pension fund has also been significantly impacted by the fluctuating market; however, it did make some money in the past month from a sale of Washington Mutual stock, netting the fund $655,860.76.