News - October 22, 2008

Lehman-related financial losses for schools larger than first thought

by Dave Boyce

Financial losses have risen for school districts as a result of the county treasurer's reassessment of the local impact of the Sept. 15 bankruptcy of Lehman Brothers investment bank.

The original mid-September estimate, in which the pool of $2.6 billion lost $155 million, or 5.7 percent, hasn't moved. And the net loss is now lower, at 4.7 percent, after including the pool's "considerable" recent earnings, San Mateo County Treasurer Lee Buffington said in an interview.

But the treasurer's reassessment meant Lehman-related losses got worse for some pool account holders, including all of the public school districts in The Almanac's circulation area.

Losses rose after the treasurer, using the same formula used to distribute earnings, recalculated each pool participant's share based on average daily account balances between July 1 and Sept. 30. The new loss figures are:

• Sequoia Union High School District, $6.5 million, or 7 percent of the district's $92 million annual budget, and up from $5.5 million.

• Menlo Park City School District, $3.9 million, or 14 percent of a $28 million budget, and up from $3.5 million.

• Las Lomitas Elementary School District, $397,000, or 2.3 percent of a $16.9 million budget, and up from $320,000.

• Portola Valley Elementary School District, $173,000, or 1.5 percent of a $11.5 million budget, and up from $102,000.

• Woodside Elementary School District, $100,000, or 1.3 percent of a $7.8 million budget, and up from $55,000.

• Town of Atherton, $552,000, or 3.3 percent of a $16.9 million budget, and up from $500,000.

The losses have been "a deep shock," Sequoia district budget officer James Lianides said in an interview. Spending cuts may be ahead, he said.

While schools can exert no direct control over a treasurer's investment decisions, there is now a committee composed of K-12 superintendents and district budget officers from around the county.

Mr. Lianides explained the committee's purpose: "We are not confident that the county treasurer has made investments that constitute a philosophy of capital preservation. We want to share our very deep concern with the composition of the county's portfolio. We have very deep concerns regarding the investment policies."

Asked to comment on Mr. Buffington's assessment to The Almanac of the pool's Lehman debt as "very conservative" and "not risky," Mr. Lianides replied: "Well we have a difference of opinion."

The pool's "significant investment" in Morgan Stanley, an investment bank that is now a commercial bank, is a concern, Mr. Lianides said.

Mr. Buffington said his office sends regular earnings reports and is in frequent communication with many account holders, but school districts are not among them.

"The funny part is that I discovered a long time ago that there were telephone lines that come into this office," he added. "I never get any phone calls from these guys. For crying out loud, we get phone calls every day from everybody else."

"I'm not belittling them," he said, "I'm obviously going to go to the (committee) meetings and I'm going to listen to them."

Indeed, citing school districts' concerns, he said he sold some pool holdings in Morgan Stanley, whose stock had fallen to a 52-week low on Oct. 10. The stock price has since nearly tripled after a $9 billion investment from Mitsubishi and a capital injection from the federal government.

"We could have made money on that stuff," he said. "We were aware of the districts' concerns, so we lightened up. We weren't that concerned. We felt we knew what was going on."

School districts appear to be exploring ways to divert unrestricted funds away from the county pool and put them under other management, perhaps the state treasurer's office that manages municipalities' investments.

That pool, the Local Agency Investment Fund, lost nothing from the troubles at Lehman, investment bank Merrill Lynch, commercial bank Washington Mutual and insurer American International Group, a fund spokesman said.


Posted by Alekaneleno, a resident of Portola Valley: Los Trancos Woods/Vista Verde
on Oct 21, 2008 at 3:36 pm

This tinhorn politician's most notable accomplishment has been to put his name first on the return address line of property tax returns, and, at least in the past, expected us to make out checks to him personally. He evidently wants to remind us how puffed up he is. So let's accommodate him by crossing out "ington" and replacing it with "oon".

Posted by district parent, a resident of Menlo Park: other
on Oct 21, 2008 at 5:52 pm

Maybe the schools won't have enough money to teach kids all about gay marriage. That should comfort the supporters of prop 8.

Posted by follow the money?, a resident of Menlo Park: Felton Gables
on Oct 21, 2008 at 7:49 pm

You have to ask why the MPCSD was hit so much harder than the other districts. Ken Ranella is not to blame, I'm sure.

Posted by Gay Hatemongers, a resident of Menlo Park: University Heights
on Oct 21, 2008 at 8:13 pm

Schools are already teaching first graders about gay marriage. They aren't waiting for you to get a clue.

Web Link

I love that front page of the SF Chronicle article on first graders being taught all about gay marriage. Shuts up the snark attacks in a flash.

That article is truly the gift that keeps on giving. Nothing better than wacking another troll.

Posted by parent, a resident of Menlo Park: Felton Gables
on Oct 21, 2008 at 8:35 pm

It's not appropriate for kids to take a school field trip to a wedding. The fact that it was a gay wedding is irrelevant.

Hatemonger, you sure do your best to live down to your handle.

Posted by Gay Hatemongers, a resident of Menlo Park: University Heights
on Oct 21, 2008 at 8:59 pm

"Maybe the schools won't have enough money to teach kids all about GAY MARRIAGE."

The fact that it was a GAY marriage sure was important to you, Troll. Geez, some idiots don't know when to quit.


Posted by a neighbor, a resident of Menlo Park: Linfield Oaks
on Oct 22, 2008 at 7:20 am

What a discussion on CA Prop 8 has to do with the financial malfeasance of the County Tax Collector/Treasurer is unclear to me.

So, getting back to the comments on the article regarding the county's loss of school district funds - I am amazed at the tone of the quotes from Mr. Buffington in this article. It sounds very much like he's blaming the school districts for trusting his financial judgement.

It seems to me that we need someone with more financial savvy in the position of County Tax Collector/Treasurer. The next election for this office will be in 2010. I hope that Mr. Buffington has some opposition this time.

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