MATC to pull $75 million

The Journal Sentinel staff

Milwaukee Area Technical College will withdraw nearly all of the $75 million it has on deposit in the troubled State Investment Fund over the next 90 days, MATC President John Birkholz said Wednesday.

The disclosure follows the City of Milwaukee's announcement Tuesday that it was withdrawing $230 million from the $6.7 billion fund because of the state fund's losses in risky investments.

Asked about MATC's decision, Patricia Lipton, executive director of the State of Wisconsin Investment Board, which administers the fund, said: "I'm not unduly alarmed. First and foremost, we have sufficient liquidity in the fund to meet these requests."

In an interview Wednesday, Birkholz echoed comments made Tuesday by Milwaukee Mayor John Norquist and City Treasurer Wayne Whittow about wanting to limit exposure to the fund. Leg 1 ends here Birkholz said he believed that the fund had misled its investors as recently as December, and that legislative hearings conducted in the wake of fund losses had "confirmed we needed a more diversified portfolio."

"We're conservative," he said. "I'm conservative personally. So is my finance director."

The State Investment Fund revealed last month that it had lost $95 million in derivative investments tied to the sinking Mexican peso and rising Mexican interest rates. The fund will spend $130 million over the next 10 years to pay off the losses.

"We feel the timely actions we've taken already will underscore the stability of the fund," Lipton said. "We are also hearing comments that are extremely supportive from other municipalities that intend to stay in the fund."

She said that audits being conducted on the fund would "reveal a well-run organiza Leg 2 ends here tion" and the fund would take whatever additional corrective actions were necessary. Other Funds Withdrawn

The fund is a cash management tool that more than 1,000 governmental units use like a money market fund. In all, about 24 local governments have withdrawn some money as a result of losses in derivatives, which are financial products based on the underlying price movements of stocks, bonds, currencies or interest rates.

The City of Eau Claire withdrew $62 million in city and school funds last week.

Birkholz said MATC officials met Tuesday with financial advisers from Robert W. Baird & Co. and M&I Investment Management Corp. and committed to transfer MATC funds to M&I as cash flow permits over the next three months.

The MATC board had previously approved the new banking services agreement Leg 3 ends here with M&I, Birkholz said, and was brought up to date on the State Investment Fund situation at a meeting March 27.

MATC will leave a small amount of money in the fund, Birkholz said, and will not withdraw all of its money at once. None of the money has been withdrawn yet.

"Our principal is protected," Birkholz said. "It's the interest on our future income that is in question."

The State Investment Board has calculated that its 10-year amortization plan for the loss will result in a 0.25% decrease in the fund's earnings rate, which is currently 5.7%.

A spokesman for the state treasurer's office said the office had not been informed by MATC of the plan to withdraw. No other governmental units had informed the fund of any withdrawal plans as of Wednesday, the spokesman said.

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