Pooled Money Investment Account

LAIF Deposits Are YOUR Money

As Treasurer of the State of California, I believe it is my duty as California's chief fiscal officer to do all that I can to preserve and protect the financial integrity of this state. I do not take that responsibility lightly. Consequently, I have commented publicly that a national economic stabilization plan is absolutely and urgently necessary to begin to restore investor confidence in financial marketplaces. I have not advocated the specifics of any proposal, but I have said and I am convinced that failure by Congress to enact a timely and effective plan jeopardizes the ability of public and private debt issuers to come to market. Chief among those imperiled public debt issuers at the moment is the State of California, though many of your jurisdictions have surely also been affected by the credit freeze. As Controller John Chiang and I have recently mentioned publicly, the State's cash reserves will be depleted by late October, making passage of a stabilization plan and unlocking the nation's credit market essential to permit the state to meet its cash needs before the end of the month.

As State Treasurer I am also the steward of State money and Local Government money which is voluntarily commingled within the Pooled Money Investment Account (PMIA). The State's fiscal crisis has an impact on the PMIA, but only to the extent of determining the pro rata participation of the State in the commingled fund. If the cash reserves of the State of California are exhausted, then the participation by the State's General Fund in the PMIA is zero. Nothing more and nothing less. There is no correlation between General Fund cash reserves and your funds on deposit in the LAIF. Those funds were yours before they were deposited, they remain yours while on deposit, and they will be returned directly to you upon only your demand.

I or my staff will be happy to answer any questions arising from my comments regarding the state's financial condition and the need for Federal intervention in the financial markets, or from any event that might ever cause you concern. If you have a question or concern, please contact the professionals in my Investment Division and LAIF unit.

Sincerely,