Walker

By Andrew Edwards Staff Writer
Posted: 08/12/2011 06:06:15 PM PDT

It is hard to predict the longterm consequences of Standard & Poor’s downgrade of the San Bernardino County Investment Pool, county Treasurer Larry Walker says.

But no immediate difficulties are seen for agencies using the multi-billion dollar fund, he said.

“The best answer as to how it will affect them is time will tell,” Walker said. “We’re talking about uncharted waters here.”

The San Bernardino County Investment Pool holds money for school districts, community colleges, water districts and other special districts in the county.

The new, lower rating may not necessarily spell new financial troubles for schools and other public agencies, but it is a symptom of the broader economic uncertainties, leaving administrators wondering if their budgets will shrink further.

“I don’t see the downgrade affecting our district,” said Kim Stallings, the deputy superintendent who oversees budget issues for the Ontario-Montclair School District.

“The federal government’s debt issues (mean) their budget cuts are coming down that could affect schools negatively, and now the state is finding out it doesn’t have enough money for the budget they adopted this year.”

The county Treasurer’s Office invests the pool’s dollars conservatively, with a majority of the portfolio being invested in instruments backed or issued by the U.S. government.

So when Standard & Poors downgraded the U.S. government’s credit rating on Aug. 5, the ratings firm followed that action by downgrading the county fund. In both cases, Standard & Poors took the ratings down a single peg from the best rating – AAA – to AA-plus.

The other major ratings firms, Moody’s Investment Services and Fitch Ratings, continue to give their top ratings to both the federal government and the San Bernardino County pool.

The U.S. government’s rating reflects analysts’ views on its ability to repay the debt used to finance daily operating expenses.

A slightly lowered rating means Standard & Poors is telling investors that government bonds are not quite as safe an investment as they previously have been.

That judgment would presumably send interest rates up, but the markets have thus far acted otherwise.

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