State Board of Administration of Florida

Management and Oversight

Board of Trustees: While financial specialists at the SBA handle day-to-day operations, the agency is governed by a three-member Board of Trustees, which includes Florida’s elected governor, chief financial officer and attorney general. The current trustees are Governor Richard Scott, Chief Financial Officer Jeffrey Atwater, and Attorney General Pamela Bondi.

Each trustee appoints three people knowledgeable about financial markets to the Investment Advisory Council, which provides oversight of the SBA’s funds and major investment responsibilities.

The trustees also appoint a three-member Audit Committee to serve as an independent and objective party to monitor SBA’s processes for financial reporting, internal controls, risk assessment, compliance and review of the agency’s independent auditors and Office of Internal Audit. The SBA also is audited by two legislative entities: the Auditor General and the Office of Program Policy Analysis and Government Accountability.

Each trustee also appoints two members to the Participant Local Government Advisory Council (PLGAC), which reviews the administration of the local government investment pool known as Florida Prime. The PLGAC was statutorily created as an additional measure to ensure that the Pool is operated and managed in the best interest of investors in the fund. The Board of Trustees appoints six members to serve on the PLGAC for four-year terms, subject to confirmation by the Florida Senate.

The PLGAC reviews the administration of the trust fund and makes recommendations regarding such administration to the Trustees. The PLGAC prepares and submits a written biennial report to the Trustees, the Investment Advisory Council, and the Joint Legislative Auditing Committee that describes the activities and recommendations of the council

By statute, the Board of Trustees appoints a nine-member Florida Hurricane Catastrophe Fund Advisory Council to provide the Board with information and advice in connection with its duties related to the Florida Hurricane Catastrophe Fund (FHCF).

Florida Commission on Hurricane Loss Projection Methodology: The Commission was statutorily created as a panel of experts to provide actuarially sophisticated guidelines and standards for the projection of hurricane losses. The Commission is administered by the State Board of Administration. The Commission consists of the following 11 members and the Board of Trustees annually appoints one of the members of the commission to serve as chair.

2007 Pool Restructuring

In 2007, Coleman Stipanovich, executive director of the $187.5 billion State Board of Administration, resigned his post after local government authorities investing in the SBA’s internally managed cash pool caused a run of withdrawals in the fund. The pool, with assets valued at $27.3 billion as of Sept. 30, fell to $14 billion following the withdrawals. It was closed for redemptions Nov. 29. Under a restructuring, the pool has since been split into two funds: A and B.

The $14 billion Florida Local Government Investment Pool, which invests short-term assets for cities and other public entities around the state, barred withdrawals. The Florida State Board of Administration (SBA), which manages the fund as well as the state’s pension assets, froze withdrawals after investors became fearful of major losses and began taking out large sums of money. The freeze left some towns struggling to make payroll and to cover other near-term expenses. Looking to shore up confidence, the pool’s directors hired fixed-income giant BlackRock to analyze the troubled fund and take over management for a 90-day period.

Florida Retirement System Pension Fund

The Florida Retirement System (FRS) Pension Plan, a defined benefit plan, is one of the largest public retirement plans in the U.S.. At year-end it comprised over 80 percent of total assets under SBA management. The FRS Pension Plan serves a working and retired membership base of nearly one million public employees.

In investing the FRS Pension Plan assets, the SBA follows statutory guidelines and a substantial body of internal policies and procedures.

The Division of Retirement and the Florida Legislature is responsible for the administration of retirement benefits, setting of benefit levels or setting contribution rates for participating employers.

The Investment Advisory Council provides independent oversight of the FRS Pension Plan’s general objectives, policies, and strategies.

Currently, the asset classes for the Florida Retirement System are Global Equities (both developed and emerging markets), Fixed Income, Private Equity, Strategic Investments, Real Estate and Cash.

The Florida Retirement System (FRS) Pension Fund, the largest mandate for the SBA, historical investment returns are:

In February 2010, the Pew Center on the States identified four states that demonstrate different approaches to designing and managing retirement systems: Florida, Nebraska, Iowa and Georgia. Florida's method for calculating annual contribution rates incorporates a portion of any unfunded liability into upcoming actuarially required contributions so that the bill is paid off over time. The state has legally mandated that pension surpluses of less than 5 percent of total liabilities will be reserved to pay for unexpected losses in the system -- and even if the surplus is greater than 5 percent of total liabilities, only a fraction can be used to reduce participating employer contributions. This process allows for a rebate in required employer contributions to the FRS when the fund is more than 100% funded, and mandates employers contributions in excess of normal required contributions to make up any unfunded liability when the fund is less than 100% funded.

Florida Retirement System Investment Plan

The Florida Retirement System (FRS) Investment Plan was established by the Legislature to provide Florida’s public employees with a portable, flexible alternative to the FRS traditional defined benefit plan. Since opening its first employee account roughly nine years ago, the FRS Investment Plan has become one of the largest optional public-sector defined contribution retirement plans in the U.S.

Florida PRIME

The objective of Florida PRIME is to provide eligible participants a cost-effective investment vehicle for their surplus funds. Its investment strategy emphasizes, in order of importance, preservation of capital (safety), liquidity and competitive yield.

In response to the economic turmoil in the markets, the SBA changed its guidelines to ensure that Florida PRIME offers daily liquidity, making it possible for investors to convert 100% of any balance into cash. Legislative and policy changes require Florida PRIME to make conservative investments, purchasing short-term assets that have received independent high ratings.

Florida Hurricane Catastrophe Fund

The Florida Hurricane Catastrophe Fund (FHCF) was created in 1993 in response to Florida’s property insurance crisis resulting from Hurricane Andrew. The purpose for this state tax-exempt trust fund was to encourage additional insurance capacity in the state by providing a stable and ongoing source of reimbursement to insurers for a portion of their catastrophic hurricane losses. The FHCF is financed by reimbursement premiums charged to participating insurers, investment earnings, and emergency assessments on property and casualty insurers.

The Florida Hurricane Catastrophe Fund finished the year in its healthiest financial position since its creation in 1993. Investing the collective assets of the Florida Hurricane Catastrophe Fund is the second largest mandate of the SBA. Changes made by the Florida Legislature continue to improve the program’s ability to meet its potential needs by reducing optional program coverage and gradually increasing its pricing to better reflect future claims.

Lawton Chiles Endowment Fund

Created by the Florida Legislature in 1999, the purpose of the Lawton Chiles Endowment Fund (LCEF) is to invest a portion of the state’s tobacco settlement monies to provide a perpetual source of enhanced funding for health maintenance and research programs related to tobacco use.

The SBA has the statutory authority and responsibility for the investment of LCEF assets, subject to certain investment limitations and consistent with an Investment Policy Statement approved by the SBA Trustees.

Florida law specifies that the LCEF shall be managed as an annuity, with an investment objective of long-term preservation of the real value of the principal. The law requires a specified annual disbursement of funds for biomedical research activities, until such time as cures are found for tobacco-related cancer and heart and lung disease. Five percent of the annual disbursement is dedicated to the biomedical research portion of the endowment shall be reinvested and applied to that portion of the endowment’s principal, with the remainder to be spent on biomedical research activities consistent with this section..