A price tag is now emerging for what last year's collapse of investment giant Lehman Brothers could cost the state of Florida: more than $1 billion.
The losses could make Florida and its citizens among the biggest casualties in the biggest bankruptcy ever.
More than $440 million disappeared from the pension fund that pays benefits for some 1 million retirees and public employees.
Counties, cities and school districts face a loss of more than $300 million for roads, sewers and schools.
The state has $290 million less to pay for everything from hurricane claims to health care, community colleges and care for infants with disabilities.
While the general losses have been expected, this is the first public accounting of the magnitude of the Lehman-related public losses for Florida.
The outlook is bleak in bankruptcy court. In years to come, the state will be lucky to collect pennies on the dollar.
In an interview, even the ever-optimistic Gov. Charlie Crist could not muster a sunny side: "It is, to say the least, an unfortunate situation.''
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Lehman Brothers, which built the nation's railroads and survived the Great Depression, filed for bankruptcy protection last September.
Its failure sank banks and stocks, but the fallout reverberated far beyond Wall Street.
In Florida, Lehman Brothers was an icon of finance and real estate, managing public assets, selling securities, underwriting bond deals and handling residential and commercial mortgages.
In the last decade, Florida paid Lehman at least $27 million in fees for managing public investments and brokering and underwriting bond deals.
The storied bank hired former Gov. Jeb Bush as a consultant in June 2007, five months after he left office. As governor, Bush also served as a trustee for the State Board of Administration, which invests public money.
Lehman was the dominant Wall Street broker that sold the SBA $1.4 billion of risky, mortgage-related securities that started tanking in August 2007.
Bush has said he had nothing to do with those sales.
"As Governor Bush has stated several times in response to your inquiries, his role as a consultant to Lehman Brothers was in no way related to any Florida investments,'' said his spokeswoman, Kristy Campbell.
"It is unfortunate the St. Petersburg Times continues to perpetuate this incorrect and baseless conjecture.''
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The risky investments Lehman sold the SBA meant losses to the budgets of almost 1,000 state and local governments.
The local governments still get principal and some interest payments but are stuck with about $556 million in tainted securities that they can't redeem.
The off-limit funds mean less operating cash for sewers in Port St. Lucie and classrooms in Jefferson County.
Hillsborough, already shedding jobs and cutting services, faces a loss of $11.3 million. "When you're making cuts, every additional cut is more painful than the last,'' said budget director Eric Johnson.
Pasco faces a loss of $6.6 million.
"That's a huge amount of money for us,'' said Commissioner Michael Cox, a financial adviser. "To put it in perspective, our whole parks and libraries budget is $19.8 million.''
He said Florida made a costly mistake by not selling the tainted investments long before the bankruptcy.
State officials are telling local governments that if they hold on long enough, they just might recover their losses.
Still, the state has filed a claim in bankruptcy court in Manhattan, seeking to recoup $675.8 million for the bad investments.
In its complaint, Florida says Lehman Brothers sold it securities that were not registered with the Securities and Exchange Commission. Such securities are meant only for qualified, sophisticated buyers that understand the risks.
But documents show that SBA managers were made aware of the risks all along. Before they bought the securities, they received confidential memos, e-mails and investor reports from brokers and sponsors that detailed the risks.
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Florida lost more than $400 million in sales of Lehman stocks and bonds. It also faces a loss of more than $80 million on bonds it hasn't sold yet. That has squeezed dozens of state organizations — from the Division of Blind Services to the Chiles tobacco endowment to a health insurance subsidy for retirees.
The biggest casualty is Florida's giant public pension fund. It took a $230 million hit on Lehman stocks and bonds. The pension fund holds another $53 million in Lehman bonds that have lost most of their value and has $323 million tied up in tarnished mortgage-related securities purchased from Lehman. If the state sold those securities today, the pension fund would lose about $188 million more.
Almost 1 million public employees and retirees — from teachers and firefighters to social workers and police officers — participate in Florida's plan.
The SBA, which manages the pension fund, downplayed the long-term effect of the Lehman bankruptcy. Spokesman Dennis MacKee said that benefits paid to retirees won't be affected. Government employers would have to pay more to plug any pension funding gap. But MacKee said the Lehman holdings were such a small part of the pension fund portfolio that it's "very unlikely'' the losses would result in higher costs.
Here are how some other agencies with Lehman bonds fared:
• The state's hurricane catastrophe fund, which helps insurance companies pay for storm damage, lost $81 million.
• Citizens Property Insurance held $39 million of the bonds the day of the bankruptcy. It lost $9 million and now holds bonds originally worth $26.5 million — on the books for just $3.3 million.
• The state Treasury saw more than $75 million evaporate and holds an additional $53 million in troubled Lehman assets. That reduced earnings for, among others, universities, housing subsidies and clean water programs.
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Lehman's failure also hurt cities and counties that invested on their own in what they thought were top-rated Lehman securities.
Karen Rushing, comptroller of Sarasota County, told a U.S. House committee on May 5 that the Lehman bankruptcy had a "devastating'' impact.
The county saw $40 million disappear, Rushing said, meaning it couldn't build a fire station, two libraries and 11 parks and also could cost jobs.
Rushing and locals in California and Colorado and elsewhere are lobbying the U.S. government to cover Lehman losses with federal bailout money.
Florida "is navigating very difficult times,'' Rushing said. "High in job losses, high in foreclosure rate, a housing crash and an insurance crisis … all affect our ability to withstand the consequences of the collapse of Lehman Brothers.''
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Bankruptcies move slowly; it could take years for Florida to recover anything.
"Florida gets to wait in line like everyone else,'' said Andrew Gottesman, a vice president at SecondMarket, which is a marketplace for bankruptcy claims.
Estimates vary on how much Florida might recover, from a few cents on the dollar to 20 cents. An average guess is about 14 cents on the dollar.