DALLAS - Since Texas excised its state treasurer's office Sept. 1, possibly the most sensitive - and most hush-hush - topic floating around the state's public finance circles is the future management, or even existence, of TexPool.
Comptroller John Sharp now runs the $4.2 billion pool, and a spokesman said he would not decide what to do with it until next year. But several groups have already volunteered to take over the fund, and meanwhile rumors buzz like flies around a West Texas feed lot.
Did the treasurer's office run the pool so badly that the state should stop handling money for municipalities? A pair of reports issued this March said the fund's 1994 bailout cost twice as much as predicted and that some of the state money used in rescue wound up there illegally. Former Treasurer Martha Whitehead said none of that was true, but Lieut. Gov. Bob Bullock had a different response.
"TexPool turned out to be a cesspool," Bullock said, and he suggested that the state shouldn't be an investment manager for cities, counties, and school districts. The Texas Constitution gives the lieutenant governor's office a lot of power, so his words are being listened to.
With assets totaling just over $10 billion at its peak, TexPool has been the dominant player in public funds management in the state - and an important source of stability for a host of small municipal governments unable to afford their own money management services.
But the agency's star began to fall in December 1994, when Orange County's pool went bankrupt and the panic caused runs on pools elsewhere. One was TexPool, whose assets plummeted to $1.3 billion at the end of the month from $3.8 billion at the end of November 1994.
As municipalities pulled out, Whitehead bought back their stakes at above-market prices. She raised the money by selling state investments, at a cost that she said came to $55 million but that state auditor Lawrence Alwin said in March was actually $97 million.
The comptroller's office could, without legislative approval, shut down TexPool and force its 1,500 government units to seek money management services elsewhere.
"I know there's an effort under way to close it down or privatize it," said Charles Cox, treasurer of the Government Finance Officers Association of Texas and director of finance for the city of Farmers Branch.
Cox said that GFOAT's president, Lou Ann Heath, has been trying to arrange a meeting with Sharp to discuss the future of TexPool. Heath couldn't be reached for comment.
Sharp has been approached by bankers and others in the financial community interested in taking over management of the pool in recent months, an official in his office confirmed. And the Texas Association of Counties confirmed late last month that it was making a pitch of its own.
Andy Welch, Sharp's spokesman, said no decisions about TexPool's future will be made until a consultant reports to the comptroller early next year. After taking over the treasurer's functions Sept. 1, Sharp put out a request for proposals for consultants to evaluate whether all the treasury's former functions could be further streamlined or consolidated. The contract is expected to be issued Oct. 1. A report will be due early in 1997.
"Our general philosophy is that if there's a business that can perform the same function we do at less cost, then we'd certainly consider that," said Welch. "But we don't have any preconceived notions about where we are going."
Meanwhile, TexPool's program director, Randall Corwin, has left for MBIA Municipal Investors Service Corp. MBIA-MISC announced Sept. 16 that Corwin planned to become regional marketing director for the company's investment program for public entities in the state, which was launched late this summer.
Mike Haley, a spokesman for Bullock, said the lieutenant governor looks on TexPool the same way he did in March, although there are still questions about what to do with it. Privatization is one option being looked at, he said.
If the comptroller does not act, Haley expects some sort of bill to eventually make it into the Legislature. As lieutenant governor, Bullock has the ability to shape and shepherd legislation.
"Bullock wants local governments to work with their representatives and senators to see what's feasible both politically and practically," said Haley.
