Question: State law provides that all cash not immediately needed by
State law provides that all cash not immediately needed by school districts to finance current operations be forwarded to the counties in which the school districts are located. The law also requires that county treasurers place these resources in a separate fund and invest them on behalf of the school districts. Because Contra County is experiencing financial problems and to provide resources to the county, the county treasurer tells the county administrator that he plans to invest the school district funds in “junk bonds” yielding 9 percent interest. He will credit the “normal” rate of return (5 percent) to the school districts and the remaining 4 percent to the county itself. Explain the position the county administrator should take on the treasurer’s proposal.
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