Plummeting interest rates are cutting into income earned by Flathead County's pooled investment program and likely are indicative of what's to come this year, Treasurer Adele Krantz told the county commissioners on Tuesday.

"I'm hoping that here shortly, say in a year, they'll pop back up," Krantz said.

The interest rate on the short-term investment pool run by the state averaged 2.52 percent in September 2008, then slipped to 1.91 percent in December. On Jan. 30, a one-day 'snapshot" of that interest rate was 0.79 percent.

By comparison, Flathead County was earning 5.5 percent in the short-term investment pool a little more than a year ago.

"It's quite disappointing," Krantz said, adding that she planned to immediately transfer some investment funds to get a better rate.

Managing the county's investments is a strategic juggling act that's been made even more challenging by the drop in interest rates as part of the national recession.

In the sweep account - the account in which the county takes all the excess available money at the close of each business day and invests it in overnight interest-bearing instruments such as money-market mutual funds or repurchase agreements - the interest rate was 2.68 percent in December but now is 1.8 percent. It was 3 percent just three months ago and in October 2007 was 5.57 percent.

Last quarter's top investment rate was 5.38 percent with Smith Barney. Now, Krantz said the top rate is 3.55 percent, "and that's reaching."

In December, the county's investments totaled $117.5 million; interest earned and distributed was $428,618.

Flathead County's investment policies limit investments to the safest types of securities and require diversifying the investment portfolio so the impact of the potential losses from any one type of security are minimal.

Krantz invests money from the county, local school districts and other districts, such as fire and rural special-improvement districts, in a variety of short- and long-term funds, then distributes the interest back to those entities.

The Columbia Falls School District has contemplated dropping out of the pooled-investment program, she said, but for now has decided to stay onboard.

Commissioner Dale Lauman said he understands the temptation to pull out of the pooled program.

"Every entity is looking to maximize" its investments these days, he said.

Lauman said reduced earnings from investments are among the many ways the county budget is being squeezed in the wake of the economic downturn.

Krantz plans to set up an investment workshop for school officials in the near future.

She wrapped up her quarterly treasurer's report by noting that her department is working on a system to allow people to pay taxes online using e-checks. Currently the county takes credit-card payments, but taxpayers pay a 3 percent credit-card fee.

There may be a small transaction fee for the e-check payment system, Krantz added.

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at [email protected]