BISBEE — Speaking at the Arizona Association of County Treasurers Conference on Wednesday, State Treasurer Dean Martin reassured the attendees that the investments made on the behalf of counties and municipalities remained secure and profitable.

Pia Smal, left, of Realauction.com, Fort Lauderdale, Fla.; Dean Martin, Arizona State Treasurer; and Cheri Kiefer, chief deputy treasurer for Coconino County, compare handheld computers before the start of the Arizona Association of County Treasurers Conference in Bisbee. (Ed Honda-Wick News Service)

By placing money on hand with the state treasurer in the local government investment pool, local governments can see a quick return and build up a savings that can be used for troubled times. Sort of like the one the nation is in now, Martin said.

“Our philosophy is safety before liquidity before yield,” he said.

His office handles $355 million in transactions every day.

While other states, such as Florida, Connecticut and Maine, are suffering the consequences of bundled investments that included subprime mortgages, Martin kept to the straight and narrow and carefully scrutinized prospects before investing money.

“This is the taxpayers’ money. It is not the state’s, not the city’s, not the county’s,” he added. “To date, more than $100 billion in subprime-related losses have been announced and there are more to come. This isn’t going away any time soon.”

Caught in the middle of the estimated $600 billion subprime mess, however, are many Arizona homeowners who were quick to get in on the easy loans. In 2006, 32 percent of all mortgages in the state were subprime loans. In Phoenix, 34.1 percent of all mortgages were subprime in 2006, he said.

As for the state and the impending money-flow crisis in the general fund, there is money that can be used to keep the government running for a few more weeks, Martin noted. It will just take the Legislature’s approval on moving it from one fund to another.

“The state has been in a recession since October 2007. It’s not a terrible recession. You still see people at Starbucks. But there is a slowdown. We warned them that spending was exceeding revenues,” he said. “And we prepared the state’s funds for liquidity, so that when the money was needed it would be there to run the government … Right now, we’re looking at a 1.2 to 1.4 billion-dollar shortfall … The problem is that the constitution requires that the government spend no more than what revenue is taken in. In a few weeks, they won’t be able to write checks because of that. It would be breaking the law.”

Right now, there is $685 million in a rainy day fund that can be moved into the general fund to keep the state government solvent for a few weeks.

Other funds hold a total of $5.2 billion, but some of that money cannot be moved from one account to another, Martin said. But it’s going to take action in other areas as well, such as cutting spending or even borrowing money, to get by.

“This has never happened before,” he said. “We’re facing a 3.1 to 3.5 billion-dollar  shortfall over the next 16 months.”

Martin used to be on the Senate Finance Committee when he served in the Legislature. “It’s important that they act responsibly. Every day they fail to do something, more money goes out the door and we end up with fewer options. They could be backed up to a tax increase,” he added.

Recessions are expected in any climate, he said.

“They always happen. Predicting them is the fun part,” he said with a smile. “Our job is to see the warning signs.”

• Arizona State Treasurer Web site: www.aztreasury.gov/

• Arizona Association of Counties: www.azcounties.org/affiliates/