The State of Florida, according to Bloomberg, has a big problem on its hands.

School districts, counties and cities across Florida are scrambling to raise cash after being denied access to their deposits in a $15 billion state-run investment fund.

Florida's State Board of Administration, manager of the Local Government Investment Pool, halted withdrawals yesterday at an emergency meeting after $12 billion was pulled out this month from participants. Governments from Orange County, home of Disney World, to Pompano Beach asked for their money back following disclosures that the fund held $1.5 billion of downgraded and defaulted debt.

"The unthinkable and the unimaginable have just happened here in Florida," said Hal Wilson, chief financial officer of the Jefferson County school district, which kept its entire $2.7 million of cash in the fund. What we just experienced here is a classic run-on-the bank meltdown."

Marketwatch is reporting similar problems in Montana.

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