San Mateo County took tax payers' money and invested it through Lehman Brothers.
When Lehman went bankrupt, the county lost $155 million from its $2.7 billion investment fund; money that would have gone to local school districts and other agencies.
"Everybody shared proportionately in the earnings when we are making money, so the logic now says everyone is going to share proportionately in the loss," said San Mateo County Treasurer Lee Buffington.
The County Office of Education says:
Raul Parungao is with the Redwood City School District.
"It could mean several teachers, positions. We are not suggesting we are going to cut those positions but if you asked me what the value of that is, it's about 10-11 teachers," said Parungao.
The county maintains there were no warning signs.
"No, we didn't see anything when we went back. There were some indications that they weren't in such good shape as they had been, but there was nothing that indicated they were in this kind of shape," said Buffington.
But perhaps not all is lost.
That's because the much-talked about Congressional bailout addresses the financial woes of counties like San Mateo, which have lost money to investment banks like Lehman Brothers.
San Mateo County Congresswoman Anna Eshoo introduced the local bailout provision.
"The plan in the overall legislation is to buy back some of the toxic paper. In this case it is paper that is highly toxic because it's only worth 20-24 cents on a dollar," said Eshoo.
San Mateo County school districts say given a tight state budget, any money they get back will help.