The state lost $240 million of its $1 billion investment in securities that it now can’t sell, lawmakers learned Tuesday.

The state took a writedown of an estimated $140 million in the fiscal year ending June 30, 2010, according to Director of the State Budget and Finance Department Georgina Kawamura, who testified at a Senate Ways and Means Hearing on Tuesday. The previous fiscal year, the state took a hit of about $100 million.

The writedowns are from controversial state investments known as student-loan-backed auction-rate securities, or SLARS. The investments had been marketed by bankers and brokers as a higher yielding alternative to U.S. treasuries, but the money essentially became frozen when the market crashed in 2008. In recent years, the state had invested $1 billion in the securities, which essentially became illiquid.

A stinging March 2010 report by the state auditor blasted the state’s finance department for sloppy investment methods and for allegedly breaking state law that says investments may not exceed a maturity more than five years from the date of investment. The finance department responded by saying it believed the charges were unfounded. An investigative legislative committee is now tasked with creating its own report.

Based on previous Civil Beat reporting, which found that 37 percent of the writedown belonged to the general fund, this means that $88.8 million of the writedown over the past two years belonged to the state’s main operating budget and could have been used to help with the state’s budget mess.

The final figure for the writedowns will be released with the state’s comprehensive annual financial report — commonly known as the CAFR. The report — which aggregates all the state’s revenues, expenditures and assets — is typically completed in May of each year, but this year the report is late. It is not yet known when it will be completed.

The state also received more than $90 million of the funds in principal reduction — investments that had matured and been paid back at 100 percent par value, Kawamura said at the hearing. Another $17.1 million was earned by the investments in the fiscal year ending June 30, 2010, with an average yield of about 1.78 percent.

As of June 30, 2010, more than $916.5 million was left in the auction-rate securities.