O.C. owes state $150 million, judge says in tentative ruling

Orange County may owe the state as much as $150 million after a judge tentatively ruled this week that it must pay back funds originally meant for local schools and community colleges.

The lawsuit, filed by the state, alleges that county officials broke the law when they redirected the funds. The money fight erupted in 2011, when the county lost money in vehicle license fees and redirected tax funds that were supposed to go to schools.

“We’re pleased with the court’s ruling because it affirms that the county’s withholding of property tax from schools was illegal” said H.D. Palmer, a spokesman with the state Department of Finance.

The move could have reduced funding to community colleges by $12 million to $15 million per year, a cost that would have been passed along to the schools statewide, according to documents.

The court ruled that the state is not raiding local property tax allocations but rather redirecting funds according to the law. Orange County can’t be treated differently, documents stated.

John Moorlach, an Orange County supervisor, said that the lawsuit came down to different interpretations of the law and was ultimately a disappointment.

“We’re going to have to make some serious cuts to somehow make up for the hit to our general fund,” Moorlach said.

Moorlach said that supervisors will discuss the ruling next week in closed session. He couldn’t give specifics on the impact to the county, but said that the upcoming fiscal year budget will have to be revised.

“We’ve tried to be careful of our spending because of this hanging dagger,” he said. The county’s general fund is $663 million, he said.

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nicole.santacruz@latimes.com