Mixed Impact Expected for County From Budget Plan

The Reagan Administration’s proposed budget, which was sent to Congress Monday, would force cuts in Orange County transit service and curtail enrollment of low-income students at area colleges but might mean more money for local AIDS research programs, county officials and other observers said Monday.

“We’ll certainly fight this back in Washington,” said Orange County Transit District General Manager James P. Reichert, referring to possible elimination of $11 million in federal operating subsidies received by his agency--nearly 14% of OCTD’s $80.7-million operating budget. “If those subsidies are eliminated, it would certainly cause a reduction in service.”

Reichert said that, besides reducing bus service, the Administration’s proposed slashes in transit funding would threaten OCTD’s plans to build 16 miles of concrete bus transit ways beyond the four miles it hopes to finance with local money.

Higher education also would feel the pinch if the Administration’s budget proposals were to become law as formulated. The guaranteed student loan program would be eliminated gradually. Also, some college grants would be unavailable to students whose families earn more than $20,000 a year.

T. Roger Nudd, vice president for student services at Cal State Fullerton, said the proposed cuts in federal aid to higher education “would be a very catastrophic situation for our students. Many students would not be able to provide the cost of their education with money up front; many students depend on loans to go to school, and these cuts would affect them dramatically. This would especially hurt low-income students.”

Alan Mishne, financial aid director at Chapman College in Orange, said that if the proposed budget is approved, many students will not be able to afford private colleges, such as Chapman. Mishne said much federal aid to education, like the work-study program, “isn’t a giveaway, since a student has to work for $3.35 or $3.50 an hour.”

Mishne added: “In the past we have seen other education budget cuts proposed, but Congress has not adopted them because it believes the federal government has a greater role to play in helping students than the Administration seems to believe. I am optimistic, and I believe the House and the Senate will not accept these recommendations from the White House.”

Said UC Irvine Chancellor Jack W. Peltason: “Being able to borrow money (in federally backed student loans) and then pay it back has meant opportunities for millions of people. There have been proposals in the Nixon Administration, and the Carter Administration and the Reagan Administration to cut back in aid to education, but Congress has resisted the proposals because on close inspection it’s always found that federal aid to education is a fine investment.”

Dr. Thomas Cesario, a professor of infectious diseases at UCI, applauded the Administration’s proposed funding boost for AIDS research, saying the move reflects a widespread change in attitude about the deadly disease.

Now that they have been able to track statistics longer, researchers are discovering that “substantially greater numbers” of people carrying the AIDS virus are likely to develop the disease than previously thought, Cesario said. It now appears, he said, that about 30% of the 1 million to 2 million people infected with the virus will develop the disease, which cripples the immune system and leaves the body vulnerable to infections, cancer and other diseases.

Cesario said he will be eager to find out if UCI’s AIDS research efforts can benefit from the budget boost. UCI’s AIDS researchers belong to the California Collaborative Treatment Group, which also includes faculty from UC San Diego, UCLA and Stanford. The group is performing studies on various experimental treatments for AIDS complications. By combining their efforts, the researchers from the four universities have a larger pool of AIDS patients to study, he said.

One piece of the proposed budget that was expected to have little impact in Orange County was the plan to raise fees on Federal Housing Administration and Veterans Administration loans.

“The overwhelming majority of lending in Orange County is conventional,” said Leonard Shane, chairman and chief executive officer of Mercury Savings & Loan Assn. in Huntington Beach and chairman of the legislation committee of the U.S. League of Savings Institutions.

Mortgage bankers pointed out that the $90,000 mortgage limit on FHA financing makes such loans all but useless for purchasing much of Orange County’s exceptionally high priced housing.

However, the proposed new regulations may pose some difficulty for buyers of homes being specially built in Orange County for first-time home buyers. They would raise the loan origination fee on a VA loan from 1 point to 2.5 points. Also, they would require all home buyers who obtain FHA-backed mortgages to pay a 5% up-front insurance fee instead of the current 3.8% and would no longer allow such fees to be financed as part of the home purchase price.

Tim Unger, president of Laguna Hills-based John Lang Homes Inc., said that 95% of the “affordable” homes that his company is building in the new south Orange County community of Rancho Santa Margarita are sold with FHA financing, with the remainder financed through VA loans.

Generally, officials cautioned that many of the Administration’s budget proposals will be killed or modified by Congress.

James McConnell, the county’s Washington lobbyist, said that most of the controversial spending cuts were “dead on arrival,” based on the fact that Congress rejected many of the same cuts last year and now both houses are controlled by Democrats.

Times staff writers Bill Billiter, Marcida Dodson and Leslie Berkman contributed to this story.