Layoffs Loom in Orange County Financial Crisis

In a move intended to head off a growing financial crisis that jeopardizes hundreds of county jobs, the Orange County Board of Supervisors is expected to adopt an immediate hiring freeze today.

Supervisors and county officials said Monday that they expect some layoffs and program cutbacks will be announced next month and that the worst-case scenario could involve the loss of more than 1,200 employees--almost 10% of the government’s total work force.

“It could reach that,” said Supervisor Thomas F. Riley, although he and other county officials said they expect to avoid numbers of that magnitude.

400 ‘More Realistic’

“Probably 400 is more realistic,” Supervisor Harriett M. Wieder said. “And that translates into less services.”

County administrators have been reluctant to talk publicly about their budget problems in view of the fact that strong warnings of county budget crises in the past sometimes have been followed by 11th-hour solutions.

But in a letter to the supervisors last Friday, County Administrative Officer Larry Parrish said “our budget situation is critical.” The crunch, he said, is a result of the fact that $23 million--in state funds and proceeds from a sale of county land--the administration expected when the fiscal year began in July has not been received.

Parrish called for several mid-year cutbacks, starting with the hiring freeze. He also recommended that money for travel, training and data services be frozen unless specifically authorized by his office and asked the board’s approval to instruct all departments of county government to curtail expenditures for outside consultants, supplies and equipment.

Supervisor Don R. Roth said he has been told that those steps could save about $2 million during the rest of the fiscal year--an amount that does not even approach the budget shortfall.

The county’s total budget amounted to just over $2 billion for this fiscal year.

Steve Lewis, the county’s auditor-controller, called Parrish’s recommendations “a start. It sets the tone that it’s not business as usual.” He said that further steps are going to be necessary and that “it’s just a matter of the longer you wait, the more you’re going to have to cut.”

One of the most significant warnings in Parrish’s letter concerned the long-lasting damage that the fiscal crunch might have on the county’s bond rating, which determines how much interest the government must pay on borrowed money. Currently, the county has an AA rating, the second highest available.

If the New York investment companies decide that Orange County is a greater credit risk, it would make all of the major projects planned by the county--such as new jails and roads--more costly.

“You couldn’t pick a worse time to lose our valuable credit rating,” Roth said.

Parrish’s concerns about the county’s bond rating stem from the possibility of a cut in the county’s so-called contingency budget--a fund used for unexpected costs such as litigation or emergencies like natural disasters. The size of the contingency fund is one of the major factors considered by investment companies in setting a government bond rating.

If other sources of revenue are not found to cover the county’s $23-million budget shortfall, as much as $13 million could have to come from the contingency fund, leaving about $2.5 million in the account, Lewis said. Last year, Lewis said, the county needed a contingency fund of $20 million to be safe, and Parrish said $15 million was “rock bottom.”

Statewide Dilemma

In his letter, Parrish said Orange County has the second biggest contingency fund--when viewed as a percentage of its total budget--of California’s five largest counties. He also said that all four of the other five counties already have laid off employees or instituted hiring freezes at some time in the last 3 years.

Orange County’s budget crunch is part of a statewide dilemma for county governments still being attributed to the property tax-cutting Proposition 13, county officials say.

In August, when the supervisors gave final approval to the current budget, county administrators balanced the budget by freezing $23 million in revenue that they did not yet have but believed would be received. They also identified four sources that they considered likely to generate the $23 million before December, when it would be needed.

So far, two of those sources have fallen through. One was a $2.5-million state grant that was redirected by the Legislature to smaller counties. The other was $10 million expected from a sale of county property that collapsed.

County officials are negotiating with the Orange County Retirement Board about the possibility of a $30-million loan for the current fiscal year. But Parrish’s letter said that money is “no longer anticipated.”

The only likely remaining source of money is a new program under which the state would assume the cost of operating courts in the county. That could save the county about $12 million this year.

But the state requires that county administrators and the judges agree on the disbursement of money before they join the program, and currently they are at odds.

The supervisors are expected to vote today to join the state Trial Court Funding program, hoping that the spending plans can be worked out with the judges in the next few weeks.

Wieder said she will announce the formation of a special ad hoc committee at today’s meeting that will involve major Orange County business and academic leaders in seeking new, long-range funding sources for the county. Wieder said that she was creating the committee--called Financial Future--under her authority as chairman of the Board of Supervisors and that a vote of the entire board would not be required.

The members who have agreed to participate in the committee so far include Gary Hunt, Irvine Co. senior vice president; Dr. Jewel Plummer Cobb, president of Cal State Fullerton; Dr. Dennis Aigner, dean of the graduate school of management at UC Irvine; Mary Yunt, secretary-treasurer of the Orange County Central Labor Council; Pat Krone, incoming chairwoman of the Orange County Chamber of Commerce; Marty Wikstrom, regional manager for Nordstrom, and William Batiste, a managing partner at Price Waterhouse.

“We balanced the budget on a bunch of maybes,” Wieder said. “This method must be changed to meet our needs into the ‘90s. We must be visionary.”