Orange County Budget Bailout Averts Crisis

An Orange County budget crisis that could have meant hundreds of layoffs was averted Monday when the county retirement board agreed to a bailout plan that will save the county $8 million.

The plan, announced by County Administrative Officer Larry Parrish, in effect will provide enough money to fully fund all budgeted county services for the remaining six months of fiscal 1988-89.

Parrish said a hiring freeze the supervisors implemented last month will remain in place but there will be no layoffs or program cutbacks. Nor will it be necessary to tap the county’s contingency fund, an account that is set aside for emergencies.

That forecast was drastically different from the outlook just last month when supervisors were told privately that as many as 1,200 employees--almost 10% of the county’s entire work force--might have to be laid off.

Parrish had set Jan. 17 as the deadline by which he would have announced cutbacks if additional money had not been found.

Monday, county supervisors and administrators said they were happy about the agreement with the retirement board. It provides that the county will not have to pay $15 million it owes the retirement fund in the remaining months of the fiscal year--saving about $8 million for the county’s general fund.

County officials’ enthusiasm was blunted somewhat, however, by the bleak outlook for the fiscal 1989-90 budget, which is being prepared now.

“There is relief, far more than there is some wild celebration,” said Parrish, adding that the difficulty ahead “sort of takes the fun out of it.”

Thomas F. Riley, chairman of the Board of Supervisors, said: “We have to still remember that we’re not home free. We’re going to be tight, and we’re going to have to work it that way.”

Supervisor Gaddi H. Vasquez said: “My feeling is that we’re certainly not out of the woods. While I’m delighted about the agreement, some of those revenues here this year may not be here next year.”

And Supervisor Harriett M. Wieder said: “We’re constantly holding our breath to see if all of these balls we’ve tossed in the air come down and we can catch them. This is no way to run a county.”

Agreement With Judges

The agreement with the retirement board came just four days after administrators announced they had reached an agreement with the county’s judges that allowed the county to join a state funding program that will bring it another $9 million in the next few months.

The county’s municipal judges are scheduled to take a formal vote on that agreement today, setting up final approval by the supervisors on Wednesday. Under the Trial Court Funding Act, the state would assume much of the cost of operating the county’s courts if the judges and the county agree to join the program.

Combined, the two agreements will bring roughly $17 million into the county’s general fund--still about $6 million short of the $23 million officials had said would be needed to fully fund this year’s budget. But Parrish said other miscellaneous revenue sources, coupled with savings from the hiring freeze and other belt-tightening practices, should bring the budget into balance.

With a total budget of more than $2 billion, the county has at least $15 million in a contingency account that it saves for unexpected costs. While that money could be used to help cover a budget shortfall, the size of the fund is an important indicator used to determine the fiscal condition of a government--and depleting it might seriously injure the county’s credit rating.

Parrish said Monday he did not expect the county would have to use money from the contingency fund.

The county and the retirement board, which oversees a retirement fund with a $100-million surplus, have been negotiating a bailout scheme since last June.

The agreement reached Monday relieves the county of its obligation to pay $15 million into the fund in the remaining months of fiscal 1988-89--about a quarter of the county’s annual premium to the fund. Since salaries and benefits for many county employees are paid with state and federal grants or through various fee programs, not all of the savings from the premium reduction will be realized in the county’s general fund.

County auditors figure about $8 million of the $15 million premium actually comes out of the general fund and therefore will be a savings.

In return for the reduced premium, the county agreed that it will negotiate with the retirement board “in good faith” about the possibility of providing medical benefits to county retirees.

Originally, the retirement board had made the benefits a condition of their participation in a budget bailout.

But county officials argued in negotiations that they have overpaid the retirement board in the past and therefore have a right to claim some of the retirement fund’s $100 million surplus.

Parrish said Monday he was grateful for the cooperation of the retirement board but “it is our view that (the bailout) is a result of the amount we have paid in.”

Robert L. Citron, the county’s treasurer-tax collector, also said the retirement board “has made it emphatic” that this arrangement is a one-time agreement and is not intended to be repeated next year.

Complicating the budget outlook next year is the fact that labor contracts with almost all of the county’s 12,000 union employees will expire June 30.