Bleak Future Predicted by O.C. Budget Experts : Deficits of Up to $50 Million Feared Unless New Revenue Sources Are Found or Services Cut

Orange County’s budget crisis could worsen dramatically in the next 5 years, with annual deficits that could reach $50 million, unless taxes are raised and services sharply reduced or state and federal officials deliver more help, a report released Wednesday concludes.

In the first study of its kind in Orange County, forecasters portray a financially strapped county government which already has nearly exhausted its reserves to balance the budget.

Analysts predicted annual deficits ranging from $4 million to $50 million between fiscal years 1989-90 and 1993-94 if there is no increase in the county’s current revenue. The forecast released by the county administrative office said those same deficits could climb to $109 million a year if the county were to begin any new programs or projects.

Associate County Administrator John Sibley, coordinator of the report, acknowledged that the findings “are indeed gloomy,” adding, “we obviously do not have the revenues to meet our future demands.”

If the county doesn’t find new income, Sibley said, a range of county services and projects could be seriously hampered, most notably health and welfare programs, road construction and the expansion of jail and court facilities. Sibley also said the county would face the “delicate task” of trying to remain competitive in salaries with other governments when negotiating new contracts with its 12,000 employees.

County government pays for operations of the Orange County Fire Department and the Sheriff-Coroner’s Department, which includes operating county jail facilities and the Harbor Patrol, and juvenile justice facilities such as Juvenile Hall and other youth correctional programs. The county also funds the offices of the district attorney, the public defender, the county marshal, the Probation Department, the registrar of voters and the assessor.

A large portion of the county budget goes toward health and social services, such as paying for medical care for the indigent who are not covered by Medi-Cal, providing programs for the disabled and mentally ill, drug and alcohol abuse counseling, foster children, administering welfare programs and tracking communicable diseases.

The county also maintains county roads, operates John Wayne Airport, runs the county regional parks system, oversees development of land in unincorporated areas, and provides environmental health programs and animal control.

Robert MacLeod, general manager of the Assn. of Orange County Sheriff’s Deputies, said the county’s “protestations of poverty” are nothing new.

“I don’t ever remember hearing the county say they didn’t have money,” said MacLeod, whose association represents 1,200 deputies. “To some extent it’s like the little boy who cried, ‘Wolf!’ At this point, their forecast of lack of funds doesn’t carry much credibility.”

The Board of Supervisors requested the 5-year budget projection last fall for a long-range view of the county’s budget problems and possible solutions. It is strictly a planning document that examines the situation from a “worst case scenario,” officials said, and it makes no specific recommendations on what, if any, programs or projects should be eliminated or solutions adopted.

‘Tough Budget Decisions’

However, it does illustrate, rather bluntly, the potential financial troubles facing the county.

“This report will help frame the tough budget decisions that are ahead,” said Christie McDaniel, executive assistant to Board of Supervisors Chairman Thomas F. Riley.

“It’s not a surprise that we may be looking at strong cutbacks in a number of areas,” she said.

The bleak budget forecast was blamed on a series of factors, including the federal budget deficit, inadequate funding from Sacramento for state-mandated programs for the poor and elderly, and the formation of new cities in south Orange County, according to the report.

The incorporation of Mission Viejo and Dana Point, for example, is expected to cost the county between $8.7 million and $22 million in lost revenue such as sales and property taxes that now are going directly to those new cities.

Sibley said the loss in tax revenue is not offset by the savings to the county in discontinuing police and fire protection, trash, street maintenance and other services provided to the unincorporated areas.

Two tax proposals are mentioned in the report as possible ways to offset the forecasted deficits.

A proposed statewide ballot initiative could generate an estimated $125 million annually for Orange County. The measure would transfer proceeds from a half-cent of the existing sales tax receipts from the state to counties, the report says.

Orange County is also exploring whether to ask voters for a half-cent sales tax increase to build new roads or a new jail, which is needed to relieve serious overcrowding at the men’s central jail in Santa Ana. That proposal would also generate about $125 million a year for the county.

However, even if voters approved a half-cent sales tax increase, it would not cover the construction or annual operating costs of a new jail, the report says. The estimated cost of building a new 3,199-bed jail proposed for Gypsum Canyon in the eastern county is about $430 million. To operate the facility would cost another $100 million a year, the report says.

And without such measures, the county’s financial future looks grim, with a projected $38-million deficit looming next year, Sibley said.

County officials narrowly avoided financial trouble this year by adopting a series emergency measures and drawing heavily on reserves.

In December, the supervisors implemented a countywide hiring freeze and recommended not replacing employees who leave or retire in order to reduce staff by 3%. The hiring freeze will remain in effect until the current fiscal year ends on June 30, Sibley said Wednesday. He did not rule out a similar freeze next year.

The county’s cash reserves are down to $15 million, below the level recommended by credit rating agencies for financial integrity, county officials said.

In the coming years, analysts said, the county, without new revenue, will be unable to replenish those reserves, “raising questions as to the county’s ability to make debt payments.”

Sibley said the study’s importance is providing county officials with a “glimpse into the future.” This is the first attempt, he said, at taking a look at the budget beyond a year or two.

ORANGE COUNTY’S 5--YEAR BUDGET FORECAST

Net County Costs-Fiscal Year 1988-89

Human Services: 16.1%

General Services: 14.6%

General Administration and Support: 19.5%

Enviornmental Management: 0.4%

Community Safety: 49.4%

Source: County Administrative Office