Fiscal Disaster Inevitable, Say O.C. Officials

Orange County government departments submitted their 1990-91 budget requests last week, and as officials took their first look at them, many agreed on one thing: Without help from somewhere, it’s only a matter of time before the county goes broke.

“Believe me,” said Board of Supervisors Chairman Don R. Roth, one of more than a dozen state and county officials interviewed for this article, “it won’t be long before county governments, all 58 counties, crumble. We’re looking at a very tough time.”

For Orange County officials, the litany of budget woes is as long as it is familiar. The state keeps cutting back on funding while it mandates new programs for counties to administer. At the same time, tax and spending limits restrict the county’s ability to absorb waves of new residents, and local voters adamantly refuse to raise their own taxes.

So county government’s pool of available funds--the money that carries over from one year to the next--shrinks almost every year, and desperate officials dig ever deeper into their contingency budget. That buys time but leaves the county perilously vulnerable to a disaster.

The result: A county that boasts a bigger economic base than many nations and a bigger annual budget than some states finds itself on the brink of fiscal catastrophe.

“If not this year, then next year or the year after, it’s going to happen,” County Administrative Officer Ernie Schneider said in an interview last week. “It will happen eventually unless we get some help from the state or from the voters.”

And when “it” happens, it won’t be pretty. If the budget ax falls, the county would face Draconian cutbacks in workers and services to the public. Welfare rolls would grow, law enforcement would likely suffer as sheriff’s deputies were laid off, and park and open space acquisition would probably be frozen.

“It’ll be very bad,” Roth said. “We’ve had to worry for a couple years about laying off 500 to 800 employees, and at the last minute something’s come along to bail us out. That won’t keep happening.”

Layoffs would have a particularly stinging effect in Orange County, officials say, because the county already has one of the nation’s leanest work forces for a large county. According to a City and State Magazine survey last year, Orange County, which has the nation’s fourth largest county budget in terms of general fund revenues, ranked 41st in terms of employees per capita.

Chief among the problems driving the county’s budget toward the precipice is that state government, which often creates new programs, requires counties to administer them and then gradually whittles away the funding. Counties are then required to pick up the slack, even if it means cutting local programs to make up the difference.

“We have two kinds of counties,” State Sen. Marian Bergeson (R-Newport Beach), who chairs the Senate Local Government Committee, said in an interview Friday. “Those that are hurting and those that are dying. And in order to get help for the ones that are dying, you have to take it from the ones that are hurting.”

Indeed, the shortfalls have grown so acute in some parts of the state that governments have already toyed with the idea of throwing in the towel. In Northern California’s Butte County, for instance, the government last year tried to declare bankruptcy.

In Orange County, the day of reckoning is further off but no less inevitable, officials here say.

“The mandates hurt us badly, and there’s nothing we can do about it,” Schneider said.

Ronald Rubino, associate county administrative officer for management and budget, ruefully agreed. “It’s the hand we’re dealt, and we’re playing it,” he said in an interview last week.

The mandates have triggered another issue for the county government, gradually shifting its focus away from land-use and development and toward social services such as health care. But state funding for health care programs has lagged far behind the growth in demand for those services.

Gov. George Deukmejian’s proposed 1990-91 budget, for instance, slashes aid to Orange County health care programs, stripping them of $19.1 million. The state requires the county to offer many health services, however, so county officials cannot cleave many of the programs to match their budgets from the state.

With the county already facing a projected deficit of more than $20 million next year, an additional $19 million hit would likely gut other programs such as law enforcement, environmental management or other government services.

For now, county officials are hoping that lobbying efforts in Sacramento will reduce the size of the cuts proposed in the governor’s budget.

That may or may not be enough to get Orange County over the budget hurdle this year. But even if the county clears it one more time, the room to maneuver has become so tight that few officials believe the county has more than a year or two left before time runs out.

In past years, the county has relied on one-time bonuses such as the sale of government property to get through the budget crunch. That has artificially created a sense that the government has large reserves to fall back on; officials say it does not.

This year’s spending will consume about 98% of the government’s available funds, officials say, leaving almost nothing to roll over into next year. (Los Angeles County, the nation’s largest, rolled over 3.23% of its budget last year, about average for the 50 biggest counties, according to City and State Magazine.)

As available funds shrink, the contingency account, which is supposed to be held in reserve for emergencies, has increasingly become a pot into which the Orange County Supervisors dip when confronted with tight budgets.

Supervisors used to be advised that the contingency fund should never fall below $20 million during normal times. At last report, the fund stood at a little more than $13 million, and few officials believe it will be replenished to $20 million at any time in the near future.

“I think that’s a serious problem,” said Supervisor Roger R. Stanton. “What happens if there’s an earthquake? How’re we going to pay to deal with it if the fund is depleted?”

The answer, officials agree, is that the county government quite simply could not.

That has left an overriding sense of helplessness in some budget discussions. County officials wait nervously to see what the state will do to their planning, hoping for the best but knowing to expect the worst.

And it’s even forced a reluctant determination among some county leaders to bring tax measures before area voters. Whether voters will do it is doubtful, as it’s been more than 30 years since Orange County residents approved a general obligation bond.

Still, the county is facing several high-priority capital spending projects and has virtually no money to pay for them. Transportation improvements, new court construction and open-space acquisition all have powerful constituencies in the county. Moreover, the county is under a court order to relieve jail overcrowding, so jail construction cannot be put off forever, either.

County officials proposed this week that a court construction bond be put on the November ballot. Backers of a half-cent transportation sales tax are aiming for the same election.

Although supervisors worry about loading up that November ballot, even some of the county’s traditionally conservative Republicans say that the time may have come to rethink reflexive opposition to taxes.

“It’s strange, isn’t it?” acknowledged Roth, a Republican who often holds forth on the virtues of limited government. “But I’ll tell you why it is. We’re up to our elbows in this on a daily basis. The average person just doesn’t grasp that. They’re welcome to come up and give me a helping hand.”

COUNTY GOVERNMENT’S DWINDLING RESERVES Desperate to make ends meet with less and less state assistance, Orange County officials keep dipping into their contingency fund, a savings account that is supposed to be tapped only in emergencies. Though county revenues have annually increased, county reserves are declining. In millions of dollars 1984-85 Total General Fund: $691 Contingency Fund: $30 1985-86 Total General Fund: $773 Contingency Fund: $20.1 1986-87 Total General Fund: $857 Contingency Fund: $18.3 1987-88 Total General Fund: $895 Contingency Fund: $17.5 1988-89 Total General Fund: $989 Contingency Fund: $16.1 1989-90 Total General Fund: $1,050 Contingency Fund: $14.3