O.C. May Face Budget Deficit of $70 Million

Soaring costs for jail expansion, social services and health care--combined with a sluggish economy and declining state support--could mean a $70-million shortfall for the county government next year, according to a new, five-year financial forecast.

The forecast, which is still in draft form and circulating among top county officials for their comments, also projects that the deficit could grow to $100 million by 1992-93 before beginning to drop in subsequent years.

The forecast is made even more foreboding by a record deficit in the state budget, which means the county can expect little help from Sacramento. In fact, the county may face the prospect of taking over some sorely needed state programs.

Even though the projections are still tentative, the threat of growing shortfalls in the county’s $532-million general fund alarms many of the county’s top leaders, causing some to worry that Orange County may be entering a period of long-term fiscal uncertainty and declining government services.

“Orange County faces severe fiscal challenges over the next five years,” states the report, written by the County Administrative Office. “It appears from the fiscal projections presented that program reductions . . . may be necessary.”

Ronald S. Rubino, associate county administrative officer, who oversees budget and management issues for the county, was unavailable for comment on the report, but several county supervisors expressed concern about the projections and the prospect of declining state support for local services.

“It’s shocking,” said Supervisor Thomas F. Riley. “We’re looking at real problems, and we’re going to have a tough time.”

Board Chairman Gaddi H. Vasquez cautioned that the estimates in the report are preliminary and could represent a “worst-case scenario.” But he agreed that the budget problems are formidable.

“Any way you cut it, it’s going to be a tremendously difficult year for the county,” Vasquez said. “This year will take us, without a doubt, to the limits.”

The prospects for relief from the state are not encouraging, officials agreed.

“Every time we get new numbers, it looks worse,” said Supervisor Don R. Roth, who has led the board in urging strong action toward resolving county budget problems. “I’m very concerned about this. In my humble opinion, counties in this state are in real trouble.”

By law, the county must balance its budget every year, so shortfalls in revenue mean cutbacks in county programs at a time when growing population has increased demand for services. Law enforcement, environmental management, health care and social services for poor people make up the bulk of the county budget, so cuts could affect those areas.

As county officials eye the coming budget year, which begins July 1, the scheduled opening of the expanded Theo Lacy Branch Jail in the city of Orange causes particular concern. The first phase of that expansion will add 200 badly needed jail beds to help relieve overcrowding but staffing it will cost the county $5.8 million next year.

“Opening that facility is my No. 1 priority,” said Roth, who waged a long and ultimately successful battle to clear the way for the Theo Lacy expansion. “We can’t end up like San Diego, where they have a brand new jail, and they can’t afford to open it.”

It won’t be cheap in Orange County, either. By the time the Theo Lacy expansion is completed next year, operating expenses will grow to $13 million a year, the CAO report estimates.

Measure J, the proposed half-cent sales tax for jails, could have supplied at least some of that money, but county voters resoundingly defeated that proposal last week, so other services may have to be trimmed if the jail expansion is to open on time. Sheriff Brad Gates, who oversees the county jails, is under an order from local Municipal Court judges to end early release of prisoners, and to do that he needs to expand the number of jail beds in the system.

Other costs are growing as well, according to the report. Lease payments are growing rapidly and are expected to double during the next five years, from about $9 million in 1990-91 to $18.7 million in 1996.

Projects such as the expansion of Juvenile Hall and an earthquake safety retrofit of the county courthouse have been put off time and again, and the report notes that they too will eventually need to be undertaken, at great cost to the county government.

“Aging county facilities and growth in county staff, especially in the area of social services, health care and criminal justice, will necessitate the county funding capital improvements in the near future,” the report warns. Each of those projects are expected to cost upward of $2 million, and the Juvenile Hall expansion would run $89.4 million, according to the report.

Where the money will come from, however, remains the question of the hour at the county Hall of Administration.

Annexations and incorporations by Orange County cities have stripped the county budget of about $20 million in property taxes in the coming year. And though the county has lost the responsibility for providing services to those areas--Mission Viejo, Dana Point and Laguna Niguel--that has only saved the county government $8 million.

Gov. Pete Wilson, whose state budget is also racked by large and growing deficit projections, has proposed transferring several health and social service programs to county governments. Although the exact financial implications of that shift still are unclear, some county officials worry that they may be saddled with what the financial forecast describes as “chronically under-funded programs.”

Until the details of those transfers are worked out, the exact impact on the county budget is unknown. Rubino has previously expressed grave reservations about the proposed realignment, which he has compared to Proposition 13, the landmark 1978 tax-cutting initiative, in terms of its potential effect on county governments.

Rubino, Roth and other county officials are concerned that the state will not supply counties with enough money for pay for the programs in coming years. That would leave local officials with the responsibility for seeking voter approval of tax increases to pay the cost of health care.

Conservative Orange County voters are prone to reject such measures, which could leave the county in a position of having to absorb increases in health care costs or having to cut the services.

Details of the state budget still are subject to negotiations in Sacramento, however, and county officials warn in their report that it is too soon to predict the outcome.

“We believe the state will adopt a budget-balancing plan in late May or early June of 1991,” the county report states. “Until that time, an accurate long-range analysis of state reimbursements is not feasible.”

What officials agreed on, though, is that little help seems likely to come from the state.

New budget numbers released Tuesday in Sacramento showed the state facing a $14.5-billion deficit, the largest in history.

“Nobody has ever seen a $13-billion deficit before, and now this one is up to $14 billion,” Vasquez said. “We cannot look to the state for some kind of relief program.”

Roth ruefully agreed. “I don’t know where they’re going to be able to help us,” he said. “This is a complete disaster.”

Gloomy Financial Forecast

The following financial forecast shows what can be expected in Orange County’s budget over the next five years and is outlined in a draft report now circulating among county officials. In millions of dollars. 1991-92 Shortfall: -$70 1992-93 Shortfall: -$101 1993-94 Shortfall: -$93 1994-95 Shortfall: -$91 1995-96 Shortfall: -$84 Source: County Administrative Office