Even Rich Counties Feel Pinch of the Recession : Economy: Reduced tax revenues cause layoffs and wage freezes, plus cuts in government services and education programs.

During the high-flying ‘80s, this well-heeled pocket just outside Washington spared no expense for local services.

The nation’s sixth-richest county strived to build the best schools and libraries. A spectacular $7.5-million aquatic center came complete with a 200-foot indoor water slide and a waterfall.

“We just thought there was a pot at the end of the rainbow,” said Carol Trawick, a businesswoman who heads the Bethesda-Chevy Chase Chamber of Commerce.

Now, Montgomery County is broke, victimized in part by a decline in the real estate industry. It is so broke that its budget deficit rose from $85 million a year ago--behind only New York City and Philadelphia County--to $185 million this year.

Like many affluent areas across America that once felt immune to bad times, the county of high-rises and leafy suburbs got pinched by the recession.

Residents, whose $22,000-per-capita income is the sixth-highest in the nation and nearly twice the national average, said they used to feel insulated from the bad times.

“No one’s sleeping on the street, but things are going down just the same,” Pat Holt said on his way out of the county library in Bethesda, where hours were cut to help compensate for the shortfall.

Other counties with huge deficits suffered the same scenarios, experts say: A recession-induced slide in tax revenues at the same time the federal government was continuing its trend of forcing counties to pick up more of the tab for human services, such as mental health and welfare.

A recent survey by the National Assn. of Counties found that four of every 10 counties with populations of more than 100,000 face budget shortfalls.

Big cities with big problems--Philadelphia and New York--topped the list of those with the largest deficits. But counties where the wealthy live were in the top 10 too: Suffolk County, N.Y., home to Long Island; Orange County, Calif., outside Los Angeles; and Santa Clara County, Calif., also known as Silicon Valley, where high-tech computer chips are made.

“It’s happening nationwide, in the most affluent areas to the cities where we think of urban blight,” said Kaye Braaten, a county commissioner from Richland County, N.D., and president of the association.

In Montgomery County, it has meant that teachers, police officers and street cleaners lost their cost-of-living adjustments with the implementation of a countywide wage freeze designed to save $65 million.

Another $100 million was bled from programs. More than 500 jobs were cut. Libraries, swimming pools and health clinics found their hours and services reduced. New computers, desks and cars for police and other programs fell by the wayside.

Interscholastic sports at the middle-school level were axed, as were some driver’s education programs. The education cuts came at the same time that school enrollment increased by 4,000.

A final $20 million came from what many residents call “nuisance” taxes on energy, telephones and beverage containers. Fees and fines were increased.

The sluggish real estate industry is to blame for most of Montgomery County’s budget problems. When it went into a dive, the county’s tax receipts from real estate sales dropped far below expectations, administrators said.

“My God, half those buildings are empty,” Holt said, waving his arm toward shiny new high-rises intended for apartments and condominiums. A retired Capitol Hill staffer, Holt has lived in Montgomery County for 35 years.

At a chic shopping strip nearby, “For Lease” signs dot the empty storefronts clustered around a designer furniture gallery, an Oriental rug shop and an import boutique.

“We are in a recession. . . . We hoped to see a little light at the end of the tunnel, but we don’t see it yet,” said the chamber’s Trawick, who owns a software company.

Real estate troubles sparked a ripple effect. Related businesses began to suffer and retail traffic dropped off, pushing down the county’s take of sales tax revenue.

As businesses began to go under, more people lost jobs, bringing down the county’s share of income taxes. Wealthy residents were not doing so well either on their rents, royalties and capital gains, bringing that portion of income tax down too.

The recent budget problems come as “people are demanding more and more services . . . and the federal government is passing on mandates without paying for them,” Braaten said.

“We hammer on that constantly, but we have to make choices,” she said.

In Montgomery County, virtually all programs were affected when county budget plotters looked for ways to eliminate back-to-back deficits.

“The irony is that the revenues are down, but the services start to go up when people come in for food stamps or health services,” said Vicki Lathom, a spokeswoman for the Montgomery County.