Plan Has Ironic Silver Lining For Orange County

As one Capitol wag puts it, Orange County’s situation amid the budget wrangling here this week is sort of like a line from an old Bob Dylan song: “When you ain’t got nothing, you got nothing to lose.”

Ever since the passage in 1978 of Proposition 13, Orange County has been locked into receiving proportionately less money from the state than any other county government in California.

With state lawmakers poised to take back $2.6 billion that traditionally has gone to local governments, Orange County stands to lose less than most other California counties.

Even so, it’s hardly cause for celebration.

Under the budget approved early Monday morning by the Assembly, Orange County would probably have to absorb $60 million in funding cuts and new costs, both for county government and the region’s plethora of special districts, according to Ronald Rubino, Orange County budget director.

And that, Rubino said, is a best-case scenario that assumes that the state’s special half-cent sales tax, which was enacted two years ago and set to expire at month’s end, is extended permanently. With relatively hefty retail sales to tax, Orange County would reap almost enough sales tax dollars to fill the funding gap created by the shift of property taxes from local government to schools.

“This is probably the best we’ll get out of a bad situation,” said Rubino, who was in Sacramento on Monday to lobby lawmakers. “But it’s all predicated on a big, big gamble.”

The gamble is whether California voters would approve an extension of the half-cent sales tax, an issue that is expected to appear on the November ballot. If the sales tax is not approved, the county will have to absorb an extra $70 million in cuts during the coming year, and more than double that the next year.

“We’re extremely vulnerable if the sales tax isn’t approved,” Rubino said. “This is not good news. If the sales tax is not approved, we face a horrendous problem.”

Even as Rubino talked gloomily, some Sacramento lawmakers were seeing a silver lining. After all, the Assembly’s budget would treat Orange County far more kindly than a proposal floated by Gov. Pete Wilson earlier in the spring that would have cost the county more than $200 million.

“It’s not as bad as it could have been,” said Assemblyman Tom Umberg (D-Garden Grove), the lone Orange County legislator to vote for the budget in the Assembly. “Orange County is making the best of a bad situation for the state.”

Umberg said the Assembly-passed budget eases the cuts that cities will have to absorb. While several cities in Orange County will have their funding slashed by upward of $1 million, the cuts are about half what was originally expected under Wilson’s preliminary budget, he said.

The county treasury will see a similar benefit, he said, a change that will put Orange County on a par with other counties. “We’ve been an under-equity county forever,” Umberg said. “This brings Orange County back to a level where we’re approaching parity.”

The inequity dates back to the late 1970s and the passage of Proposition 13, the landmark measure that capped property taxes and shifted fiscal powers from local governments to the state.

At the time, property tax rates in Orange County were relatively low compared to those in many more urban California counties. In Los Angeles and San Francisco, for instance, property taxes had been jacked up to tackle urban problems such as crime and overcrowding.

When the state approved a measure to help counties reeling from the tax cuts of Proposition 13, it based the funding formula on the existing property tax rates. Suddenly, Orange County’s miserly tax rates, though a boon for county residents, became a bane for county government.

In the years since, the county’s treasury has had to subsist on a paltry 18-cent return on each property tax dollar, even as city and county lawmakers have had to tackle an increasingly difficult crime situation and other problems. In comparison, Los Angeles County gets to keep 42 cents of each property tax dollar it collects; San Francisco hauls in 84 cents per dollar.

Through the years, members of the county’s delegation in Sacramento--almost all of them Republicans--have been fully cognizant of the funding inequity but did not have the political clout to push through changes.

Today, nearly all would love to see Orange County get a bigger share of the tax dollar but differ from Democrats like Umberg on how to do it. Every Orange County lawmaker except Umberg voted against the budget in the Assembly.

“For me, it’s a matter of principle. I oppose shifting the property tax from local government to schools,” Assemblyman Mickey Conroy (R-Orange) said.

Added Assemblywoman Doris Allen (R-Cypress): “I’m not for a tax shift. I’ve never liked it.”

Assemblyman Curt Pringle (R-Garden Grove) said the budget fails to really tackle the fiscal difficulties facing the state.

“No one is addressing the overall problem,” he said. “The problem is we’re spending too much money. We’re not making any structural changes to ensure we don’t have the same problems next year. We’re just papering over the problem.”

Coping Mechanisms

Money the state normally allocates for cities may be directed to local schools. With budgets already proposed for the new fiscal year, cities could have to deal with the loss of state funds in a number of ways.

Operating budget Anticipated City (in millions) reduction Anaheim * $135 $1,058,000 Brea * 26.9 381,000 Buena Park * 28.7 350,000 Costa Mesa * 51.2 893,000 Cypress * 16.6 296,000 Dana Point * 10.6 98,000 Fountain Valley 23.3 348,000 Fullerton 44.8 810,000 Garden Grove * 46.2 639,000 Huntington Beach * 96.4 1,900,000 Irvine * 63.6 367,000 La Habra 12.9 240,000 La Palma 6.2 151,000 Laguna Beach * 18 669,000 Laguna Hills Not 493,000 available Laguna Niguel 9.8 0 Lake Forest Not 32,000 available Los Alamitos * 6.3 89,000 Mission Viejo 25.8 524,000 Newport Beach * 69 913,000 Orange * 54 691,000 Placentia 22.6 257,000 San Clemente * 20 377,000 San Juan Capistrano 10 241,000 Santa Ana 135 1,800,000 Seal Beach * 11-12 233,000 Stanton * 8.4 133,000 Tustin * 23.1 298,000 Villa Park * 1.5 57,000 Westminster Not 164,000 available Yorba Linda * 13 326,000

City Possible city action Anaheim Lay off employees, hike fees Brea Continue hiring freeze Buena Park Use reserve funds Costa Mesa Eliminate city positions Cypress Hike fees, taxes Dana Point Eliminate city positions Fountain Valley Use reserve funds Fullerton Increase utility tax Garden Grove Institute hiring / salary freeze Huntington Beach Increase fees Irvine Lay off employees La Habra Increase utility tax La Palma Cut some recreation programs Laguna Beach Institute various budget cuts Laguna Hills Not available Laguna Niguel Not available Lake Forest Not available Los Alamitos Reduce street maintenance Mission Viejo Not available Newport Beach Lay off employees, increase fees Orange Lay off employees, hike hotel tax Placentia Increase utility tax San Clemente Lay off employees San Juan Capistrano Reduce city spending Santa Ana Increase city fees Seal Beach Increase utility tax Stanton Increase utility tax Tustin Continue hiring freeze Villa Park Reduce street maintenance Westminster Not available Yorba Linda Tap reserve fund

* Proposed budgets not yet approved by city councils

Sources: Individual cities, state legislative analyst’s office;

Researched by GEOFF BOUCHER, DEBRA CANO, ANNA CEKOLA, WILLSON CUMMER, BERT ELJERA, BOB ELSTON, SHELBY GRAD, LEN HALL, MIMI KO and MARTIN MILLER / For The Times