ORANGE COUNTY IN BANKRUPTCY : Wilson Says County Should Not Expect State Bailout


Gov. Pete Wilson said Thursday that he is sympathetic to Orange County’s plight but does not expect the state to provide any money to help the county get back on its fiscal feet.

“The state is eager to be helpful,” Wilson said. “But we are not in a position where we can bail out bad judgments.”

Wilson, speaking to reporters in San Diego, said the state has virtually no role to play in the crisis because local governments in California have the power to manage their own finances and the responsibility to do so wisely.


“Legally, the counties, the local governments in California have great autonomy, and very clearly they have had great flexibility on how to invest their local funds,” Wilson said, according to a transcript provided by his office.

“And it seems clear that whatever their good intentions, at least in several cases they have invested in a very risky fashion. The state . . . has no legal responsibility to counties or to cities, no oversight at this point.”

Wilson’s advice for the county: bring in a person to manage what remains of its investment fund who can “restore some confidence” and begin to work out the problem.

Wilson apparently played a role in the county’s appointment of Thomas W. Hayes, the former state treasurer and the governor’s first finance director, to help manage the fund. Wilson said he was confident the county could recover.

“They obviously are a government, as are other investors in that fund,” Wilson said. “They continue to receive revenue from taxes, from fees, and that will continue to be the case. They have to devise a plan that will allow them to pay off creditors and do so (in a way) that is fair to those who continue to rely upon them for daily services.”

The governor said there “may well be a need” for legislation to prevent this kind of debacle from happening again.


“Certainly the Legislature will want to look at that, and I encourage them to do so,” Wilson said.

Wilson’s position on Orange County is consistent with how he stood the last time a major government agency in California went belly up. In 1991, when the Richmond Unified School District in the San Francisco Bay Area spent itself into bankruptcy and sought an emergency loan from the state, Wilson rejected it.

Even when a court ordered the state to aid the school district, Wilson resisted. Ultimately, he was forced to go along. But he warned that the $19-million loan would encourage other districts to spend beyond their means with the assurance that the state would bail them out.

“Philosophically, the governor believes the state should not act as a banker to local and county authorities, nor is it in a fiscal position to do so,” said Sean Walsh, the governor’s press secretary.

In the Orange County case, Wilson has been closely monitoring the situation through aides and in telephone conversations with county officials. Earlier this week he considered dispatching a team of financial experts to the county but so far has not done so.