ORANGE COUNTY IN BANKRUPTCY : Tough Test Awaits Supervisor-Elect : Transition: After 28 years as a teacher, Jim Silva will help chart county’s recovery plan.

The day after Orange County officials announced the dramatic news that a high-risk investment strategy lost the county $1.5 billion, Jim Silva’s economics class at Los Amigos High School in Fountain Valley wanted to know why.

Silva, a fiscal conservative who for 28 years has taught high school economics and civics, illustrated the danger of leveraging by explaining how people can mortgage their homes to the hilt only to have real estate values decline, leaving them with a huge debt and no equity.

Silva will soon be helping to chart the county’s financial recovery, after he resigns his teaching job this month to become one of two new members sworn in Jan 2. as Orange County supervisors.

In an interview at his Huntington Harbour home Saturday, Silva said he is bitter and angry that the system allowed one person--former county Treasurer--Tax Collector Robert L. Citron--to make risky investments with taxpayers’ money.

“When you look at how California laws have allowed this to take place, you have to question the system,” said Silva, 50. “I was surprised there was not someone watching over the man.”

Silva said that until the revelation of Orange County’s financial woes, followed by Citron’s resignation and the county’s bankruptcy filing, he had been looking for staff members with expertise in public health issues, which seemed to be one of the biggest challenges the county faces.

But his plans changed abruptly, he said, when he received a call from County Administrative Officer Ernie Schneider “explaining there would be a press release . . . that would indicate that there would be a financial crisis. I could tell from the tone of his voice he was very concerned.”

Since then, Silva said, he has been waiting for more information that will tell him exactly how deep the financial predicament will be when he takes office.

Because Silva is not yet sworn in, he said, he has not been allowed into the mostly closed sessions where supervisors have been huddling with the county’s financial officers and consultants. He said he was pleased that his soon-to-be colleagues had sought help by hiring financial adviser Thomas Hayes, a former state treasurer.

Silva said that although he is as confused as anyone about the state of the county’s financial affairs, he has strong opinions about Citron, whom Silva said he has long disliked and distrusted.

The other incoming supervisor, state Sen. Marian Bergeson, had withdrawn her endorsement of Republican accountant John M.W. Moorlach, who unsuccessfully ran against Citron and attacked the incumbent’s investment policies. At the time, Bergeson said, she was worried that Moorlach’s attacks would hurt the county’s standing on Wall Street.

Silva, a Republican and a six-year Huntington Beach city councilman, said he cast his ballot for Moorlach in part because he did not like what he knew about Citron’s investment strategies, which for years had brought in high yields.

“People had made comments to me over the past few years that Bob Citron was an expert at leveraging money and I, being fiscally conservative, don’t follow that philosophy at all,” he said.

Silva said he also found Citron offensive. “Mr. Citron had a very arrogant attitude,” Silva said. “I never really had a lot of confidence in that man.”

Silva traced his feelings about the former treasurer to an experience he had with Citron’s office regarding his family’s 1992 property tax bill. Silva, then mayor of Huntington Beach, said he paid the bill that December but kept receiving billing notices from the treasurer, even though he sent back letters with copies of the canceled check. He said he also made at least 15 calls to Citron, none of which were returned.

When Silva confronted Citron at a social gathering, he said Citron blamed the faulty billings “on a computer problem.”

In retrospect, Silva said, he believes the state Legislature over the years passed laws granting Citron too much autonomy in making decisions about the massive pool of investment funds belonging to the county, as well as to cities, school districts, water districts and other agencies.

“Financial decisions on large amounts of money should be made by a committee of experts and not by one person in elective office,” Silva said.

“I would go further to say the office of treasurer should not be elected, but should be appointed by the chief administrative officer of the county and approved by the Board of Supervisors.” He said that after the dust settles, he intends to seek assistance from the county counsel in deciding how to make the treasurer an appointed official accountable to the supervisors.

In the afternoons after his classes end, Silva said, he is interviewing candidates to serve on his staff. The first position, he said, will be filled by someone well versed in strategic budget planning, in the realization that when all the data is in, Orange County will have to learn--at least for the near future--to make do with less.

“We can’t print more money and we can’t borrow,” he said, “and I don’t think it is fair to go to the taxpayers and ask them to bail us out of a problem that was created by state government and government bureaucrats.”

In the belt-tightening, he said, some government programs are bound to suffer. “I think the No. 1 obligation of local government is public safety and education,” he said. “Beyond that there will be some hard decisions.”