BLINDSIDED / ORANGE COUNTY’S FINANCIAL CRISIS : Prelude to the Crisis

Understanding the roots of Orange County’s financial crisis requires a review of growth in population and services and the shifts in sources of income. In the 1980s, county government grew fat, with a prosperous and growing tax base and well-heeled population. Between 1980 and 1990, the population grew more quickly than that of Los Angeles County. Along with demographic changes came changes in affluence in Orange County, as median income remained significantly higher than that of its more populous neighbor to the north.

Changes in the Landscape

Population

Orange County Los Angeles County 1980 1,932,709 7,477,503 1990 2,410,556 8,863,164 Change +24.7% +18.5%

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Race

Orange County Los Angeles County 1980 1990 1990 White 78% 65% 42% Latino 15% 23% 27% Asian 5% 10% 8% Black 1% 2% 8% Other 1% * 15%

* Less than 1%

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Income 1990

Median household Orange County: $45,922 Los Angeles County: $34,965 Per capita Orange County: $19,890 Los Angeles County: $16,149 Median family Orange County: $51,167 Los Angeles County: $39,035 ****

Critical Financial Shifts

Orange County’s growth meant increasing demand for schools, police and services. But in the early 1990s, property values had peaked and recession was taking its toll. Between 1991 and the current fiscal year, the bulk of county general fund revenues shifted dramatically from property taxes to income from interest-bearing investments. The increasing dependence on revenue from the investment pool set Orange County up for last week’s dramatic collapse.

Revenue Sources

1991-92 1994-95 Interest 3% 35% Property taxes 60% 25% DMV fees 21% 21% Fund balance available 8% 12% Sales 3% 4% Other 4% 3%

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Financing Sources

1991-92 1994-95 County general fund 39% 44% Special revenues 18% 17% Special districts 14% 14% Internal services and enterprise 17% 13% Assessment districts 11% 10% Orange County Development Agency 1% 2%

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Where the Money Goes

1991-92 1994-95 Environmental resources 25% 20% Public protection 13% 16% Community and social services 14% 16% Debt service 14% 14% Insurance, reserves, misc. 6% 14% General government and services 7% 8% Health services 6% 6% Capital improvements 15% 6%

Sources: U.S. Census; Orange County Administrative Office

Researched by CAROLINE LEMKE, APRIL JACKSON, TOM REINKEN and VICKY McCARGAR / Los Angeles Times