ORANGE COUNTY IN BANKRUPTCY : Chowchilla Drawn Into Fiscal Quagmire : Government: San Joaquin Valley town has $2.5 million tied up in investment fund. ‘The effect here could be monumental,’ the mayor says.

This town of almond orchards and rodeo riders in the wide-open spaces of the San Joaquin Valley would seem a far cry from the world of high finance.

But good word has a way of traveling and when local school officials heard what Orange County was getting for its money--nearly triple the rate of return here--they decided to take the plunge.

Today, their $2.5-million investment is one of the far-flung victims of the collapse in Orange County. As townsfolk wait nervously for the latest word on the crisis, they fear that the high school district--with an annual operating budget of $4.5 million--will be devastated if the money is lost.

“I know $2.5 million doesn’t sound like much when you’re talking billions,” said Kathy Horn, Chowchilla’s mayor and a fifth-grade teacher. “But the effect here could be monumental. It’s scary. Very scary.”

Up and down the Central Valley, far from the epicenter of the biggest municipal bankruptcy filing in U.S. history, towns and cities are trying to gauge the damage from their dance with the ill-fated fund.

Dozens of school districts in the San Joaquin Valley invested either directly with Orange County or indirectly through a statewide pool called the Schools Excess Liability Fund.

The Madera County Office of Education has seen its $3-million direct investment frozen. “The most frustrating part right now is not knowing the future,” said Sally Frazier, Madera County’s superintendent of education.

It’s like waiting for the other shoe to drop, said Ronald Moore, superintendent of the Chowchilla Union High School district. “We heard we’re going to get 80 cents on the dollar. Or 50 cents,” he said. “We can’t afford to lose any of it.”

Moore, a star running back for the Chowchilla High Redskins in 1957, has the look of a beleaguered man. It was his decision three years ago, backed by the school board, to invest in the Orange County bond fund.

It made great sense, he said. Each year, the school district must cover a few months of lag time between the collection and distribution of property taxes. So the school district borrowed $1.1 million from the bank at 3.5% interest and parked it in the Orange County fund earning 8% interest.

“The difference amounted to $35,000 to $40,000 a year in our pocket,” Moore said. “That’s the equivalent of a teacher’s salary.”

The yearly $1.1-million note is due next June; the school district needs the money invested in Orange County to meet the debt. If the money is not freed up soon, the school district may have to cover the debt through operating funds.

This could mean big cuts to staff and athletic programs, Moore said. The district also has $1.4 million in school construction funds frozen in the wake of Orange County’s bankruptcy.

“I’m doing a heck of a lot of soul searching on this,” Moore said. “I’ve been the superintendent here for 19 years. I grew up here. I attended school here. Everyone knows me. . . . Which is good most of the time.”

With its 6,200 residents and one traffic light, Chowchilla delights in its isolation from the outside world. Fresno, the nearest big city, is 45 miles south. Townsfolk like to joke that they got a McDonald’s the same time the Soviet Union got one.

If not for the sensational kidnaping of a school bus full of local children in 1976, residents say, no one would have heard of Chowchilla.

The Lions Club just finished putting up a 30-foot Christmas tree in the middle of the main street for the 20th straight year. Each spring, an old-fashioned cattle drive bounds through town, followed by four days of calf and team roping and barrel racing.

“We don’t have drive-by shootings. We don’t have graffiti,” Horn said. “This is middle America. If you want a safe place to raise your children and good schools, this is it. That’s why this Orange County thing is so hard to swallow.”

Bob Green, the high school principal, went golfing last weekend at the local country club and had to defend Supt. Moore against those who argued that Chowchilla had no business entrusting its money to faraway places.

“I told them Ron Moore has been pulling rabbits out of the hat for more than 10 years. He’s the reason this school district has been able to avoid the cutbacks other schools have felt.

“You can’t blame him. No one could have foreseen this.”

At Glen Ray’s diner on the main street, waitress Betty Meadows said everyone is talking but no one knows a thing. “People are upset but what can you do?”

Odessa Ray, mother of the proprietor, said she feared the worst. “It sounds like a done deal to me. It’s like everything else. The taxpayer is going to end up footing the bill.”

Her husband, Ed Ray, the driver of that ill-fated school bus in 1976, was not in a mood to talk. He said he was still smarting over Hollywood’s portrayal of the bus kidnaping in a recent made-for-TV movie starring Karl Malden as Ray.

“It made us look like a bunch of hicks,” he grumbled. “A bunch of country bumpkins.”

A farmer in a dirt- and sweat-stained Germain seed cap said the town wanted its privacy back. “What I know about this Orange County thing isn’t enough to complain,” he said. “I just know that it doesn’t help our anonymity any.”