County Faces Possible Cash-Flow Problem, Officials Say : Budget: Agencies may run out of money by March unless more than $1 billion in state and federal reimbursements are paid.

Delays in obtaining promised state and federal funds has saddled Los Angeles County with a cash-flow problem that could soon prevent it from paying its bills, officials said Friday.

Officials acknowledged that the problems are potentially so serious that the county could run out of money by late March and be unable to meet its operating expenses, including its $300-million monthly payroll.

If the issues are not resolved, the county could be forced to borrow in order to meet its obligations or curtail some services and programs.

The problem stems from delays in receiving reimbursements of more than $1 billion in state and federal health care funds that are included in the county’s 1994-95 budget.

The state owes the county about $400 million, which the county had assumed would be received before March. However, state officials recently informed the county that the money would be repaid over a longer period of time, with final payments scheduled for late June.

The county has alerted the state about the potential serious consequences, Chief Administrative Officer Sally Reed said.

“We have some indications that the state will be cooperative and rework its schedule,” Reed said. “If that doesn’t happen we will be looking at a number of things, including our revenue collection and expenditure patterns and ensuring that we are not paying bills early. We would be looking at all sorts of limitations on travel expenses as well as services.”

The county’s potential cash shortage is exacerbated by an ongoing dispute with the federal government over $641 million in health care reimbursements. The county had expected the money to be paid relatively quickly but was dealt a setback recently when the Health Care Financing Agency delayed a decision on whether to release the money.

The agency accepts claims from local governments seeking reimbursement for the administrative costs involved in treating Medicaid patients. The county is asking for reimbursement of three years worth of administrative costs.

The County Board of Supervisors included the questionable revenues in its budget to avoid making deep cuts in the Department of Health Services and other county departments.

Supervisor Gloria Molina said such actions leave the county in a precarious position but cannot be helped.

“It really speaks to the way counties are funded and the unevenness of it,” she said. “Unfortunately, in health services, this is how the county has to work in getting these funds.”

Assistant Auditor-Controller Tyler McCauley said “it’s one of those things where if you’re anticipating getting cash and you don’t get it then you have a problem.”

However, Zev Yaroslavsky, the county’s newest supervisor, said the difficulties point up continuing problems with how the county manages its money.

“It’s bad fiscal management,” Yaroslavsky said. “This county should be budgeting for worst-case scenarios instead of best-case scenarios as we have been doing.”