This Isn’t Just Orange County’s Problem : Hearing points to the statewide implications and the need for Wilson to act now

Tuesday’s state hearing in which Robert L. Citron made his first detailed public comments since he resigned as Orange County’s treasurer last month was largely about helping California avoid problems like the collapse of a county investment fund.

Such preventive measures are very important. However, the shift to Sacramento--where Citron testified before the state Senate Special Committee on Local Government Investments--also ought to focus attention on a more pressing issue, one that requires immediate resolution by the state. That is the matter of what Sacramento will do right now about the mess resulting from the Orange County bankruptcy.

In the early days of the crisis, which was revealed late last year, the state distanced itself, largely dismissing Orange County’s difficulty as a problem that a rich county brought on itself through reckless ways. It is clear now that Gov. Pete Wilson and the Orange County legislative delegation must acknowledge the statewide implications and that failure to do so could jeopardize the fiscal standing of government throughout the state.

In the void of political action to head off defaults by Orange County agencies on $2 billion in debt coming due this spring and summer, some Wall Street observers are worrying aloud that investors might see the state as unwilling to stand behind any local government that floats bonds. Arthur Levitt Jr., Securities and Exchange Commission chairman, goes so far as to suggest that a default on those debts by Orange County could have national impact, shaking confidence in the entire U.S. municipal bond market. If Wall Street is worried, how can the state not be?

A number of things Wilson can do are being suggested, such as forming a high-ranking oversight board, targeting the immediate problem with funds designated for Orange County and instituting direct state monitoring of Orange County financing.

If the governor intended to make a political point about local responsibility, it has been duly noted; there is no reason to belabor the lesson. The state should not rely on Orange County officials alone to clean up this muddle and restore the confidence of investors.

Wilson must acknowledge that Orange County is not only a key part of the state’s economy but that its future financial health is a matter of pressing statewide interest. The financial stake that California has in the quick resolution of Orange County’s problems should not be underestimated. Wilson needs to act.