ORANGE COUNTY IN BANKRUPTCY : 100% Refund Still Would Leave Schools Millions Short : Education: Districts had counted on interest from investments in collapsed county pool. Even if principal is returned, cuts and fee increases might be forced.

A proposal to refund school districts 100% of the money they invested in the county’s now-collapsed pool still will leave them with millions of dollars in lost interest payments, which officials warned could force cutbacks.

Though school leaders on Monday praised the plan by two county supervisors to fully refund the districts for their losses, they questioned whether the schools would receive their money in time to avoid defaulting on crucial bond payments.

The Irvine Unified School District has a $54.5-million bond payment due June 14. School board President Tom Burnham said the district will go bankrupt if it doesn’t get money to make the payment.

“We need the county to guarantee they will meet that debt obligation payment. If we don’t . . . we’re bankrupt. Then the state would have to come in and provide interim financing. That doesn’t serve the state or the county well.”

The proposed refund, suggested last week by Supervisors William G. Steiner and Marian Bergeson, has yet to be considered by the full board.

Steiner and Bergeson have said the proposal calls for covering the school districts’ $220-million losses in the pool by having the county borrow $100 million and then paying the remaining $120 million from damages the county expects to win from lawsuits filed against brokers who sold the county risky securities.

Under their plan, the county’s refund payments would be made over time, perhaps over two or three years.

School officials Monday urged supervisors to discuss their idea with them before making a final decision.

“We have to make sure the supervisors understand what our bottom-line needs are,” said John F. Dean, county superintendent of schools. “I am sure they are sympathetic to this and . . . will look into it.”

Added Irvine Deputy Supt. Paul Reed: “The timing of this will be very important. . . . One hundred cents on the dollar three years from now is certainly different than 100 cents on the dollar today.”

Even districts with less pressing cash needs said receiving 100% of their funds but with no interest will hurt.

James A. Fleming, the Capistrano Unified School District’s superintendent, said his district has lost about $3.5 million in interest because of the bond crisis, a situation that could bring cuts later this year.

“We are looking at the full gamut,” Fleming said. “There is nothing in our district that isn’t sacred.”

The situation might result in fee increases for the district’s busing and music programs and potential cutbacks in the number of school aides and administrators, he said.

Fleming said the district will fight to receive both its principal and all its earned interest.

At Saddleback Valley Unified School District, officials have calculated that they stand to lose $2.3 million in general fund interest even if they get back 100% of their principal.

Still school officials said the refund plan has lifted their spirits, at least for the moment.

“The wind is beginning to blow in a better direction, but until the ship comes home, it’s still wind,” Irvine school board member Michael B. Regele said.

Times correspondent Holly J. Wagner contributed to this story