ORANGE COUNTY IN BANKRUPTCY : Battle Lines Form as Special Session on O.C. Aid Begins : Bankruptcy: Speaker Brown firmly rejects plan by county delegation, calls for sales tax hike and state trustee. Local Republican legislators proceed with recovery bills.

TIMES STAFF WRITER

As state lawmakers convened a special session Friday to help Orange County recover from the nation's worst municipal bankruptcy, Democrats and Republicans in the Assembly quickly drew battle lines in what could become an all-out ideological war.

Assembly Speaker Willie Brown flatly rejected a recovery plan championed by Orange County lawmakers, pushing instead for a state trustee to take over operation of the beleaguered county, a 1-cent county sales tax hike and a privatized prison complex at El Toro Marine Corps Air Station.

"I'm going to treat Orange County with the same degree of consideration that Orange County's legislators have treated the rest of the state in its time of crisis," Brown declared, referring to the county delegation's stiff opposition to taxes to aid other parts of California hit by disasters.

Orange County Republicans, meanwhile, continued to press ahead with a package of bills designed to privatize many county services, strip costly state mandates and cut some welfare programs. In the Assembly, 19 measures were introduced, while several more were expected to be offered up in the Senate when the Legislature reconvenes Tuesday.

"Orange County voters don't want tax increases," said Assemblyman Curt Pringle (R-Garden Grove), who is helping shepherd the county's legislative package. "Democrats may be thumping their chests to drive it in that direction, but that certainly doesn't drive the Orange County voter."

Assemblyman Jim Brulte (R-Rancho Cucamonga), the house's Republican leader, said the looming battle over how best to help the county will pit "status quo versus change."

"The Democrats want to maintain the status quo--onerous state mandates on Orange County, additional state requirements like a trustee," he said. "Republicans are supporting change, freeing up Orange County and giving it greater flexibility to recover."

Republicans also suggested privately that Brown and the Democrats were using the special session to politically punish Orange County, a staunchly conservative region that regularly helps propel GOP candidates to victory in statewide races.

Others voiced confidence that the county's dire predicament--it suffered nearly $1.7 billion in investment losses--and the potential repercussions for other California municipalities will ultimately quiet the Democrats.

"If Orange County is pushed into default, there will be a ripple effect not only on other local jurisdictions, but on the state itself and its ratings," said Dennis Carpenter, Orange County's lobbyist.

"I hope it doesn't end up a first-round knockout," Carpenter added. "Mr. Brown is a good talker and a good strategist. He has a way of playing his cards. What he says and ends up doing aren't always exactly the same."

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During a day marked more by posturing than pomp and ceremony, Brown didn't leave Republicans much maneuvering room.

Both houses convened the special session in the morning, ran through some formalities and, after less than five minutes on the topic of Orange County, adjourned for the long weekend.

In the Senate, President Pro Tem Bill Lockyer (D-Hayward) said that, in contrast to the pyrotechnics of the Assembly, "we're trying to find solutions in a constructive, positive way that isn't political or retributive" against Orange County's conservative lawmakers.

Brown, however, quickly performed an act rich in symbolism, naming one of the Assembly's more liberal members--Assemblywoman Marguerite Archie-Hudson (D-Los Angeles)--as chairwoman of an otherwise evenly divided, 18-member Select Committee on the Insolvency of Orange County that will consider the recovery legislation.

Archie-Hudson said Democrats are wondering why Orange County, "which has always thumbed its nose at the other counties as they got into trouble," would even come to the state for legislative help.

"Every option ought to be on the table," Archie-Hudson told reporters. "It seems to us the first option should be those that raise revenues."

She said Orange County needs to "recognize the opportunity" and levy a 1-cent sales tax increase, which would pour $268 million in additional revenue into the county's coffers each year.

Such an increase would raise Orange County's sales tax from 7.75% to 8.75%, compared to 8.5% in Los Angeles County, 7% in San Diego County and 7.75% in Riverside County.

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With Republicans opposed to new taxes, Brown said he wants to hinge any relief from the state on the approval of the sales tax hike in Orange County, an increase that would have to be approved by the county's voters.

Brown also extended a carrot of sorts, proposing a $60-million loan to the county's schools. But even that gesture was laced with irony--the funds would come from revenue earmarked for transportation improvements required for a proposed expansion of Disneyland in Anaheim.

He also had an offhand suggestion for a state trustee to run the county during its financial crisis--County Supervisor Marian Bergeson, a former state senator and longtime Brown opponent. "I think she very well could run Orange County," Brown said.

As for a prison at El Toro Marine Corps Air Station, which is slated to be closed by 1999, Brown said that "you know they have some wonderful things down there. That El Toro military base could work very well. . . . Orange County should have its own prison."

Brown said the county could generate revenue through the long-term lease or sale of the base for a privately constructed and operated state prison. He also suggested it could be developed in partnership with a federal prison.

None of the proposals voiced by Brown was introduced Friday as a bill.

As for the county's legislative efforts, Brown was taking no prisoners.

"I don't think there will be any mandate relief, I don't think there would be any contracting out," Brown said, suggesting it would be akin to handing "these Las Vegas-type gamblers more money" to work with. "I've been to Las Vegas and I've watched people who have an insatiable attitude to gamble. It's a sickness."

Brown also said that Republicans may "read tomorrow's news stories" about his proposals and pull back from the special session. "They may decide they don't want to submit themselves to a trusteeship, they don't want to impose the sales taxes, they don't want Marian Bergeson to just take over and run the county."

Republicans were hardly amused.

"I'd be very surprised if they continue this posturing for the next couple of weeks," said Pringle, who chairs the Assembly's powerful Appropriations Committee. "I think they have no idea what's in this package. . . . Sure, they'll say there's some of (the bills) they don't like. They've been saying that for years."

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The county's legislative package includes several ideas previously floated--and shot down--in the state Capitol. Orange County lawmakers have tried to pump up such retreads by applying them only to the bankrupt county instead of statewide and limiting them to a temporary period, generally about two years.

Among the ideas prompting Democratic ire is a bill that would allow the county to temporarily contract out more public sector jobs--an idea that for years has drawn fire in Sacramento from labor unions. The county also wants to cut general assistance welfare benefits, a program long protected by Democrats.

Other measures include removal of mandatory pregnancy testing services and permission to make cuts in libraries, trial courts and health programs without jeopardizing state matching funds. The county also wants jail inmates who can afford it to pay for defense attorneys and for medical and dental care.

Democrats are worried that even though the legislation applies specifically to Orange County and has set time limits, passage could prove to be a crack in the wall of resistance they've built over the years to proposals pushed by conservatives.

But several bills could survive the session. Chief among them is a measure to allow the state to "intercept" Orange County's tax revenues as a guarantee to jittery Wall Street investors that the county would pay back bailout bonds it markets in the coming months.

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The Orange County delegation also introduced measures to give the county more flexibility to sell its real estate holdings, privatize John Wayne Airport, streamline administration of welfare and Medi-Cal programs, advance state payments for a variety of programs and suspend the county's payment of some landfill fees.

Other measures introduced include legislation that would allow the fingerprinting of welfare recipients to save money by cutting down on fraud, and a bill that would free up so-called "enterprise funds," which amount to millions of dollars but currently cannot be tapped for debt relief because of tight restrictions.

Pringle characterized the bills as "things that will help Orange County solve their problems themselves."

But Democrats in both houses questioned just how much aid the Orange County package would really provide, even if passed in total. Lockyer, the Senate leader, said the legislation addresses only half the problem, ignoring the need for quick revenue or cuts to curb the county's current budget deficit.

"Someone has to figure out a total solution," Lockyer said. "I don't know what that is, but we're looking for it."

Lockyer said there doesn't appear to be "the requisite political will" in Orange County or the Capitol to raise taxes to help. But state Sen. Quentin Kopp (I-San Francisco), who serves on a Senate special committee investigating the bankruptcy, suggested that taxes and further cuts in Orange County's public work force seem necessary and inevitable.

"There is a need for Orange County to decrease its work force, which jumped from 12,000 to 19,000 in the past seven years," Kopp said. "And taxes should be raised. I think the Legislature should consider an income tax instead of raising the sales tax."

While most Republicans were expressing hope for their legislation, one Orange County lawmaker was voicing doubt.

Assemblywoman Doris Allen (R-Cypress) said "it doesn't look real good" for the legislative package. Some of the measures have promise, she said, but the package is more a "nice little wish list" that probably won't get through the Assembly.

She said the county "hasn't been upfront enough" with its ideas and suggested that state and local lawmakers need to "go back to the drawing board a little bit."

Times staff writer Jerry Gillam contributed to this report.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Brown's Counterproposal

Assembly Speaker Willie Brown on Friday appointed a bipartisan, 18-member Assembly committee that will examine causes of Orange County's bankruptcy and consider recovery proposals.

KEY FEATURES

* Temporary county sales tax

* Oversight of recovery efforts

* Privately run prison on current El Toro Marine Corps Air Station site

* Lending schools $60 million previously earmarked for transportation improvements around Disneyland

COMMITTEE MEMBERS

Democrats

* Marguerite Archie-Hudson (Los Angeles)(1)

* John Burton (San Francisco)

* Richard Katz (Sylmar)

* Sheila J. Kuehl (Santa Monica)

* Diane Martinez (Monterey Park)

* Kevin Murray (Los Angeles)

* Byron D. Sher (Palo Alto)

* Michael Sweeney (Hayward)

* Antonio Villaraigosa (Los Angeles)

Republicans

* Doris Allen (Cypress)

* Marilyn C. Brewer (Irvine)

* Mickey Conroy (Orange)

* Ross Johnson (Placentia)

* Jim Morrissey (Santa Ana)

* Bill Morrow (Oceanside)

* Curt Pringle (Garden Grove)

* Richard K. Rainey (Walnut Creek)

* Bruce Thompson (Fallbrook)

(1) chairwoman

Source: Assembly Speaker's office

* TAX HIKE NOT AN OPTION

Acting treasurer proposes selling assets, not tax increase. A30

* OCTA CREDIT-WORTHY

Transportation Authority bond rating upgrade boosts O.C. A33

* CAPIZZI WON'T YIELD

District attorney sees no conflict in his heading probe. A37

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