County’s Projected Deficit Hits $589 Million : Finances: Supervisors are told that investment fund may be tapped to meet operating expenses, including $300-million monthly payroll.

Los Angeles County’s projected spending deficit has mushroomed to more than $589 million, and officials warned Thursday that the county faces a serious possibility of running out of cash before the end of the fiscal year.

Auditor-Controller Alan T. Sasaki told the Board of Supervisors that the county may have to borrow from its investment fund to pay its debts through the end of June, something it has not resorted to since the early 1970s.

“It is more likely that the county may have to utilize short-term borrowing to maintain our cash flow,” said Sasaki, noting that the county’s negative cash balance had grown by more than $190 million since his last estimate a month ago.

The cash flow problems represent a serious hurdle for the financially strapped county as it tries to ride out a tumultuous budget year that has seen substantial cutbacks in nearly every department.

Further curtailments might be needed if the county is unable to meet its operating expenses, including its $300-million monthly payroll.

The problems stem, in part, from lower-than-expected reimbursements to the county from state and federally financed health programs. But Supervisor Deane Dana laid some of the blame at the county’s feet.

“It’s obvious we’re continuing to spend too much,” he told his colleagues.

The board is attempting to rein in some of its consumption. Last week, for example, it gave Chief Administrative Officer Sally Reed authority to review and approve acquisition of supplies and services in all departments except the sheriff’s.

Reed said that action may pay off by reducing the cash flow problems. “We would hope the numbers would show some improvement over the next several weeks and months,” she said.

It is not uncommon for the county to borrow money from its various trust funds to cover cash flow deficits that occur throughout the year. But Sasaki told the supervisors the trust funds may be tapped out and unable to provide for the county’s current borrowing needs.

Tapping the treasury investment pool, however, is not common.

The pool is administered by the county, but includes money invested by the city of Los Angeles, the Metropolitan Transportation Authority, the Los Angeles Unified School District and other public agencies.