ORANGE COUNTY IN BANKRUPTCY : Wilson Signs Bill to Aid Schools Buffeted in County Pool : Legislation: Measure permits districts to borrow against real estate holdings. Five agencies that took out money to invest may seek extra time to repay their loans.

Gov. Pete Wilson signed a bill Tuesday making it easier for Orange County schools that lost big in the county’s toppled investment fund to raise much-needed operating revenue, and giving some of the districts more time to repay looming loan debts.

The measure by Assemblywoman Doris Allen (R-Cypress), which went into effect with the governor’s signature, allows Orange County school districts to raise cash by selling notes backed by real estate holdings, a practice banned elsewhere in the state.

Allen’s legislation also amends a state law to make it possible for five Orange County districts, which borrowed huge sums to invest in the county’s formerly high-flying investment pool, to seek a few extra months to pay back their loans, which previously would have had to be repaid by June 30.

The Orange County Department of Education, North Orange County Community College District and the Newport-Mesa and Irvine unified school districts borrowed $200 million to sink into the fund last June. Placentia-Yorba Linda Unified struck a separate but similar deal, borrowing $50 million to invest in the pool last August.

Wilson’s stamp of approval on the bill comes just a few months after the governor criticized those districts for borrowing heavily for the sole purpose of trying to reap profits from the county pool.

In the wake of the investment pool’s collapse last December, Wilson said that what the five districts did amounted to “taking the milk money and playing bingo with it.”

School officials quietly took exception to the governor’s statement, suggesting that they had been misled by financial advisers such as former county Treasurer-Tax Collector Robert L. Citron, who recently pleaded guilty to six felony counts stemming from the debacle.

A spokesman for Wilson did not return a call for comment, but Allen defended the governor. She said Wilson “initially didn’t realize the situation” with the districts and now understands that “they’re trying to do the responsible thing and make sure everyone gets paid off while not cutting their programs too much.”

Allen said the new law she pushed through gives the schools “a chance to help themselves out of this terrible situation without coming to the state for a bailout.”

Although the schools are counting on the county to make good their losses, some are concerned that reimbursements from the county could be delayed. The Allen bill allows them to seek brief extensions in their loan repayment schedules and gives them another financing option in case the county doesn’t come through on time.

“This gives us breathing room,” said Michael Fine, fiscal services director at Newport-Mesa.

“We’re delighted,” said Tom Burnham, Irvine Unified board president. “It gives us more flexibility to stretch out the shortfall we’ve encountered. It’s another tool to manage through this as progressively as possible.”

Under the new law, the districts now have until January, 1997, to use their property as collateral for the sale of short-term notes on the financial market.

That money can then be used to pay off debts and operating costs. California’s school districts have been prohibited from selling such short-term notes to raise operating revenue since the early 1990s, when the Richmond school district nearly went bankrupt after abusing the practice.

“I think there’s always worries about school districts doing this, and I think Richmond proved that point,” Burnham said. “I think it has to be monitored closely and used discreetly in Orange County.”

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