L.A. County is Cast Adrift and Struggles to Keep Afloat : Sacramento and Washington must help solve problem they helped create.

Sally Reed, Los Angeles County’s chief administrative officer, has fired a shot across the bow to warn the Board of Supervisors that the county is in fiscal distress: Unless County-USC Medical Center, 30 parks and 12 libraries are closed and 18,255 workers are laid off to offset a $1.2-billion budget deficit, the county government could face bankruptcy.

Reed’s shot was heard across the country. One credit agency downgraded some county bonds and others are reviewing the county’s debt rating. Los Angeles County had to turn to a syndicate of Swiss, German and American banks to guarantee the repayment of more than a billion dollars in short-term notes, which thankfully sold nicely on Wednesday. Wall Street is now watching to see whether the supervisors make the hard political choices necessary to bring spending into line with revenues.

Significant reductions in county spending are inescapable. The supervisors on Tuesday approved the outlines of an interim budget containing $257 million in cuts; the plan spares the sheriff, the Probation Department, the coroner and health services the immediate 20% cut that it imposes on all other departments. Rather than take on the $655-million deficit in health services--more than half of the county’s total deficit--the board created a Health Crisis Task Force to find alternatives to closing the county’s main medical center and slashing other health services. Despite all this, the Board of Supervisors has a long way to go if it is to avoid the adverse perceptions on Wall Street that have affected Orange County since it declared bankruptcy late last year.

STRUCTURAL DEFICIT: Unlike Orange County, whose problems resulted from the mismanagement of investment funds, Los Angeles County is grappling with a complex convergence of factors not of its own making. The recession and the downsizing of the defense industry ravaged the county (about 12% of the state’s job base was lost). Revenues have declined along with property values and property tax rolls. Sacramento has made things worse by taking some property tax revenues away from counties to help balance the state budget. The economic outlook is for sluggish, fragile growth.

Meanwhile, the demand for health and other county services has skyrocketed. The indigent, as well as the working poor who have no health insurance, rely on county-run clinics and emergency rooms.

The national problem of unaffordable health insurance--swept under the rug in Washington last year--is haunting Los Angeles in a big way. Other Washington-created problems, such as federal requirements for the county to provide services to illegal residents, also have been costly.

WHERE’S THE GOVERNOR?: So where is Pete Wilson as the state’s largest county faces a fiscal nightmare? His office has told Los Angeles County not to expect any cash or other form of bailout from Sacramento. He is, however, willing to discuss lifting some state-mandated programs. That’s not enough. The governor and the Legislature are partly responsible for the county’s money problems. Because they have balanced the state budget on the backs of counties, they must be part of the solution. The problems of Los Angeles County could have regional, national and international repercussions--not to mention a negative impact on Gov. Wilson’s impending presidential campaign.

IS SOME EXPERT HELP NEEDED?: While struggling to come up with ideas to deal with the crisis, the supervisors should also appoint a budget commission composed of Los Angeles-area business leaders. Restructuring needs to be more flexible than Reed’s budget slashing. It was only after Orange County enlisted the help of business experts that its supervisors backed a proposal to ask voters for a sales tax increase. Of course the ideas of such a panel, if they are found to be useful or indeed even vital, must not be allowed to gather dust on the supervisors’ bookshelves. It’s possible that such a commission could produce a game plan that could guide the county for years.

KEEPING UP CONFIDENCE: As the budget process unfolds, maintaining confidence in Los Angeles is crucial. Already skeptics are speculating that the county once again is crying wolf--that after some complaining, Reed and the supervisors will find some way to balance the books for another year. The county, unfortunately, has earned a reputation for addressing its problems with patchwork gimmicks. This time there must be an unequivocal commitment to wipe out the deficit. The unions representing county employees must work with government and be realistic in their expectations. That is critical to both perception and actuality in working out a credible plan.