Supervisors Give Final OK to Austere Budget : Government: The county’s bankruptcy losses lead to historic cuts in the $3.4-billion spending plan for fiscal 1995-96.

Driving home the severity of Orange County’s bankruptcy, the Board of Supervisors gave final approval Tuesday to an austere budget that solidifies historic spending cuts and promises to drastically alter the way county government is run in the future.

“There’s going to be a hangover from the budget realities,” Supervisor William G. Steiner said shortly before the unanimous vote to approve the 1995-96 budget. “The bankruptcy generally forced government to do what it would not have done on its own: downsize and restructure.”

The $3.4-billion budget reflects a 41% slash in discretionary spending from the previous fiscal year, which obliged county officials to make tough choices earlier this year about which programs would get what share of scarce county dollars.

Reflecting the board’s position that the highest priority should go to public safety, the Sheriff’s Department and the district attorney’s office escaped the process with their total budgets relatively unscathed, while health, social and welfare programs were drastically gutted by county cuts.

“The poor are faring miserably in all of this,” said Tim Shaw, an advocate for the homeless and a leader of Orange County Partnership for Responsible Public Policy. “The county can do more to lessen the severity of the cuts on the poor.”

Supervisors Chairman Gaddi H. Vasquez said the board merely heeded the will of Orange County’s residents, who demand that public safety remain the priority. During budget hearings last week, only a handful of citizen activists turned out to protest the cuts to county health and social services, most of which were actually revealed in the budget preview made public March 30.

Highlights from the final budget offered a glimpse of the devastating toll that the county’s bankruptcy has taken on the government’s operations over the past nine months: Nearly 3,000 county jobs have been eliminated since last year; the county is left with a $5-million contingency fund compared with $20 million the previous year, and $188 million had been cut from discretionary, general fund spending that totaled $463 million in the previous year’s budget.

“I think we’ve hit rock bottom,” Steiner said. “The real challenge will be following the budget plan we’ve outlined.”

Supervisor Marian Bergeson said that even though this budget is tough to swallow, next year could be even worse.

“We have to be ready to restructure” county government, she said before the board’s evening meeting. “This puts some level of urgency on the board.”

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The county has been grappling with ways to reduce its spending since it discovered last fall that risky investment strategies pursued by former Treasurer-Tax Collector Robert L. Citron had caused $1.7 billion in losses to the county-run investment pool.

The loss prompted the county to declare bankruptcy Dec. 6, and county department heads have been jockeying ever since to protect their agencies’ funding. Sheriff Brad Gates and Dist. Atty. Michael R. Capizzi, as members of a special committee that looked for ways to cut spending, managed to avoid taking heavy hits in the cutbacks and layoffs announced in the first three months of the year.

And more recently, Gates and Capizzi joined forces in an successful bid to make sure that they didn’t suffer greatly in the future.

Although they agreed to give up a $7-million windfall they were to have received from Proposition 172 sales taxes this year, they succeeded in getting Vasquez, whose resignation from the board takes effect today, to introduce a resolution that future Proposition 172 revenue from a statewide sales tax would not be taken into consideration as the county divvies up its own funds. The board approved the resolution by a vote of 4 to 1.

Refusing to go along was Bergeson, who said the policy would tie the hands of future boards.

In its first full-year budget since the bankruptcy, the county slashed its discretionary general fund spending from $463 million to $275 million. The remainder of the $3.4-billion budget is funded by other sources, including state and federal money.

But in some instances, the county’s cuts had a dramatic domino effect. When the county cut by $19 million its funding to the Social Services Agency, the agency, which provides welfare and other poverty assistance programs, lost an additional $24 million in matching funds and grants, officials said.

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The cuts are already jeopardizing the work of the agency, and could eventually violate legal guidelines providing for the delivery of welfare services, said agency Director Larry Leaman. Workers already find themselves behind deadlines for processing welfare applications because of the reduced funding and staff, he said.

The bare-bones budget poses other critical problems for the bankrupt county as well. Many county officials are skittish over setting aside only $5 million in a reserve fund for disasters or unforeseen emergencies.

But county supervisors were left with few options.

The county’s bankruptcy recovery plan, which received Legislative approval two weeks ago, centers on seizing more than $810 million in sales and property tax funds over the next 20 years from other county agencies to help solve the financial crisis--money that normally would have gone to government operations.

Still to be ironed out is a dispute between the county and the courts. Presiding Superior Court Judge James L. Smith has formally notified the county he is prepared to take legal action to force the county to pay an additional $41 million in funding that the courts insist is needed to provide basic services.

The county’s budget sets aside only $33.8 million and wants the courts to make do with less. Both side say they are hoping to reach a compromise, but if the county is forced to come up with additional money for the courts, it could trigger a new round of fiscal woes, county officials say.

Orange County residents, many of whom have also escaped feeling the brunt of the bankruptcy, can expect to brace themselves for higher fees and reduced services in the future, officials said.

Several fee hikes have already followed the bankruptcy, including an average $24-per-household increase in trash collection fees, higher penalties and other service costs at local libraries and the prospect of higher gate and parking fees at county parks.

County officials have been reluctant, however, to brand them as bankruptcy-related fee hikes, preferring instead to call them “cost-recovery” fees.

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Budget Changes

Although county discretionary spending was slashed 41% to $275 million, total funding, including revenue from the state, declined just 10%. Total budget allocations by department, excluding federal funds:

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Percent 1994-95 Budget 1995-96 Budget change District Attorney $56,584,797 $55,273,873 -2.3 Probation 68,159,324 60,419,673 -11.4 Public Defender 20,567,571 23,244,476 +13.0 Alternate Defense* 12,711,334 3,292,334 -74.1 Sheriff-Coroner 178,861,027 184,636,465 +3.2 Health Care Agency 236,278,107 233,140,961 -1.3 Community Services Agency 16,554,378 16,130,495 -2.6 Social Services Agency 213,267,995 171,622,760 -19.5 Environmental Management 95,615,583 82,400,881 -13.8 Agency Assessor 17,103,040 16,407,849 -4.1 Auditor-Controller 9,147,285 7,239,387 -20.9 Board of Supervisors: First District 549,000 391,102 -28.8 Second District 538,863 395,000 -26.7 Third District 537,090 387,000 -27.9 Fourth District 573,538 405,206 -29.3 Fifth District 613,686 397,000 -35.3 General Services Agency 37,000,083 22,653,999 -38.8 Treasurer-Tax Collector 7,911,206 7,978,857 +0.9 County Administrative Office 6,504,376 4,347,824 -33.2

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* Pays attorneys when public defender has conflict.

Source: Orange County Administrative Office