Money Woes Ease as County Begins to Draft New Budget

When Orange County leaders signed off on a series of drastic spending cuts last spring, the grim task was made more difficult by the haunting prospect that still another round of budget slashing might be required this year.

“At the time, there was total uncertainty,” recalled Bob Wilson, the county’s assistant chief executive officer. “No one knew if we could stabilize the situation or if there would be total upheaval.”

But as officials began preparing the 1996-97 fiscal year budget this month, the unease has given way to guarded optimism that the worst of the cutbacks are behind the bankrupt county.

County officials expect to have a $38-million surplus in this year’s $3.4-billion budget that can be carried over to the following year.

If the spending and revenue projections for the remainder of the 1995-96 fiscal year hold up, the county should be able to avoid any further service reductions or significant layoffs.

The Board of Supervisors will begin considering the budget recommendations in June--the same month the county is scheduled to emerge from bankruptcy. Despite the hopeful forecast, some supervisors have vowed to scrutinize the budget in search of more savings.

“I think we can squeeze millions of dollars more through government restructuring,” Supervisor Don Saltarelli said. “I think if we err, we must err on the side of caution. We need to prepare for all the unexpected contingencies that are out there.”

While some looked for more cuts, other county leaders warned that the present financial situation leaves many needs unmet.

Sheriff Brad Gates said last week that because of bankruptcy-related cutbacks, his department had to eliminate 30 jail positions that would have allowed the county to house more inmates in county jails.

The Probation Department, which late last year had to release some nonviolent juvenile offenders early because of bankruptcy-related cutbacks, stands to loose $11 million in federal funds this year. The department’s $68-million budget was already slashed by nearly $10 million last year.

Funding for trial courts is another unresolved issue. The courts might shut down from May through the end of the fiscal year June 30 unless they are provided an additional $20 million in operating funds.

But overall, the situation is a far cry from the crisis that faced the county in the months following its Dec. 6, 1994, bankruptcy filing, which stemmed from the $1.64-billion collapse of the county-run investment pool.

The staggering losses forced officials to slash the county budget from $3.7 billion to $3.4 billion. Nearly 3,000 county jobs were eliminated and 580 workers laid-off. Discretionary spending was reduced by 41%, and the county’s contingency reserve fund fell from $20 million to $5 million.

While the Sheriff’s Department and district attorney’s office were largely spared from cutbacks, other agencies were hit hard. The Probation Department lost 11% of its budget and laid off 129 workers. The Social Services Agency--which handles child welfare matters--cut its operating budget by 27% and its staff by 24%.

When the cuts were approved last spring, officials wondered whether the county would be able to operate within the tight spending limits. “That was the big question mark going into this year,” Wilson said.

Not only did department managers live within their means, but they also produced $38 million in additional savings that will be used to help balance next year’s budget.

The county also benefited from higher-than-expected tax and fee revenue. The improving regional economy should result in healthier revenue in years to come as well.

More savings came from privatization efforts and public-private partnerships. The parks division turned to volunteers and private fund-raising to maintain some of its nature trails, while the Sheriff’s Department was able to reopen a police training center with the help of the private sector.

“The department heads did an outstanding job,” Supervisor Marian Bergeson said. “If the trend of economic recovery continues, the projected revenues should stabilize the budget situation.”

Department managers submitted their preliminary budget plans to Chief Executive Officer Jan Mittermeier on Friday. Wilson said the county administrative staff will examine the proposals with an eye on trimming fat and permanently eliminating vacant positions. About 1,000 of the county’s 15,000 jobs are now unfilled.

Additionally, Mittermeier is seeking to increase the county contingency reserve from $5 million to $10 million.

Saltarelli said the county should establish as strong a revenue stream as possible to help pay off its bankruptcy-related bond debts. Among the ideas he said should be examined: A one-week unpaid furlough for county employees and establishment of lower salaries for some future county employees.

Bergeson said she favored a comprehensive examination of the role of county government. “I think there are many ways to reduce government,” she said. “We need to evaluate what businesses the county should be in. Services we should not provide can either be given to the private sector or to other jurisdictions.”

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Budget Boost

County officials may be able to balance the 1996- 97 budget without resorting to the widespread layoffs and cutbacks required last year. The upbeat financial forecast is due in part to $9.5 million in projected extra revenue. Revenue sources for fiscal year 1995- 96, in millions.

Budgeted:

Projected:

Property taxes:

Budgeted: $117

Projected: $116.4

*

Motor vehicle fees:

Budgeted: $86.1

Projected: $90.2

*

Fund balance available:

Budgeted: $25

Projected: $25

*

Sales & other taxes:

Budgeted: $18.5

Projected: $17.5

*

One- time revenue:

Budgeted: $15.6

Projected: $16.1

*

Property tax administration

Budgeted: $6.6

Projected: $6.6

*

Interest

Budgeted: $4.0

Projected: $9.7

*

Miscellaneous

Budgeted: $2.2

Projected: $3.0

*

Total:

Budgeted: $275

Projected: $284.5

Source: County of Orange

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Assessing Jobs

Although 3,000 county jobs-about 16%-have disappeared since the bankruptcy, officials plan to scrutinize next year’s budget with an eye on eliminating unfilled positions:

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Authorized positions

Dec. 1, 1994: 18,373

March 14, 1996: 15,373

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1996 position breakdown

Filled: 94%, 14,385

Vacant: 6%, 988