Finance-Report Backers: Remember O.C.

State Treasurer Phil Angelides is opposing a plan to scrap a 5-year-old law requiring counties to send quarterly investment reports to the state, and questioning whether lawmakers are ignoring the lessons of Orange County’s bankruptcy.

“Those who forget history are doomed to repeat it,” Angelides said Wednesday after a legislative analyst recommended that California abandon its stepped-up reporting requirements, adopted in the wake of Orange County’s fiscal meltdown.

The cost of the requirements, estimated at about $3.5 million a year, is “significantly more than the Legislature anticipated,” analyst Elizabeth G. Hill wrote Tuesday in a seven-page report to the Senate Local Government Committee, which requested the review last summer.

Hill’s analysis is certain to rekindle the debate over whether the state should be a watchdog over local government, as well as the relevance of reams of financial data that counties must compile.

An Inland Empire lawmaker contends the reports would do little to prevent another bankruptcy like Orange County’s. Instead, he said, the paperwork is simply filling space in some warehouse.

“We’re paying a lot of money for very little,” said Assemblyman Bill Leonard (R-Rancho Cucamonga). “We may have been overreacting to require the counties to submit so much data that is just filed away in Sacramento.”

Angelides says the reports play an important role by shedding light on local investment practices. Angelides and Orange County Treasurer John M.W. Moorlach called the program an “inexpensive insurance policy.” Based on the documents, Angelides’ staff finished a report earlier this month that found that California’s county treasurers have about $32 billion invested, most at low risk.

“I still see a need for this disclosure,” said Moorlach, who was elected after Orange County’s bankruptcy. “It doesn’t hurt to have another set of eyes looking at these reports.”

State officials have gone back and forth over the necessity of making counties file the documents. The state has demanded since 1933 that county treasurers make public filings. Sixteen years ago, the requirements were bolstered after San Jose had problems with its investments. In 1990, then-Gov. George Deukmejian persuaded lawmakers to relax the requirements. The Legislature did, only to quickly restore the rules after Orange County’s bankruptcy.

The exact cost of the program was difficult to determine, Hill wrote. However, last year, the state set aside $15 million to reimburse local governments and school districts for complying with the reporting requirements since 1995.

The laws have forced counties to adopt policies to guide their investment decisions, and some treasurers have even placed the reports on county Web sites, Hill wrote. But other reforms have gone further to improve the climate for making sound investments. Now counties are legally required to diversify their portfolios and avoid the risky schemes employed by former County Treasurer Bob Citron.

But Angelides and others say the reports are still needed.

“It is worth the cost. It’s important to have oversight,” said Mark Baldassare of the Public Policy Institute of California. “I don’t think we’re asking that much--to have local government entities make a report so that someone at a higher level can take a look at what they’re doing. Particularly these days when there is so much borrowing going on.”