O.C. Gauges Its Hit From State Budget

Orange County would have to slash its general-fund budget nearly 8% under Gov. Gray Davis’ budget plan, requiring across-the-board cuts, officials said Monday.

In a grim fiscal forecast, Orange County Chief Financial Officer Gary Burton said the county would lose $30 million because of altered vehicle license fee revenue, and maybe millions more from law enforcement, social and health programs.

The loss from the vehicle revenue change would be 7.6% of the county’s $395-million general fund, part of a total county budget of about $4 billion.

County department heads are now trying to prioritize their services, with an eye toward eliminating or reducing those not required by law. But “I don’t know how, with these kinds of cuts, if the board will have sufficient funds to meet their [legal] mandate,” Burton said.

A central part of Davis’ budget is shifting some vehicle license revenue now received by local governments to the state. Orange County is more reliant on that revenue than any other county in California because it gets back from the state less of another key source of income: property taxes.

The average California county receives roughly $120 per person in property taxes; Orange County gets $42 per person, the lowest in the state.

Thus, Orange County is one of the only counties whose largest general-fund revenue source is the vehicle license fee, Burton said.

The county now receives $183 million from the vehicle fees. Under the Davis budget, that revenue would fall to $92 million. But that sum would be used to help pay off debts incurred when the county fell into bankruptcy in 1994, and $62 million from other revenue formerly earmarked for bankruptcy debt could now be put back in the budget. Burton said that would still leave the county with a $30-million general-fund loss.

County officials are also concerned about Davis’ plan to shift $8.2 billion for health, long-term care, court security and other programs from the state to the counties.

He proposes to help counties pay for these programs by raising the state sales tax 1 cent, increasing the income tax for the state’s wealthiest residents and raising tobacco taxes $1.10 per pack.

The shift would make Orange County responsible for roughly $820 million in programs now run by the state. Burton said he is worried about the long-term reliability of funding those programs with cigarette revenue.

“The use of tobacco ... is going to go down, but these mandated programs aren’t going to go down,” he said.

A National Cancer Institute study found that for every 10% increase in the cost of cigarettes, consumption drops 3% to 5%.

Burton added, “If they’re going to keep the mandates, they have to pay for them with a reliable funding stream.”

California is faced with a roughly $35-billion budget deficit. To bring the budget into balance, Davis on Friday proposed a $96.4-billion spending plan that would raise taxes, sharply reduce government services and shift many state responsibilities onto county governments.

Davis’ proposal would also require Orange County to pay more than $3.5 million in federal penalties the state has been assessed for not developing an automated child support collection system.

And, Burton noted, the state again proposes to defer paying the county for some programs required by law, which this fiscal year is costing the county $20 million.

Burton asked each county department to comb through the proposed state budget to find spending cuts that could affect them and to identify nonessential programs. These matters will be brought before the board at a workshop Jan. 29.

But until a budget is completed, Burton said, it will be difficult getting a handle on what will be cut.

“How can you possibly, at this level, do financial planning, much less capital planning ... when the revenue you’re pledging is unstable?” he said.