State Asks for Money Back; O.C. Says No

California’s finance director says the state mistakenly sent Orange County about $20 million in vehicle license fees that should have been withheld because of the state’s budget deficit. He wants the money back.

But Orange County officials say they may be entitled to the money and don’t plan to send it back to Sacramento.

State officials this summer decided to keep three months’ worth of vehicle license fees -- collected in July, August and September -- and use the money to help offset the state’s budget deficit. Normally, the money is collected by Sacramento and distributed among local governments. The state’s plan was to repay the money it was withholding, plus interest, to the cities and counties in 2006.

The situation with Orange County was a little murky, however. Under agreements after the county’s 1994 bankruptcy, the state taps the vehicle license proceeds for Orange County to make monthly payments on the county’s nearly $900-million bankruptcy debt. After its debt payment is covered, the state sends Orange County the balance of the fee revenue.

So the state used vehicle license fees to pay the county’s $2.3-million debt payments in July and August. But the state also sent Orange County its ordinary share of the vehicle license fees -- about $20 million -- that some officials say should have been withheld under the plan to fill the state budget gap.

Tom Wilson, chairman of the county Board of Supervisors, said lawyers for the state controller and the county believe the county was entitled to all of the money under the bankruptcy agreement.

“I’m saying until they sort it out, let’s keep the money,” Wilson said. “I’m going to let them haggle it out and resolve the differences they have in Sacramento.

“If the lawyers say, ‘Pay it back,’ and Wall Street says, ‘You can pay it back,’ we’ll just send it back. We have enough in the general fund, in the reserves, that we can pay it back.”