Orange County supervisors today signaled support for a $5.6-billion annual budget with only a few minor changes, but significant service cuts may be needed if they lose a legal battle with the state over property tax revenue or have an unexpected cost increases from housing inmates as part of state prison cuts.
Members of the Board of Supervisors told county staff they wanted to increase funding for a program run by the Health Care Agency from $1 million to $2 million and spend an additional $25,000 for more beds in the county's mental
health care facilities. The supervisors also added $108,710 -- the price of an
annual salary -- to hire someone to help develop a computer system for property tax payments.
The budget also assumes the county will have $73.5 million that may be taken away if the state prevails in its property tax lawsuit. The county has, in turn, filed a claim for $23 million against the state, a precursor to a lawsuit.
The dispute has its roots in Orange County's 1994 bankruptcy when the county pledged a portion of its vehicle license fee revenue to bondholders holding the debt because it was a guaranteed source of money. The state changed the way it allocates the vehicle license fee revenue to counties in 2004, but left its arrangement alone with Orange County because the bondholders were legally required to continue receiving the money, according the county's claim.
State officials last fiscal year decided to stop sending the $48 million in vehicle license fee revenue to Orange County, which had paid off its debt from the bankruptcy. County officials retaliated by withholding $73.5 million in property taxes from the state that had been allocated to fund school districts.
The other wild card for county officials will be the cost of providing beds for inmates sent to the county's jails to alleviate overcrowding in the state's prisons.
The Orange County Sheriff's Department has a contract with federal authorities to supply beds in the county's jails for detainees in the country illegally. U.S. Immigration and Customs Enforcement pays the county $118 per bed, but the state reimburses the county only $60 to $70 per bed, said Orange County Budget Director Frank Kim.
It costs the county about $136 per bed, so the more inmates the county has to house from the state, the fewer beds would be available for federal inmates, meaning less money for the county.
If the $73.5 million from the legal dispute is not available and housing the state's inmates costs more than expected, significant cuts could be on the horizon, Kim said.
``We'll have to look at everything,'' including layoffs and furlough days for county employees, Kim said.
County officials have a contingency plan to cut costs and services by 5 percent.
Supervisors praised county staff for beginning a ``glide down'' in costs five years ago as the economy began to slump, helping the county avoid sudden, massive cuts.
``The last five years have been very difficult for the county,'' said Supervisor Janet Nguyen. ``But my hat's off to the staff and CEO (Tom Mauk's) finance team.''
Board Chairman John Moorlach noted that today was the anniversary of Orange County exiting bankruptcy in 1996.
He said the lessons of the bankruptcy continue to loom over the budgeting process.
``That's always in the back of our minds when we do the budget,'' Moorlach said.
``We have flat revenues,'' Moorlach said, ``So we have to keep our expenses flat as well.''
As for discretionary spending, the budget sets aside $344 million for public safety, $133 million for community services, $33 million for infrastructure costs, $99 million for general government, $17 million for capital improvements, $20 million for debt services and $9 million for miscellaneous costs. The rest of the budget is earmarked for programs the supervisors have no control over.
If the county loses its dispute with the state then nearly $14.3 million would be stripped from the public protection budget, $6.6 million from community services, $1.6 million from infrastructure and environmental resources, nearly $4.1 million from general government, $485,000 from capital improvements and $42,821 from insurance, reserves and miscellaneous costs.
The board will consider adopting the annual budget June 26.
-City News Service