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Orange County

State Deficit Forces Delicate Balancing Act

Finance: County, its cities and schools are worried more about the future, especially in education.


The state's budget deficit--$23.6 billion at last count--is forcing many school districts to slash spending and raid their reserves in an effort to save classroom programs. "It is not as though we are running out of yellow pads and pencils," said Paul Burkart, assistant superintendent of fiscal administration for Anaheim City School District. "But we may have to postpone that computer upgrade we were planning on."

California began the fiscal year July 1 without a spending plan after the Senate's proposal failed in the Assembly. While cities and counties are feeling the pinch, many schools are in a real bind. State officials say public education will receive at best about $47 billion, a $4-billion increase from last year that barely covers cost increases.

Among Orange County districts, Irvine Unified has grappled with some of the most painful choices, with officials saying earlier this year that they might have to eliminate class-size reduction programs and science and art classes.

Parents and local businesses raised more than $2 million to save some of those programs, but the district anticipates a $5.2-million shortfall this fiscal year.

"One thing we enjoy is a very supportive community," said Vernon Medeiros, the district's deputy superintendent and chief financial officer. But the 24,000-student district with an annual budget of more than $150 million does not want to depend on donations to stay afloat, he said.

Irvine Unified laid off nine employees, including teachers and nurses, in May and is still in salary negotiations with its teachers union. The outcome of those talks could affect the final budget.

Meanwhile, the district is saving money by combining some administrative duties. Alderwood and Eastshore elementary schools will share a principal, as will Deerfield and Westwood, but "we are running out of options," Medeiros said.

Earlier this year, officials throughout Orange County were worried about the budget crunch, which has been blamed on a sluggish economy that has dramatically cut revenue. Laguna Woods, Rancho Santa Margarita and Aliso Viejo--the county's three newest cities--feared the governor would take back vehicle license fees that have made up 30% to 60% of their budgets.

"It would have been a huge hit if they lost that," said Michael Gold, deputy director of the Orange County division of the League of California Cities. "There was some serious talk that, if they didn't get it, they might have to disincorporate."

State lawmakers decided to raise vehicle registration fees instead of pulling the money from cities.

Anaheim was hurt when tourists stopped flocking to Disneyland and conventions after Sept. 11. But the tourists have returned, and city officials say their $1.07-billion budget will enable them to maintain services at current levels. They are confident enough to transfer $10 million from city reserves to a capital improvement plan that includes new parks and gymnasiums.

Orange County's $4.9-billion budget includes cuts of $57 million across most departments and a hiring freeze. Much of the cuts are in state money that pays for welfare-to-work programs, day care, job retraining and transportation for thousands of low-income residents. The county's budget is up 4% over last year, but county officials said most of that increase is due to rising costs of employee benefits.

County officials are awaiting the final state budget to see how closely it matches the May revisions. If the county's budget is far off, it will be revised in the fall.

Although the Legislature has yet to pass a state budget, the county, its cities and school districts generally know what their budget pictures are for fiscal 2002-03. They are worried more about the future, especially in education.

"It is a high-wire balancing act," said Burkart of Anaheim city schools. "You try to stay the course, but there are a lot of bumps on the wire."

Some districts are dipping into their reserves. Orange Unified, for example, will use more than $8 million of its $20.6-million reserve fund to meet its 2002-03 budget of $230 million. Capistrano Unified, which, like Irvine, is in contract talks with teachers, will take $3.8 million from reserves to balance its $305-million budget.

Centralia School District, a 5,500-student district in north Orange County, will use half of its reserve funds this fiscal year, leaving it a cushion of about $1 million.

Santa Ana Unified, the county's largest district, will be able to meet its fiscal obligations with a $420-million annual budget, said Don Stabler, associate superintendent of business services. But there is little wiggle room. The district, which has 62,000 students, typically sets aside $2 million to $7 million a year for unforeseen costs, Stabler said. This year the amount is only $500,000.

"We will be able to fund all our commitments," Stabler said, "but that's about it."


Times staff writers David Reyes and Kimi Yoshino contributed to this report.

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