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Less O.C. Money From Sales Taxes, Car Fees Predicted

Finance: Chapman report suggests county budget, already facing a $57-million deficit, will be hit by the area's slow job growth in the second half of the year.

September 14, 2002|DAVID REYES | TIMES STAFF WRITER

Orange County, already facing a $57-million budget deficit, got more bad news Friday in the form of a Chapman University report predicting reduced revenue from sales taxes and car-license fees.

The forecast, produced by economist Esmael Adibi, director of Chapman's Anderson Center for Economic Research, suggests that the county's budget will be hit by the area's slow job growth in the second half of the year.

"The only bright spot is in property taxes, because home prices have gone up and sales action has increased. But in all other components of the county's revenue, they're going to be under pressure," Adibi said.

Orange County saw modest job growth earlier this year, but Adibi believes that will decline slightly by year's end.

"Jobs drive the model for projections," he said. "Because if personal income doesn't grow, spending goes down."

Adibi said it is too early to tell exactly how much tax revenue the county will lose.

The county already has made cuts in social services because of reductions in funding from the state.

The county anticipates at least $40 million in additional cuts to its $4.3-billion budget later this year, said Michael Schumacher, the county's chief executive.

He has asked department administrators to recommend where expenses can be trimmed. Schumacher will then use labor-management committees, set up in each department, to help make further recommendations.

"It's too premature to list where the cuts will be, because we still are in the process of getting that information," Schumacher said.

The county has frozen hiring and is seeking approval for an early retirement incentive program that would cover 1,080 supervisors ages 50 and up.

In June, the Social Services Agency trimmed $39 million from welfare-to-work programs, adoptions, day care, job retraining and transportation for thousands of low-income residents.

"In social services there are more lines for services and longer waits, because caseloads are larger," said Gary Burton, the county's chief finance officer.

Some managers have expressed concerns about the proposed employee buyout plan, which they fear will drain them of their most experienced workers.

They also worry about how additional cutbacks will affect services the public receives.

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Pension Plan Suffers Loss

One major impact has been on the county's $4.5-billion pension fund, which had expected an 8% gain last year but instead saw a 3.2% loss, forcing county government to make up the difference.

Throughout the state, municipal governments have felt the budget crunch from retirement plans approved during the stock market boom of the late 1990s that are now coming home to roost.

It represents the third consecutive year the fund has either been flat or posted a loss, said John M.W. Moorlach, the county's treasurer-tax collector, who sits on the pension fund board.

"It's historic," he said.

"During the good times, when the stock market was stronger, Gov. Davis signed lots of legislation calling for more benefits. What they didn't expect was three years in a row of declining returns." The pension fund is considering whether to shift its allocations into safer investments and whether to lower its 8% assumed gain, which is its benchmark for long-term investments, said Keith Bozarth, executive director of the Orange County Employees Retirement system.

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