ORANGE COUNTY ANNOUNCES FIRST OF BUDGET REDUCTIONS; COMBINATION OF
PAYROLL AND PURCHASED SERVICES ELIMINATED TO REACH $42 MILLION IN CUTS
SANTA ANA, Calif., Jan. 10 /PRNewswire/ -- Orange County officials today
announced measures that -- through a combination of payroll, operational and
purchased service cuts -- will reduce County government by $41.9 million. The
cuts represent specific cost reduction goals requested of department heads by
the Board of Supervisors two weeks after the County filed for Chapter 9
bankruptcy protection in the wake of the financial crisis resulting from
County losses in the investment pool.
The reductions involve:
-- $15.2 million in direct salaries and benefits;
-- $8.8 million in costs for contract employees;
-- $7.1 million in new or accelerated revenue from outside sources;
-- $6.1 million in costs related to leases and equipment; and
-- $4.7 million in costs related to training, travel, services and supplies.
Net workforce reductions attributable to the County General Fund total 698,
of which 186 represent layoffs, 31 retirement, 27 employees transferred to
other agencies, 233 elimination of vacant positions, 172 temporary, "extra
help" employees and 49 contract workers.
The reductions are a starting point in bringing net County costs in line
with losses of $172 million suffered as a result of lost interest income from
the fund for the six months remaining in the 1994-95 fiscal year, according to
Sheriff-Coroner Brad Gates, who along with District Attorney Michael R.
Capizzi and director of the County Health Care Agency Tom Uram comprise the
Operations Management Council who have been charged by the Board with the task
of solving the County's cash-flow problems.
"Clearly the reductions being announced today are an important first step in
bringing the County's discretionary budget in line with the losses," said
Sheriff Gates. "Our mandate from the Board was to impact cash flows as
quickly as possible within a six-month period while enabling the County to
continue to provide essential services related to health, welfare and public
safety," Sheriff Gates said. "That's what these cuts are intended to do:
provide short-term reductions in cash flow and set the course for long-term
"In a very short time, we have created a mind set that acknowledges the
magnitude of the problem an the fact that immediate action had to be taken.
We have taken what we believe to be unprecedented action in addressing the
problem, first by modifying labor contracts and second by getting the
authority of the Board to act."
Additionally, Sheriff Gates said, the County Administrative Officer is
looking at options aimed at longer-term solutions to the County's financial
The County's accounting consultants have estimated the cash shortfall to the
County's $463 million General Fund to be $172 million through June 30, 1994.
As reported earlier, the shortfall primarily reflects the loss of anticipated
interest income to the County general fund and is over and above the County's
loss of approximately $700 million in principal from the investment pool.
The $172 million cash shortfall represents more than 37 percent of the
general fund's $463 million in annual unrestricted revenues budgeted for
fiscal 1994-95. The general fund, which is the largest single County fund,
has total revenues of $1.6 billion, which represents approximately 44 percent
of the County's overall operating budget of $3.7 billion. Of the general
fund's $1.6 billion in revenues, however, 72 percent -- or $1.2 billion, is
funded by federal or state funds and billings for services provided to other
municipal governments primarily for police and fire services and is thus
restricted in how and where the money may be used.
"We have already said that the County will not be able to cut its way out of
the problem," said Paul Sachs a partner with the firm of Arthur Anderson LLP
and head of a special team of consultants assisting the County in managing and
restructuring its operating budget.
"The loss is so large that the reductions today -- as important as they are
-- are only a beginning and must be integrated with a range of other financial
and operational strategies. These are currently under study by the County."
COUNTYWIDE SUMMARY OF NET BUDGET REDUCTIONS
Summary of Position Changes
-- Layoff 186
-- Retirement 31
-- General Fund Transfers to Other Agencies 27
-- Elimination of Vacant Position 233
-- Extra Help 172
-- Contract Employees 49
Summary of Budget Reductions
-- Salaries & Benefits $ 15.2
-- Contracts 8.8
-- Training, Travel, Services & Supplies 4.7
-- Leases, Equipment & Other Costs 6.1
-- New or acceleration of revenue from outside sources 7.1
Total $ 41.9
/CONTACT: Sandra Sternberg or Michael Kolbenschlag of
Sitrick Krantz & Co., 714-834-4720 or 310-788-2850/