California Taxpayers Get a Detailed Peek At Where Bucks Stop

AS reports circulate this week that America's state governments may be in the best economic shape in a decade, a survey released July 18 in California shows why the financial outlook for major urban counties here continues to darken.

The study of Orange County, the rich Republican enclave that filed for bankruptcy protection in December, is the first of its kind: a comprehensive look at the per capita cost of government services in a large, urban county. Some criticize the study for its ideological bent, while others hail it as a consumers' guide to government. But whatever its politics, the study could be significant as a looking glass into problems yet to come for other counties nationwide.

''If [Orange] County had not raised salaries and benefits, there would have been less need to rely on the disastrous speculations of the [county] treasurer [Robert Citron],'' says the study by the Rose Institute of State and Local Government at Claremont McKenna College, in Claremont, Calif. Mr. Citron resigned earlier this year in the wake of a county investment-pool fiasco and has pleaded guilty to felony charges related to his handling of county finances. The county is currently grappling with how to recover from its $1.7 billion loss.

According to the study, county workers earned an average of $49,961 during the past fiscal year, up 11 percent from two years ago - totaling about $115 million. By comparison, an average county resident earned $19,433, down 3 percent over the same period. William Dannemeyer, a former state politician leading antitax forces, says that the $115 million annual figure would be nearly enough to retire the county's $1.7 billion debt as a yearly payment on a 10-year bond.

Steve Frates, co-author of the study, calculates that a 20 percent reduction in those salaries and benefits - still higher than average private-sector salaries - would save the county $400 million per year, easily enough to retire the county's debt sooner.

''The increases in salaries over the past year alone account for most of the shortfall that set the Orange County bankruptcy in motion,'' he says.

Even before official release, the study was criticized heavily by both county officials and the Orange County chapter of the League of California Cities.

''We found your comparisons between budgeted functions and population to be highly flawed and generally misleading,'' wrote Ernie Schneider, Orange County's former chief administrative officer, in a formal complaint to the study authors. Executive director of the League of California Cities Janet Houston, has called the report, ''ideology ... not research.'' County legislative manager Cathy Knighten faulted the study for looking solely at the costs of employees, not their efficiency.

Alan Heslop, director of the Rose Institute, concurs that there are ''no common ways of measuring costs in Orange County,'' but says his study methodology ''is better than any other measure.''

Antitax groups say the criticism by county officials is predictable.

''County officials complain that the information is flawed because the study shows us figures they don't want anyone to know - the wages and benefits of their employees,'' says Reed Royalty, executive vice president of the Orange County Taxpayers Association. ''No one buys anything else in life without knowing what they're paying for. Now the same can be true of government.''

Statewide, local finance here has been more problematic since 1978, with the Proposition 13 initiative that lowered property taxes and created limitations in raising them. In addition, state legislators last year shifted use of property-tax revenue from counties to public schools. Following California, 37 states have since adopted some form of tax limitations on county governments.

''With federal budget cuts looming on the horizon, striking fear into the hearts of state and city officials alike, you are going to be seeing far more scrutiny of where and how county monies are being used,'' says Dan Wall, fiscal analyst for the California State Association of Counties.

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