Bankruptcy? What Bankruptcy?!

OCs financial meltdown, five years later

"You can't lose $15 million per year without some pain," Jim Kenan, OCTA's chief financial officer, said in 1995.

OCTA officials quickly assured critics of their already-languishing bus system that they had a plan to swap the extra $23 million per year with local cities. By giving the cities road funds in exchange for no-strings-attached cash, OCTA said, it could use the money to pay for maintaining bus service.

But not one of the cities approached by OCTA had any interest in swapping their highly flexible general-fund revenue for money that could only be spent on new roads.

Nonetheless, for the next two years, the unflappable OCTA continued to advertise its revenue-swapping plan at various public meetings. The agency even managed to float a proposed state law, Assembly Bill 168, that would facilitate the revenue swap through legislative fiat. While the bill collects dust in Sacramento, the end result of OCTA's efforts is little more than a heap of flowery, hopeful-sounding talk about keeping bus service affordable.

Finally, on July 11, the inevitable happened: OCTA raised bus fares from $1 to $1.50—the same day it eliminated all bus transfers, thereby forcing a majority of bus riders to pay triple what they had before. The total savings to OCTA: $1.5 million per year.

News of the July fare hike had hardly hit the press before OCTA announced yet another 50-cent increase, to a total of $2 per bus trip. The new fares are scheduled to go into effect on Jan. 1.


One of the agencies hardest-hit by the December 1994 Orange County bankruptcy was the county's welfare-providing Social Services Agency (SSA). Its annual budget was slashed by millions of dollars, which forced the agency to shed numerous services and programs. Then, in a massive bloodletting, 884 SSA employees lost their jobs. A May 25, 1998, Los Angeles Times report claimed the bankruptcy was responsible for the closure of four of the agency's Family Self-Sufficiency Program offices that month. Nearly 500 of the program's employees were fired, and pay was significantly slashed for those who remained behind.

The only good news for SSA came when President Bill Clinton and congressional Republicans joined forces two years ago to tear down the nation's 60-year-old welfare system, transferring responsibility for the poor, in our case, to a county government dedicated to serving the rich.

In December 1997, Orange County Supervisors Spitzer and Silva took local stewardship of the federal war on the poor, joining forces to defeat a proposal that would have forced welfare recipients to work 26 hours per week in return for receiving modest public assistance. That proposal, favored by supervisors Steiner, Wilson and Smith, also had the support of Felix Schwartz, executive director of the Health Care Council of Orange County.

But working 26 hours sounded too easy for Spitzer and Silva. On Jan. 8, the hard-nosed duo got what it wanted when the entire board voted to force OC welfare recipients to work 32 hours per week—six hours more than the minimum work requirement for welfare recipients living just about everywhere else in the United States.

"For too long, our welfare system has served as a disincentive to work," Spitzer argued at the time, trumpeting his successful collaboration with Silva. "We both favored the 32 hours from the start and strongly felt that we should not start welfare reform with built-in excuses for welfare recipients on why they cannot wean themselves off public assistance."

Other than making Silva and Spitzer seem tough on the all-important issue—the laziness of the lower orders—the chief effect of welfare reform in Orange County was to throw thousands of poor people, many of them single mothers, from a hard place onto a rock.

But it didn't take long for the bright side of welfare reform to shine through. On May 27, 1998, the Times ran a front-page story trumpeting the arrival of a leaner, meaner county government. Orange County's proposed budget for the 1999 fiscal year, the Times reported, would be $3.6 billion, $223 million less than the 1998 budget. But the reduction was achieved, the Times reported, "from reduced demands on county funding, not from cuts in any programs." "Reduced demands" turned out to be a euphemism for the "transfer of 1,553 court positions to the state" (a savings of $138 million) and the postponement of some capital spending. The rest of the savings was achieved through "reductions in welfare rolls."

Exactly how much savings to Orange County's bankruptcy-addled budget was achieved through welfare reform? $85 million per year. But the death of welfare hardly spelled the end of the county's SSA. In fact, last year, the SSA saw its first increased budget since the bankruptcy: 15 percent of the county's overall budget, up $4 million from the SSA's total allocation the year before. Some of the money was used to add 87 new staff positions to the SSA. No less than 73 of those workers, however, went straight to the Orangewood Children's Home to meet federal mandates requiring one staff person for every three patients.

Bob Griffith, chief deputy director of SSA, said his agency's budget is currently running at $532 million, down from $537 million in 1994. But he added that the county's share has dropped from $72 million in 1994 to a current level of only $45.7 million. Meanwhile—and thanks mostly to welfare reform—both California and the federal government have increased their shares of the SSA's funding. Both the agency's child-abuse intervention program and a similar program for disabled people and senior adults have received substantial increases in state funding. The third program whose funding has also swollen is CALWORKS.

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