We, Orange County, have a "new brand" and a "new logo" The OC. Our County, Our Community

This morning I attended the Orange County Board of Supervisors meeting to hear Chairman John Moorlach’s State of the County Address.
In his opening remarks John said that the County has adopted a “new logo” and a “new brand.” The OC. Our community, Our county.

It was refreshing to listen as he stated that there will be fiscal transparency and that they will establish a five year strategic plan (similar to the private sector way of planning ahead).
He than shared the new Government Accounting Standards Board, GASB statement #45, where they must report on such items as the former $1.4 billion of unfunded liabilities as of June 2006. John told us that they asked employees and retirees to make some compromises which resulted in a reduction of the unfunded liability by $940 million dollars.

He then commented that we have some “turbulence and buffeting” challenges ahead beginning with the selection of a new sheriff, job losses in the County, our housing sector recession, proposed 10 percent cuts form Sacramento that will impact the county, decline in revenues as well as a decline in sales tax that will impact Prop 172 and Measure M. He also mentioned fiscal impacts of illegal immigration, our aging infrastructure, more welfare, etc. We must recognize that “economic cycles happen.” Orange County lost 16,000 jobs in the second quarter of 2007. Some additional statistics. Housing is down 24.8 percent. We had a 9.2 percent drop in auto sales in 2007.I appreciated his candor. John stated that “we need to tell the truth.” Adding “we need all hands on the oars–work together through thick and thin.”
After obtaining permission from the Chairman, Supervisor Campbell will be posting a link of the entire presentation in his next newsletter.

To put this financial report into perspective Supervisor Moorlach stated that due to the “triple flip” 80 percent of our revenue comes from housing.

For those unfamiliar with the “triple flip” action let me share data from UCLA Today staffer Anne Burke.

“Gov. Arnold Schwarzenegger and the Legislature’s first joint effort at setting California’s fiscal house in order resulted in some remarkable feats that included a “triple flip” to pay for a voter-approved bond issue and a “backflip” to make up for lost revenue from vehicle license fees, the UCLA Anderson Forecast’s Michael Bazdarich said in a recently released review.

The so-called triple flip was set in motion when Schwarzenegger persuaded California voters to approve a $15-billion deficit-plugging bond issue, Bazdarich, a senior economist with the forecast, wrote in a report titled, “The Circus Is Back in Town: More on the State’s Budget Crisis.”The bonds were supposed to be paid through a .25% sales tax levy, but rather than raise the state sales tax, Sacramento took .25% of the 1.5% of sales taxes that goes to local governments, the economist noted. That was the first “flip.”

The second occurred when Sacramento compensated local governments for the lost sales tax revenue by dipping into property tax revenues that would have gone to public schools. The acrobatic stunt was complete when the state designated General Fund outlays to compensate K-12 schools for lost property tax revenues, according to Bazdarich.

Bazdarich’s colorful assessment of Schwarzenegger’s first foray into the world of California budget politics was released Dec. 8 as part of the quarterly Anderson Forecast, one of the most widely watched and often-cited economic outlooks for California and the nation.

Bazdarich said the triple flip is not the first time Sacramento has “given away revenues not its own.” To compensate local governments for revenue lost when Schwarzenegger lowered the vehicle license fee, Sacramento turned to property taxes, Bazdarich explained. But since the state doesn’t “own” property tax revenues, the funds will be diverted from flows currently going to public schools, he wrote.

“In effect, [vehicle license fee] cuts will be paid for …. out of the K-12 education budget portion, the same as with the Deficit Finance Bond debt service,” Bazdarich explained.

In comparison to the Schwarzenegger administration’s acrobatics, Bazdarich said that budget wrangling under former Gov. Gray Davis resembled a flea circus because there were “lots of appearances of action, but nothing much really going on.”

The forecast predicts that the California economy will grow at a slightly slower pace in 2005 and that the deceleration looks to continue into 2006. Next year, personal income growth will slow to 5.2% from this year’s 5.6%, and taxable sales will drop under 5% from 2004’s 6%, according to the forecast’s senior economist, Christopher Thornberg.

Still, California can expect a “solid but not spectacular” year in 2005, Thornberg said. Payroll employment growth, at .8% this year, will rise by 1.6% in 2005. But trouble could be brewing in 2006 because of an expected plunge in consumer spending on homes and durables, said Edward Leamer, who directs the forecast.

With political considerations precluding cuts in spending and Schwarzenegger firmly opposed to new taxes, the state budget situation remains “out of control,” Thornberg wrote.

“Of course, the idea of ‘no new taxes’ when the state is running a deficit is an oxymoron,” Thornberg added. “All the financing done to make up the gap through borrowing is only taxes deferred, not taxes avoided.””

My final thoughts. As our Legislature is faced with a massive shortfall, and the governor proposes a 10 percent across the board cut, I would not be looking for any financial aide trickling down from up north.

In his conference call last night Senator Tom McClintock told the listeners to write down three numbers. They were “20, 29 and 33. In the past few years the state has seen a 20% increase in population, a 29% increase in revenues and a 33% increase in spending.” It does not require a Harvard or Stanford degree to see that you cannot continue to spend more than you take in.

Let me quote from an OC Register editorial dated Tuesday, Jan 25, 2005. This story was based on governor Schwarzenegger’s visit to the Register where the editorial reads that he is engaging the right financial issues. He is quoted to say: “California does not have a revenue problem,” he reiterated. “It has a spending problem.” He likened his approach to “slowly taking the drugs away” from an addict, in this case, a Democratic controlled Legislature made up of “spending addicts[who] can’t help themselves.”

Respectfully governor, you are now one of them. Larry Gilbert