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County Treasurers Squeezed By Tightfisted Taxpayers, Congress Graphic ORANGE COUNTY TAXES

December 13, 1994

SANTA ANA, Calif. (AP) _ Orange County’s financial meltdown has illustrated one thing: your local treasurer’s office is no sleepy little job.

Throughout the country, treasurers on the state and local level are in a crucible of conflict, trying to mollify tightfisted taxpayers who want lower bills while devising innovative ways to finance growing demands to pay for educating your kids, picking up the garbage, building highways.

To make matters worse, the federal government increasingly is pushing the burden on state and local governments to pick up the tab for housing, transportation and human services.

About two dozen states have imposed some type of limitation on their own tax-raising powers. At the same time, the spending pressure ballooned: in the 1980s, Congress imposed 182 new requirements on state and local government while cutting federal aid by 75 percent, said Frank Shafroth, director of policy at the National League of Cities in Washington.

Many treasurers have sought to live within their new means. But others, like former Orange County treasurer and tax collector Robert L. Citron, sought to finance the shortfall by betting the public’s money in complex Wall Street investment strategies.

″It’s pretty clear when your tax raising ability is limited, you have to look for other revenues,″ said Betsy Dotson, a spokeswoman for the Government Finance Officers Association.

Over the past 15 years, Citron’s management of the Orange County investment pool worked well: the fund averaged a 10.10 percent return, exceeding state returns by more than 3 percent annually.

Citron became a local hero to many of the 186 local government agencies that came to depend on the high returns - the Garden Grove Unified School District, for example, has budgeted $1 million in 1995 for investment earnings from the county fund.

″Clearly, they’re feeling the squeeze,″ California State Treasurer Kathleen Brown said of local treasurers. ″But I do not think that’s a reason or rationale for risky investment practices.″

Rising interest rates this year devoured Citron’s investment strategy, leading to a loss of at least $2.02 billion and forcing the well-to-do Orange County into bankruptcy court.

Some analysts believe this pressure will only get worse under a Republican- led Congress. Shafroth said the GOP favors limiting spending on social programs that particularly benefit the inner cities.

Rep. Newt Gingrich, R-Ga. and the incoming House Speaker, told a conference of mayors last month that he intends to restructure some of the classic pillars of the Democrat social agenda, such as the Head Start early childhood education program and Job Corps training.

But Rep. Christopher Cox, a California Republican who represents Orange County, said the critics have it backwards.

″One of the battle cries of the November election was no more unfunded mandates,″ said Cox, chairman of the Republican policy committee. He referred to the frequent cases in which Congress ordered or ″mandated″ local governments to provide a service without providing sufficent federal funds.

″The Democrats that controlled Congress all these many years didn’t heed that cry. They were the ones that put the unfunded mandates in place and increased the burden,″ Cox said.

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