Published: Sept. 30, 2011 Updated: 5:56 p.m.

The County of Orange needs to make $29 million in cuts, lay off dozens of employees and dip into its reserves under a plan recommended by the county’s chief executive officer to recoup $49.5 million the state took to fix its own budget issues.

The plan would avoid draconian service cuts and massive layoffs, but it also relies on $8 million in county reserves and estimates that better-than-predicted sales and property tax revenues will continue. Those solutions are temporary, county budget officials warn.

“These solutions, if they’re not available in year two, these cuts will have to grow,” said Frank Kim, the county’s budget director.

The county is engaged in an exercise in frustration, having gone from a balanced $5.6 billion budget that actually increased spending 2.7 percent to being $49.5 million in the hole as the result of a Legislative money grab targeting special funds Orange County receives from California vehicle license fees while the county pays off its bankruptcy debt.

“It’s not a shortfall,” Vice Chairman John Moorlach said. “It’s a theft.”

County lawmakers and union officials failed to convince state legislators to give back the $49.5 million before the Legislature’s session ended Sept. 9. The county has now hired outside lawyers to explore any legal options the county may have to recover the money, but even if the courts agree that the state should pay what is owed the county cannot force the state to write a check.

The state reimburses the county for state-mandated services rendered by the county, but payment delays can range from a few days to months, Kim said. At the same time, the county still has to pay its employees and vendors. California already owes Orange County an additional $91 million for a wide variety of state mandated services, and it remains unclear if and when the county will see that money.

“The state is the multi-ton elephant in the room,” said county Chief Financial Officer Bob Franz. “They have a lot of authority.”

The loss of vehicle license fees has forced the county to push through a months-long budget process in a matter of weeks.

The Board of Supervisors will discuss the CEO’s recommended plan at Tuesday’s board meeting along with a more draconian proposal that would slash 175 county jobs, shut down the fourth floor of the Men’s Central Jail and make service cuts across the county.

Eighty-eight percent of the county’s $5.6 billion budget is restricted revenue including pass-through money from the federal and state government to pay for services. The remaining 12 percent – $663.8 million – funds the county’s core public safety services and general government, and that is what the county can control.

“Services are required to be provided,” Kim said. “But the service level is at the county’s discretion, and that’s what gets impacted.”

Among the hardest hit by the CEO’s proposal are the county’s public safety services, including the Sheriff’s Department, the District Attorney’s Office and the Public Defender.

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