LA battles to beat a $1bn budget deficit

Haunted by the fiscal collapse of Orange County, neighbouring Los Angeles County is facing a $1.2bn budget deficit of unprecedented proportions. The huge budget gap is being blamed on recession-related decrease in tax revenue, bad financial planning and a large increase health and welfare costs.

The reality in Los Angeles County is that it can no longer afford health care for millions of poor and uninsured residents.

The health care system - the nation's second largest - accounts for $655m of the deficit and appeals for $300m in financial assistance from the state government and from Washington have failed to exact any firm commitment so far.

"There's no doubt the problem is significant, and it's a structural problem," says Elizabeth Hill, a county analyst. "It represents a massive budget problem."

Under a new $11.1bn budget plan, county supervisors have proposed to cut the county's deficit by closing USC Medical Center, the county's largest hospital, and public amenities such as health clinics, parks and libraries, with the loss of 2,500 jobs. The losses, which were due to come into effect today, have been reprieved until next week by a Superior Court judge.

"The best scenario is miserable and the worst scenario is disastrous," said Supervisor Zev Yaroslavsky of alternative proposals to close clinics, reduce hospital staffing, reduce preventive care and cut public health programs.

With no end to the crisis in sight, Wall Street bond rating agencies, which have been presented with a borrowing plan, have warned that a reliance on one-time budget fixes would damage the county's credit rating.

The problems of Los Angeles County will not be alleviated by the faint recovery of the California's $850bn economy. While tourism, movies and technology are growing, improvements in key areas have failed to materialise, notably the real estate market and farming. Closure of 22 military bases and defense contractors has already cost the state 300,000 jobs since 1988.

California's proposed 1995-96 budget does virtually nothing to help LA County. Governor Pete Wilson has proposed a significant cut in welfare and an injection of $1bn for education, an extra $40m for abortions and as much as $170m for various family planning programs.

"The chickens have come home to roost after several years of band-aid fixes," said Senator Tom Hayden.