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County might tap into reserves in bad economy [UPDATED]

January 27, 2009 | 12:03 pm

Los Angeles County supervisors are considering whether to transfer $34.1 million from one-time reserves to cover an upsurge in welfare and construction costs. They said they might have to cut services and workers next month if state leaders follow through on plans to defer health and social services payments.

The state controller is expected to delay $105.6 million in payments to Los Angeles County next month, and the governor has proposed deferring $1.4 billion in such payments in the six months that follow. "We do not have the cash flow to deal with this," L.A. County Chief Executive William T. Fujioka told supervisors this morning. "We would have to go on the market to borrow the money."

Supervisor Zev Yaroslavsky said borrowing was "not an option."

"How much are we going to have to pay in interest — if we can get a loan?" Yaroslavsky said, adding that tapping the reserves and borrowing are simply "deferring the inevitable."

"This is ridiculous," Yaroslavsky said. "The state deferring its responsibility so it can defer balancing the budget."

Supervisor Don Knabe, who chairs the board, questioned whether the county can transfer legal responsibility for welfare payments back to the state, or refuse to cover the state portion of payments.

Philip Browning, the county's director of public social services, said welfare rolls are growing more than expected, and any cutbacks would hurt the 145,000 low-income families the agency serves daily. 

"The impact will be very dramatic if it carries on more than a month," Browning said.

-- Molly Hennessy-Fiske

Updated at 12:25 p.m.: An earlier version of this post incorrectly reported that the supervisors had voted to approve the money transfer. The board was still debating the item.

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