• U.S.

A SOCIAL EMERGENCY

5 minute read
David Van Biema

TEODORA MARIN, 21, ARRIVED LAST week at the sprawling County-USC Medical Center in Los Angeles in no mood to ponder the fine points of municipal finance. Earlier in the day, she had discovered several soft lumps on the neck of her son Jesus. Jesus had been born at County-USC, premature and sickly; the doctors had told Teodora, a recent Mexican immigrant, that she must bring him back if unusual symptoms developed. Back to County-USC, that is: without money or insurance, none of the area’s private clinics will see her. As a nurse inspected her son’s swollen lymph nodes and scheduled a blood test, Teodora allowed that she knew enough of Los Angeles County’s latest disaster–the fiscal one–to dread its consequences. “If the hospital weren’t here,” she said, “I don’t know what I’d do. I don’t know where I’d go.”

Her apprehension is justified. County-USC, one of the busiest hospitals in the U.S., may fall victim to emergency budget cutting that has its root causes in California in the 1970s but foreshadows grim national choices in the ’90s. The dire prognosis for County-USC was delivered on Monday by L.A. County chief administrative officer Sally Reed. Saying that she wanted to “put reality on table,” Reed announced that the county risked insolvency unless it could make up a $1.2 billion budget shortfall within a year. She suggested a raft of drastic measures: a 20% cut in services, the elimination of 18,255 jobs and the closing of 30 parks and 15 libraries. But the biggest savings would come from shutting down the 9,000-employee County-USC Center, with its annual $803 million budget.

Within a day, 1,500 protesters gathered on the center’s steps, chanting, “Hey, hey, ho, ho. Sally Reed has got to go.” The huge hospital complex, which serves 60,000 overnight clients and 855,000 outpatients a year, is an island of security in violence-riven East L.A. If it were to close, smaller, private facilities might fail to replicate the quality of its burn center and trauma ward; or, most important, its commitment to the uninsured poor, who make up 40% of its customers. Already furious at California’s anti-immigrant Proposition 187, local leaders see Reed’s plan as a pursuit of the same policy by different means. Said Chicano activist Agustin Cebada: “This is genocide against our community.”

And yet Reed, and a growing number of politicians who support her, held their ground last week. For three years, the county’s revenues have lagged hundreds of millions of dollars behind its budgets, with the deficits covered through big-time borrowing. This year the lenders, spooked by the spectacular bankruptcy of nearby Orange County, seem ready to rebel. Within days of Reed’s announcement, three major investment services warned potential buyers of L.A. County’s bond issues that its credit rating was being reviewed or downgraded, an adjustment that could signal the start of a tailspin. Zev Yaroslavsky, a fiscally hard-nosed Democrat who is the swing vote on the five-person County Board of Supervisors, which must rule on Reed’s proposal, says, “The Latino community may feel these cuts are racial, but it’s not racial, it’s economic. It’s about whether the entire county shuts down next year.”

If that were to happen, L.A. would indeed repeat the experience of Orange County. Until 1978, both counties, like the rest of California, had comfortable social services, financed primarily by property taxes. In that year, both counties sacrificed much of that revenue to the statewide Proposition 13, the property-tax-cutting referendum that presaged the Reagan revolution. For a decade and a half, the state government in Sacramento made up the difference. But three years ago, in the midst of California’s particularly nasty recession, those payments were suspended. “The state is withholding about $1 billion a year,” says Yaroslavsky. “Guess what? Our deficit is $1 billion a year.” Orange County allowed an executive to try to recoup part of the lost funds by speculating in derivatives. He lost. Los Angeles merely borrowed, but could end up nearly as broke.

By midweek some of the immediate edge had been removed from L.A. County’s predicament. By obtaining a letter of credit (essentially, insurance against default) from a group of Swiss, German and U.S. banks, the county soothed enough investors to sell $1.3 billion in short-term bonds at a favorable rate. The Board of Supervisors agreed on $267 million in cuts, but put off a decision on County-USC until next month. Meanwhile, the Board of Supervisors will ask Governor Pete Wilson for relief from some costly unfunded mandates, as well as asking the state legislature for permission to levy a county tax on alcoholic drinks.

No one believes the deficit will be completely relieved, however. Instead California will again be a trailblazer. As the Federal Government devolves more independence–but less money–to the states, and the states do the same to the counties, those with the least clout are likely to lose the most. Says Yaroslavsky: “The people who need government and government services don’t have political power. The ones who do have political power don’t need government and don’t want to pay for it.” Too bad for Teodora’s son Jesus.

–Reported by Elaine Lafferty/Los Angeles

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