More tumult in Orange County: 800 layoffs seen, treasurer out.

LOS ANGELES -- The long holiday weekend provided no respite for officials in Orange County, Calif., as lawsuits and personnel shake-ups joined a grim mix of budget cuts and bomb threats.

In the most recent development, top officials met with union leaders yesterday to try to avoid yet another lawsuit -- this one over the county's plan to lay off hundreds of county workers.

Leaders of the 11,000-member Orange County Employees Association, in several emergency meetings Sunday and Monday, authorized legal action against the county, but agreed not to make a final decision until next week.

Union members were outraged at the county's decision last Thursday to reduce its current fiscal budget by $40.2 million, with most of the cuts coming from layoffs among the county's 18,000 workers. The reductions are expected to take place during the next six months.

The county expects to cut an additional $80 million from its fiscal 1996 budget next summer. Fiscal 1996 starts July 1.

"There is a profound sense of betrayal here," said union attorney John Sawyer Jr., in a press statement Monday. Sawyer estimated that 800 employees would lose their jobs.

The county board of supervisors approved the budget cuts Thursday afternoon, without citing a specific number of layoffs. The action is part of the county's extraordinary bankruptcy proceedings, which began Dec. 6 after officials disclosed a multibillion loss on the county's pooled investment portfolio and filed for protection under Chapter 9 of the federal bankruptcy code.

The supervisors did not say which jobs should be eliminated. They gave department heads the latitude to trim personnel on a merit basis, not according to seniority.

Supervisor Thomas F. Riley said yesterday that the layoffs are necessary because employee salaries -- at about $7 million a week -- are one of the county's largest expenses.

"God knows, I wish I was smart enough to think of some other way to settle this than to cause human misery," Riley said. "I'd be very happy if someone came up with a plan that would require less drastic action. But I haven't found anybody that has given me an alternative."

Riley, 82, is retiring on Monday. He will be replaced by Marian Bergerson, a Republican state senator who gave up her seat to take the supervisor's job.

Riley and two other supervisors reported receiving bomb threats late Thursday after the budget-slashing plan was announced.

The call came into Riley's Santa Ana office while he was at home. Police checked his office and home and found nothing.

"I was not that concerned," Riley said. "It just seemed like an angry person who wanted to talk to me."

Also late Thursday, Moody's Investors Service issued a report noting that treasurers in six other California counties have used the kinds of aggressive investment strategies that sank Orange County's portfolio. The report was included in a nationwide survey of 1,450 municipal issuers.

Moody's said the six treasurers did not go as far as former Orange County treasurer-tax collector Robert L. Citron, and that the other counties are not in any immediate danger of going bankrupt.

The six counties are Monterey, Placer, San Bernardino, San Diego, Solano, and Sonoma.

"The indicators in those six counties suggest a significantly different risk category" than Orange County, Moody's analyst David Brodsly told the Associated Press. "We haven't sorted through the risk factors enough to say it couldn't happen there. But the fact we didn't put any ratings under review reflects something less than immediate concern."

In the six counties, investment declines this year ranged from 5% to 10%, but Moody's said the portfolios are strong enough to ride out the paper losses.

The Moody's nationwide survey found that most public investments are conservative.

"Most issuers have represented that either they do not engage in leveraging strategies, or are not authorized to borrow for investment purposes," the credit rating agency said.

In other Orange County developments:

* The board of supervisors replaced acting county treasurer-tax collector Matthew Raabe Thursday afternoon, following reports that Raabe was the chief salesman for the county's investment pool.

The board moved Raabe back to his position of assistant treasurer and appointed Thomas E. Daxon, a former Oklahoma state auditor, as treasurertax collector.

Daxon was brought in this month as a finacial adviser to the county. He has left his position with the accounting firm of Arthur Andersen & Co. to take the four-month treasurer appointment.

Raabe, meanwhile, has hired a private attorney and has not returned phone calls since the investment debacle began. He is scheduled to testify before the Securities and Exchange Commission next month regarding his role in the crisis.

* Local government investors in the Orange County portfolio said Friday they have received SEC questionnaires asking about their dealings with the county treasurer's office.

Officials with the Orange County Department of Education and several other investors told Reuters that the questionnaires asked whether the county adequately explained the risks of investing in the highly leveraged pool.

The SEC is just one of several agencies investigating possible criminal misconduct in the management of the county portfolio. The Orange County district attorney last week served search warrants on the offices of Citron, Raabe, and several other county officials.

* Outside of Orange County, the city of Montebello said Thursday that it is talking with investors about rolling over $11 million of $20 million in notes that require a debt payment by this Friday.

Montebello, a Los Angeles suburb, has $47 million in the now frozen Orange County investment pool. The city had been counting on a portion of the money to meet the debt service payments.

* Yesterday proved to be the first quiet day in Orange County since the Dec. 1 announcement of the multibillion dollar loss on its portfolio. A 9:30 a.m. board of supervisors meeting was canceled for lack of business.

"We think it's a quiet day, but there are no guarantees it will stay that way," said county spokeswoman Sandra Sternberg. "It's a day-by-day thing."

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