CHICAGO - Cuyahoga County, Ohio, commissioners unanimously passed a fiscal 1995 budget yesterday that cuts spending by 11% and projects the slow buildup of a fund balance that was depleted by losses from a local government investment pool.

The commissioners'action shrinks the county's operating budget to about $303 million in the next fiscal year, which begins Jan. 1, from the current $340 million.

"Eleven percent for Cuyahoga County is an awful lot of program reductions," said Dennis Roche, a county spokesman. "There will be a lot of difficult decisions over the next year."

Commissioners cut the budget in the wake of $114 million of investment losses from the county's Secured Assets Fund Earnings, or SAFE program, which was shut down in October.

As a result of the losses, the county is anticipating a zero balance at the end of the current fiscal year, compared with a $127.1 million balance at the end of fiscal 1993.

The spending cuts, which would be in place through fiscal 1998, are expected to result in fund balances of $28.5 million at the end of fiscal 1995, $57 million in fiscal 1996, $85.5 million in fiscal 1997, and $115 million in fiscal 1998, according to county projections.

The SAFE program was closed by commissioners after they learned about large paper losses sustained by the program and about the program's investment strategies, which included reverse repurchase agreements.

The program, which had been run by Cuyahoga County Treasurer Francis Gaul, had been investing public funds for about 75 local,governments, including the county itself. While principal was returned to the governments, the county, which was the largest investor in SAFE, was left with the bulk of the portfolio.

So far, the county has sold just over $800 million of securities, realizing losses of $114 million. The county still has a portfolio of about $258 million of securities.

Roche said that because a bond issue to restructure the remainder of the portfolio is no longer feasible, the county has decided to hold onto the remaining securities "for now."

The new budget contains no tax increases, program expansions, or salary raises. In addition, the county is looking at raising money from asset sales and through possibly pursuing lawsuits against securities firms that sold investments to the SAFE program. A criminal and civil investigation into the program is continuing, according to Roche.

Roche said county officials are "satisfied" they did the right thing in dealing with the program's investment troubles. Unlike the similar and unfolding situation in Orange County, Calif., Cuyahoga County officials immediately returned all principal to local governments that had invested in the program, allowing those governments to operate normally.

"For us, the crisis hit and the bulk of the difficult decisions have been made," Roche said. "We're going forward from here."

County officials are scheduled to meet today with Moody's Investors Service, which has the county's Aa long-term rating under review.

Both Moody's and Standard & Poor's Corp. have confirmed their highest short-term ratings for $246 million of county notes due to mature on Dec. 30. The county was able to come up with most of the money needed to pay off the notes through the sale of some of the securities in the SAFE portfolio.

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