LOS ANGELES - Standard & Poor's Corp. yesterday affirmed its ratings on Los Angeles County debt, citing the county's "decisive action" to close a projected $1.4 billion budget gap.
The county budget "remains very tight," given anticipated revenues in fiscal 1994, which began July 1, the rating agency said in a release.
Other developments, however, have provided budget relief, including more federal and state revenues and use of fund balances, the agency said.
Nevertheless, Standard & Poor's maintains a negative outlook on county finances.
"They're not out of the water yet by any means," said Chris Irwin, a director at Standard & Poor's in San Francisco.
The regional economy continues to remain weak, the agency noted. Furthermore, pending legislation affecting county finances and a statewide November vote on extending a temporary sales tax increase "will provide the next indicators of future budget stress," the release says.
Maintaining the county's current ratings, which range from AA-minus on general obligation bonds to single-A levels for lease-related obligations, "will depend on further alignment of on-going revenues and expenditures and evidence of improvement and structural stabilization of the local economic base."
Though difficulties remain, county officials sidestepped some of the more dire predictions of service and employee cutbacks. At one point, Standard & Poor's observed, the county contemplated laying off more than 9,000 employees, closing several major health centers and half its libraries, and reducing service levels in some areas by as much as 25%.
A two-pronged dilemma - the region's economic restructuring, fueled by steep aerospace and defense-related cuts, and a major shift by the state of local property tax revenues for school purposes - drove the dismal predictions, Standard & Poor's said.
So far, however, extra state and federal revenues "have forestalled the need to close county health facilities, and the closure of 43 libraries has been postponed until Feb. 1, 1994," the rating agency said.
Numerous bills also are pending on Gov. Pete Wilson's desk to assist local finances, including one paving the way for use of benefit assessments to support libraries. It remains unclear how much help that bill would provide, partly because voters must ratify the assessments within 12 months of their imposition.
Los Angeles County officials also are counting on $174 million in the current fiscal year if voters next month permanently extend a statewide sales tax increase due to expire at the end of the year. If that measure fails, further layoffs and service cuts are likely.
The county also anticipates a gain of about $149 million from a labor settlement ratified by various employee unions. The settlement includes deferral of overtime pay and no wage increases for two Years, Standard & Poor's noted.
County leaders also took some heat last month when they announced an extra $125 million of available funds that apparently stemmed from effective cost-management strategies. some public officials, including Gloria Molina, a county supervisor, grilled administrators over why they failed to identify the surplus earlier during crucial budget negotiations.
But other officials viewed the complaints as more of a tempest in a teapot, given the complex nature of the county's overall $13.5 billion budget. They also said that the extra funds are a one-time find, not part of a broader solution to long-term problems.