Orange County’s interim CEO warned department heads and leaders to restrict local spending and find possible areas of savings amid slowing revenue streams and the potential in the wake of the Airport fire for litigation to possibly cost taxpayers “hundreds of millions of dollars.”

Interim CEO Michelle Aguirre directed staff in a Jan. 3 memo to freeze hiring, cut back on discretionary spending and find ways to reduce services for possible savings.

The Airport fire has drawn more than $400 million in liability claims the county is now considering related to the 23,526-acre fire that began Sept. 9 as a public works crew used heavy machinery to move boulders in Trabuco Canyon. It burned for 26 days in Orange and Riverside counties, damaging or destroying more than 190 buildings, which could be homes, sheds and other structures. The claimants are seeking damages stemming from the loss of personal property and the cost of evacuating, as well as emotional distress.

In her letter to staff, Aguirre said the county needs to be mindful of what the Airport fire might cost, but also the forecast for changes in economic winds.

The county creates a five-year budget plan, called a “Strategic Financial Plan”, to identify spending priorities and forecast revenue and expenses. And that plan projected funding sources could be insufficient to cover department budgets and additional requests for funding. According to the report, operational costs are increasing beyond general purpose revenue growth.

“As a result of possible economic headwinds, immediate budget restrictions and cost-saving measures were instituted to close any gaps that may occur in the current fiscal year and to prepare for balancing of the FY 2025-26 budget,” Aguirre said through a county spokesperson in response to questions.

Vacant positions funded through the county’s general fund, except for a few exempt roles, are frozen and could be permanently closed. Discretionary expenditures are restricted to only those essential to maintain operations such as vacation payouts, overtime and large supply purchases, among others, according to Aguirre’s letter.

Each department is responsible for identifying non-mandated programs and services funded through the county’s general fund and reviewing possible impacts if reduced or slashed altogether, Aguirre said in her letter.

Third District Supervisor Don Wagner said county staff and leaders are being proactive to the fluctuating economy.

“What people around this state, around this country, are facing is a belt-tightening. We are in an inflationary time period,” Wagner said. “We’re not immune to those economic cycles. That said, we are keeping an eye on it, we have a handle on it, and we are preparing to be as lean and as frugal as we possibly can and still get done the things that need to be done.”

Wagner added that public safety remains a challenge and that he would not expect to see any skimping on ensuring residents’ safety.

“What’s being done, people looking at the budget and making suggestions for how to plan ahead is quite normal,” Wagner said. “What is a little bit different this time is that early on, we were seeing some warning signs from the state, in terms of the state’s own budget, (and) the Airport fire, which is a potentially significant liability for the county that we haven’t had in past years. So we’re looking at how to handle what we know is coming down the road.”

The total amount that Airport Fire claims, and possibly lawsuits, will cost is still unknown, Fourth District Supervisor Doug Chaffee said, but added that the county is not looking at bankruptcy.

The county has $30 million in insurance coverage that may be available to pay for claims, said county spokesperson Molly Nichelson.

Chaffee said the county has started paying out smaller claims, but added, “When we get down to the larger claims to deal with, we (need to) look for different ways (to cover the cost). We do have some cash, not the hundreds of millions. We could look for ways of paying over time. Sometimes you borrow money. These things are all not decided yet.”

Along with freezing hiring, possibly postponing expensive projects are other ways the county can scrounge more dollars to pay for Airport fire litigation, Chaffee said.

Every department will be scrutinized in the efforts to save money, but public health, public safety and social services will need to be safeguarded, Second District Supervisor Vicente Sarmiento said.

“All our departments are going to be going through some level of scrubbing of their department funds,” Sarmiento said. “It is, though, trying to make sure that we have those vital services that provide safety net support for our vulnerable communities, our residents that really don’t have any other options except for county services.”

Sarmiento said this “belt-tightening” is common practice for any responsible public agency.

“This is a starting point. It’s probably not where we’re going to end up, but at the very least it’s more of a tone-setting letter to make sure that we all understand we’re in a moment of paying closer attention to the way we expend public funds on our programming,” Sarmiento said.

County staff are currently reviewing Gov. Gavin Newsom’s state budget for possible impacts on the county’s finances, Sarmiento added, but at first glance, there is hope that cuts won’t be as deep as anticipated.

“The county has faced and overcome similar challenges in the past and, together, we will see our way through the current challenges,” Aguirre wrote in her letter to staff and county supervisors. “Collectively, we must prepare to mitigate any potential impacts to critical public health and safety services for the community we serve.”

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