Stockstill: How the OC Bankruptcy and Yours Truly Nearly Sank CalOptima

I was director of communications at CalOptima in 1994. It was in start-up mode to organize publically paid medical services into a managed care system.

We had around $2 million in transition funds, but the state was to allocate millions when we went live in a few months.

The senior staff were top flight health care experts, but none were local. I was hired in part to help navigate the murky, often insular world of OC politics.

At a staff meeting in late Fall, our new chief finance officer inquired about investing the extra operating funds we had on hand. “Put it in the Bob Citron pool,” I piped up. “All the county funds, OCTA and toll road funds are there, plus a lot of school districts and cities. Citron gets amazing returns, although no one is quite sure how he does it.”

And so, all of CalOptima’s savings joined hundreds of millions of other public funds in the mysterious, but highly successful, Citron pool.

It was a crisp, sunny December 4, 1994, when the news began to circulate that something was amiss at the county. I hustled over to Civic Center plaza where TV trucks were massing, their forest of antennas beaming the news around the nation: Orange County had declared bankruptcy.

I sidled past Ron Insala, who was standing on the mall, speaking into a microphone. Wow–we are on CNBC!

I walked into the chambers where the supervisors met. Dozens of men in suits were milling about. Was that Bill Gross who just walked by? Would the bond king bail out our county like JP Morgan saved the nation’s banking system in 1907?

No such luck.

Back at CalOptima, the mood was grim. Fortunately, all money was not transferred to Citron; we had about two weeks operating funds in the checkbook, most of which would cover staff salaries. I mentally calculated unemployment benefits and revised my resume.

Then, hope emerged: the committee organized to manage the funds in the Citron pool was full of friends: Gary Hunt, Wally Kreutzen, Paul Brady and Stan Oftelie. An extra bonus: Ron Rus, one of the score of attorneys in the legal scrum, was a pal from summer days in Laguna Beach.

I attended the mass meetings where dozens of city council and school board members alternatively pleaded, begged or bullied the committee to release funds. One of the fund groups was labeled B. For reasons lost to memory, their circumstances led them to demand full repayment, henceforth becoming known at the “Killer B’s.”

CalOptima was running out of time, which became clear to the late Dr. Ken Bell of Kaiser Permanente, who took it upon himself to organize a multimillion dollar loan to get us sufficient funding to continue to operate. The loan likely saved CalOptima.

For a scholarly account of the entire event, I recommend my friend Mark Baldassare’s excellent book, “When Government Fails.” Or you can buy me a beer and hear more of an ex-bureaucrat’s recollections first hand.

Michael Stockstill is retired. He worked in Orange County for newspapers, KOCE TV, The Irvine Company and the Transportation Corridor Agencies, as well as a public affairs consultant.

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