Chapman University has bowed out of a nearly decade-old contract to provide crystal ball projections on the economy for Orange County’s multibillion-dollar budget.
Chapman cited a burgeoning workload providing economic forecasts to government agencies for bowing out of the small but influential work.
The only bidder on the contract was academic rival California State University, Fullerton, according to county officials. A deal with Cal State Fullerton is expected to be in place by June.
Orange-based Chapman began providing the forecast for OC’s five-year “strategic financial plan” in the late 1990s.
The county was looking to make sure it was managing its finances effectively, said Steve Dunivent, OC’s budget manager. The hiring of Chapman’s A. Gary Anderson Center for Economic Research came in the wake of OC’s 1994 bankruptcy.
“We wanted to make financial decisions in a long-term context,” Dunivent said.
“We really enjoyed Chapman,” said Dunivent, who characterized the loss of Chapman as “a little disappointing.”
Chapman’s forecast for the current year covered areas making up roughly 11% of the county’s $4.96 billion annual budget. Chapman is asked to gauge how much of the budget can be used by the county for discretionary spending.
The university’s researchers said there’s roughly $523 million in OC’s general fund that can be used for discretionary spending on public safety, social service and healthcare agencies, among others, for the year starting July 1.
The county’s discretionary account is expected to grow 3% annually for the next few years, Dunivent said.
In building its forecast, Chapman considers revenue from property taxes collected in unincorporated areas, building permit fees, payroll, sales and other taxes, motor vehicle license fees, franchise and rent revenues among other sources.
Chapman has earned about $500,000 since 1998 for the forecasting work, figures provided by Dunivent.
Money isn’t behind Chapman’s dropping out of the forecasting, said Esmael Adibi, director of the A. Gary Anderson Center for Economic Research at Chapman.
“It’s very time-consuming and our resources were extremely limited,” Adibi said. “I’m glad Fullerton is doing it, and I’m sure they’ll do a great job.”
Fullerton is expected to get a one-year deal, according to Dunivent.
“We are happy that the county wants to use the work we do,” said Anil K. Puri, co-director for the Institute for Economic and Environmental Studies at Cal State Fullerton.
Puri, who also is dean of Cal State Fullerton’s College of Business and Economics, said he’ll do the county forecasting work with business professor Adrian Fleissig.
Cal State Fullerton issues annual and mid-year updates on its economic outlook for OC, the state and nation. It also has done work for the Orange County Transportation Authority on Measure M, the half-cent sales tax that the agency wants to renew prior to its expiration in 2011.
Chapman provides similar forecasts, competing with Cal State Fullerton for bragging rights on the accuracy of the forecasts.
The universities also conduct business surveys. Chapman takes the economic pulse of purchasing managers while Cal State Fullerton surveys chief executives and others on everything from hiring and labor cost trends to inventory and regulatory costs.
County officials were surprised that Cal State Fullerton was the only bidder out of 48 requests for proposals mailed to prospective universities and researchers.
Other universities tapped for proposals included California State University, Long Beach; University of California, Davis; University of Southern California; and the University of California, Los Angeles.
“Understanding the county government is not easy,” Chapman’s Adibi said. “The last three to four years there have been so many changes. You’re not just forecasting but understanding laws.”
The county has tightened its belt since the bankruptcy.
OC last year refinanced about $600 million in debt related to the bankruptcy by selling new bonds. The move retired the county’s official bankruptcy debt a decade early and saved $110 million. n
