The District of Columbia is “very much worried” about cuts on Capitol Hill that could eliminate millions of dollars in revenue and spending capacity in the city, a potentially austere task as the D.C. government simultaneously learns to wean itself off one-time stimulus money it became accustomed to in recent years.
Fallout from the savings plan known as federal sequestration remains to be seen, but officials who control the city’s purse strings are committed to keeping their house in order, D.C. Chief Financial Officer Natwar M. Gandhi said.
“The sequestration is a major issue for us. As you know, it’s the law already,” Mr. Gandhi said during an interview with editors and reporters at The Washington Times. “But no matter what happens, no matter how much money we would lose from the federal government … we will balance our budget.”
Congress set forth sequestration in the Budget Control Act of 2011 as an attempt to cut $1 trillion in federal spending, about half of it from defense, over the next 10 years. Although observers are skeptical that the plan will be implemented, at least in full, state and local finance officials nationwide are girding for its potential impact.
Mr. Gandhi’s office estimates that roughly $1.7 billion will be exempt from the cuts, namely $1.3 billion in Medicaid payments and the balance through the Temporary Assistance for Needy Families and several other programs.
But estimates show the city could lose $40 million in federal grants annually under sequestration and lose about $24 million in revenue in fiscal 2013 - and even more in succeeding years - from frozen federal hiring, salaries and procurement in the city, Mr. Gandhi said.
The District finds itself at a budgetary crossroads as it navigates its give-and-take relationship with the federal government. A plethora of steady federal jobs fortified the D.C. economy while cities across the country suffered debilitating effects from the recession.
“On one hand, it’s a major driver of the economy,” Mr. Gandhi said of the federal presence. “At the other end, it also is a major burden because we have to provide services for which we do not get paid. It’s a double-edged sword.”
Cities and states across the country floundered without steady government jobs or a rosy real estate market such as the District’s - the “hottest in the country, if not the world,” as Mr. Gandhi is fond of noting - to buoy them through the recession. But like the District, they used stimulus funds for operating costs as well as capital projects.
Mayor Vincent C. Gray told the D.C. Council on Tuesday that budget holes are re-appearing now that those stimulus dollars are gone, and lawmakers should also consider the looming effects of sequestration as they hash out the city’s spending priorities for fiscal year 2013 and a supplemental budget for the rest of the current year.
“Sequestration is going to make things ever more difficult, because again we have a receding situation with federal dollars,” he told council members.
Council member Jack Evans, Ward 2 Democrat, is not convinced that the federal cuts will impact the District as severely as some expect, although he respects Mr. Gandhi’s stance.
Many federal employees do not live in the city and do not spend enough of their income in the District to make a significant dent if sequestration gets the green light, said Mr. Evans, chairman of the council’s Committee on Finance and Revenue. As for direct cuts to the District, he said Congress has not “drilled down into what the effects will be.”
Mr. Gandhi acknowledged there is a philosophy that, “Washington being Washington,” things will work themselves out and the impact will not be so bad.
“I cannot take that view,” he said, “because I think sequestration is a law and we must account for that.”