- The Washington Times - Friday, March 10, 2000

''Despite the good economy, District revenues are growing more slowly than expenditures," Alice Rivlin, former vice chairman of the Federal Reserve Board, warned on Wednesday. "Without major productivity savings or cuts in currently provided programs and services … current revenue policy and spending trends will lead to a $123 million deficit in 2004 if these trends are not corrected."
Whether imminent or down the road, such a forecast does not bode well for the District, which has boasted more than $660 million in surpluses since 1997 and which was insolvent just five years ago. A surplus is anticipated this year, too, but a huge problem is that the city's current financial state is not yet cast in hard numbers. What is certain is the financial warning must be heeded by the control board, Mayor Williams and the D.C. Council.
Their bottom line, of course, is balancing the checkbook for 2001, and to do that they must increase revenues and decrease spending. Right now, one city official told this page, the council and the mayor are both calling for new spending. "It's like filling up a bathtub with holes in all four corners."
Balancing a budget is an exercise in arithmetic that states reckon with every year. Yet in the District, it is always a risky affair because often, officials tend to take the easiest way out of a budget jam. This year D.C. officials will have very little wiggle room. In fact, Mrs. Rivlin called the 2001 budget "very tight."
Fortunately, the 2001 budget is balanced, though only because of several assumptions, including $39 million in spending cuts this fiscal year and $49 million in savings the next. The latter assumption is based on the mayor's promise to implement managed competition programs, which permit some city agencies to compete with the private sector for certain services, such as trash collection. The temptation to stall those plans looms as tough labor negotiations begin in earnest.
As for revenues, there is good news. While the national economy steams ahead, a number of variables are especially beneficial to the District. Single-family home sales are up, 8,700 D.C. residents are newly employed, there is moderate growth in sales tax revenues, and there is enough office space under construction to house 10,000 new employees. "So right now, we're doing very well," Mrs. Rivlin said.
To be sure, it is the so-called "out years" that have her most concerned, when revenues will be outpaced by new spending programs and capital improvements. Some of those include subsidized health insurance, new recreational facilities, school renovations and drug treatment programs not to mention demands by labor unions. And that's just this year. Cost overruns in any of those areas must be factored in as well.
The mayor and the council were warned months ago that city's financial recovery was fragile and that it would become even shakier if they do not curb spending. For its part, the Office of the District Chief Financial Officer could help by completing the annual audit and presenting the council with solid evidence regarding the fiscal impact of the laws they propose as well as the laws they pass. The mayor, meanwhile, must resist the temptation to spend money the city does not have. A deficit is not an option.

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