- The Washington Times - Saturday, October 20, 2001

D.C. Mayor Anthony A. Williams yesterday said he "will not allow a deficit" despite the projected shortfall of more than $240 million for fiscal 2002.

"If need be, the city will simply cut expenditures to make up any shortfall," Mr. Williams said, and it is "a question of political will" to do what is necessary.

City officials outlined plans to avert the projected deficit amid grumbling by D.C. Council members that the budget forecasts are becoming increasingly "alarmist."

Chief Finance Officer Natwar M. Gandhi announced that the revenue shortfall of more than $240 million is because of declining tax revenue, uncollected Medicaid reimbursements and unforeseen overruns.

He said a deficit could lead to budget cuts and layoffs in the city next year.

The projected fiscal 2002 shortfall consists of: a $48 million loss of uncollected federal Medicaid reimbursements by District education, health and mental health agencies; about $81 million in increased special education costs; $12 million in labor overruns; and $100 million in lost tax revenue.

Mr. Gandhi told the council yesterday that the city has created a task force to address the uncollected Medicaid funds, but must tighten its belt.

"We shouldn't simply sit tight, but do something about it," said Mr. Gandhi. "It is not unusual for governments to have spending pressures, but what is important is how we manage them."

The projections come with a declining economy and the financial aftershock from the Sept. 11 terrorist attacks. They also follow the demise of the financial control board by almost three weeks after the city balanced its books and regained an investment-grade bond rating over the past five years.

"The will is here to ensure the city does not overspend," Mr. Williams said. "The last thing we're going to do is allow this city to go into overspending, regardless of the consequences."

D.C. Council member Jack Evans, Ward 2 Democrat and chairman of the Committee on Finance and Revenue, said he is concerned about the projections, but pledged that city would deal with spending pressures and closely monitor the revenue shortfall. He reminded other officials that the city still has hundreds of million of dollars in the emergency reserve fund.

"This is always a concern and I don't want to minimize the situation," said Mr. Evans. "Informing us of the situation is good, but alarming us is not good."

Last December, Mr. Gandhi alerted the D.C. Council to a potential shortfall that turned into millions of dollars of additional revenue, said D.C. Council member David Catania, at-large Republican, calling it "deja vu."

Although city officials are accusing him of "crying wolf," Mr. Gandhi said he considers it his duty to alert them to fiscal pressures.

Some city leaders said privately that District financial officers are more cautious because they are still smarting over the disclosure last month of an $80 million deficit in the school system's special education budget.

The shortfall was reported three weeks before the end of fiscal 2001, and city officials transferred $60 million in unanticipated revenue to bail out the school system.

Whether the city discovered a deficit three weeks ago is still being disputed by D.C. school officials, who say they haven't been given any proof.

"I don't not believe we have an $80 million deficit because we have not received any paperwork that says that," school board President Peggy Cooper Cafritz said.

She said an Aug. 31 financial report shown to the board indicated a surplus, but finance officials have disavowed the report.

School officials this month have ordered audits of all school departments.

The first issue, city officials said, is to figure out how much it really costs to educate special-needs children and ask for that amount, because they intend to hold the school system to its budget this year.

But school officials say they deliberately ask for less than they need because city officials have called for budget cuts.

• This article is based in part on wire service reports.

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