- The Washington Times - Tuesday, September 17, 2002

D.C. leaders are dismissing a preliminary congressional report questioning a need for millions of dollars in extra federal payments, saying the District faces an estimated $325 million shortfall.

D.C. Chief Financial Officer Natwar Gandhi will release the official revenue forecast for fiscal 2003 today, just as a congressional deadline expires for city leaders to submit proposals to balance the $5.3 billion budget.

Finance officials said yesterday the final figures are not expected to change drastically from the projected $325 million deficit. D.C. officials must balance the budget before it takes effect Oct. 1.

The General Accounting Office, Congress' auditing agency, earlier this month cited "insufficient information to determine whether and to what degree to which the District might face a structural imbalance."

The preliminary findings noted that the District had "unique" challenges because of its role as the nation's capital.

But it also chided city officials for maintaining that the current tax base couldn't support an acceptable level of service unless other policy alternatives, including tighter expenditures, were considered.

Federal officials also said the District failed to value the "substantial economic activity" and revenue resulting from the federal presence. The agency said it would continue to study the issue and look at the experiences and data from other cities for comparison.

The final report, which is expected to be ready in the next few months, was requested by Rep. Joe Knollenberg, Michigan Republican and chairman of the House Appropriations subcommittee on the District; Delegate Eleanor Holmes Norton, a Democrat and the District's nonvoting representative in Congress; Rep. Constance A. Morella, Maryland Republican and chairman of the House Government Reform subcommittee on the District; and Sen. Mary L. Landrieu, Louisiana Democrat and chairman of the Senate Appropriations subcommittee on the District.

The update was requested by Mr. Knollenberg. A spokesman said yesterday the congressman was waiting for further information before drawing any conclusions but added that every state was facing revenue shortfalls because of the economic downturn.

Mrs. Norton was outraged that the agency released preliminary findings before answering the initial question it was asked: Does D.C. have a structural imbalance?

"It is almost unheard of to release an unfinished report," she said. "They haven't even gotten to the structural imbalance part yet."

Local leaders, including former financial control board Chairman Alice Rivlin, have maintained for years that the city suffers a shortfall of hundreds of millions of dollars annually because of its unique role as the nation's capital.

The city each year pays almost $900 million for services to the federal government, including public works and policing, as well as road improvements and state functions such as higher education.

Meanwhile, say city leaders, more than 50 percent of real estate in the District is untaxable because it belongs to the federal government, churches and other exempt organizations; the city has no state support it as most large urban centers do; and the District is unable to tax the 66 percent of income earned in the city by people who live in neighboring jurisdictions.

The economic slowdown after September 11, forecasts of million-dollar budget shortfalls and the sunset of the control board led to increasing calls for federal help and warmer responses from congressional overseers.

Meanwhile, D.C. leaders are grappling with ways to shave millions of dollars from the fiscal 2003 budget.

So far, they say, they plan for tax and fee increases, cuts in schools and public safety and a restructuring of administrative staff in various agencies.

City officials have long maintained that they are committed to balancing the budget. They have little choice: Deficits are one of the triggers that could reactivate a control board. Council Chairman Linda W. Cropp said yesterday that the cuts will come from the 10 largest agencies, which take up 80 percent of the budget, including police, schools, corrections and the fire department.

"The schools came before us today and said don't cut us," she said. "OK, then we will have to cut corrections and that will mean less guards; or we will have to cut the fire department and that will mean firehouses will close and people won't be protected; or parts of the police department or health care You tell me where to cut. We have got to cut something."

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