- The Washington Times - Wednesday, September 18, 2002

The District is facing a $323 million shortfall that area leaders say will probably force authorities to lay off city workers and make cuts in education and human services.

D.C. Chief Financial Officer Natwar Gandhi released official financial projections yesterday, showing deficits ranging from $323 million in fiscal 2003 to $351 million in fiscal 2006 because of declines in tax revenues and earnings from stock market investments. Fiscal 2003 begins Oct. 1.

Council members yesterday discussed ways to balance their $5.3 billion budget and cut 10 percent of operating expenses.

Council member Adrian Fenty, Ward 4 Democrat, proposed borrowing $110 million from the "rainy day" fund to avoid deep cuts in services.

"The District should be able to use its rainy-day fund because it is raining now," he said in a letter to Democrat Delegate Eleanor Holmes Norton, the District's non-voting representative in Congress, urging her to take up the matter with lawmakers.

Mr. Fenty said a majority of states with reserves already have used them in the past year to counter substantial deficits resulting from the September 11 terrorist attacks, the stock market crash and a weak economy. He added that using a small portion of the reserve would still leave more in savings than Congress mandated for fiscal 2003.

Other council members such as Harold Brazil, at-large Democrat, recommended reducing the deficit by cutting approximately $245 million from programs and agencies, and making up the rest by raising hotel and property taxes and delaying income tax cuts.

"The weighting toward expenditure reductions reflects my belief that we have not done enough to control spending and that controlled spending, rather than tax increases, presents the only long-term solution to the District's fiscal imbalance," he said.

But council member Jack Evans, Ward 2 Democrat and chairman of the council Committee on Finance and Revenue, dismissed as inappropriate proposals to use the rainy-day fund or raise taxes.

"That would be taking money to pay off this year's deficit, then having to again pay off next year's deficit, plus the money owed to the fund," he said. "A one-time fix isn't going to resolve this situation."

Mr. Evans said the only way to grapple with the deficits projected is to cut current expenses, particularly the budgets of D.C. schools and human services that account for about half of all money spent in the operating budget.

"People are going to go crazy," he said. "But there isn't any other way to do it. In 1991, we were in the same situation, and we avoided the big decisions. We went bankrupt. The last four years we have been living in a fantasy world."

As for taxes, many council members say it isn't feasible to raise them higher income tax rates here are the highest in the nation; sales tax rates are the highest in the region; and property taxes rose last year, causing an outcry among area homeowners.

"Which exact tax are we talking about?" asked Mr. Evans. "We raised 22 taxes in 1991, and at the end of the day, we still went bankrupt."

The budget cuts will be finalized and voted on Oct. 1.


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