- The Washington Times - Thursday, February 28, 2008

D.C. officials said yesterday that the city faces a $95.8 million budget shortfall next year, in part because of a reduction in expected revenues as a result of the slumping national economy.

“In the past, when the U.S. economy has slowed, the District’s economy has also,” said Chief Financial Officer Natwar M. Gandhi. “The current revenue forecast is cautious, but not a recession forecast and by no means the worst case.”

The shortfall is based on revised estimates by Mr. Gandhi that show an expected decrease in city revenue by $62.5 million next year, combined with an early draft of Mayor Adrian M. Fenty’s fiscal 2009 budget proposal that officials said is roughly $30 million short in funding.

Mr. Fenty, a Democrat, said in response that he will not propose tax increases to reduce the estimated shortfall and that the budget will continue to improve services for D.C. residents.

He is expected to deliver his final budget proposal March 20, with Mr. Gandhi’s new numbers.

Maryland and Virginia have dipped into reserve funds to reduce shortfalls while the District has had budget surpluses in recent years.

In Maryland, Gov. Martin O’Malley, a Democrat, last year transferred $1.2 billion from state reserves to balance his fiscal 2008 budget.

He also called a special General Assembly session in November to resolve a shortfall, estimated then to be at least $1.5 billion.

Lawmakers increased taxes by $1.4 billion, proposed $550 million in spending cuts and approved a plan to legalize slot machines to generate state revenue, but the state still faces a shortfall of about $331 million.

In Virginia, Gov. Tim Kaine, a Democrat, said this month that projected revenue was about $1.4 billion short in the $78 billion, two-year budget he introduced in December. He has recommended scaling back spending, trimming agency budgets and diverting $423 million from the state’s savings.

D.C. Council member Jack Evans, Ward 2 Democrat, said the city may have to make spending cuts in areas such as human services and the public school system to close the budget gap.

The council last year approved Mr. Fenty’s request to spend $81 million in supplemental revenue in fiscal 2008 to help close a deficit of up to $155 million in D.C. public schools. But Mr. Evans, chairman of the council’s Committee on Finance and Revenue, said school officials last week were unable to account for the money.

“At some point, somebody’s got to stand up and say, ‘Wait a minute, folks. We’re pouring money into the school system, and they can’t tell you how they’re spending it,’ ” he said. “If they’re spending it wisely, I’m there.”

Mr. Gandhi said the gap is smaller than those in surrounding jurisdictions, including the $401 million shortfall in fiscal 2008 in Montgomery County.

He said the revised revenue estimates are based in part on assumptions that home prices will decline in coming years and employment and wage growth rates will fall.

Mr. Gandhi said the estimate also was calculated using legislation co-introduced by Mr. Evans and passed by the council last month. The measure is designed to bring small-businesses tax relief and reduce the city’s commercial-property tax rate in some cases.

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