- The Washington Times - Monday, October 4, 2010

Facing a projected $175 million deficit in the fiscal year that began Friday, Mayor Adrian M. Fenty plans to issue an executive order that will freeze hiring and promotions to help curb spending.

The move came at the behest of D.C. Council Chairman Vincent C. Gray, the mayor’s likely successor who will start a town-hall listening tour Tuesday.

Layoffs, tax and fee increases, curbing travel and additional budget cuts also are on the table. Mr. Gray said he hopes to have a final plan by the end of October, before voters return to the polls for the Nov. 2 general election.

But the freeze on hiring and promotions is a stopgap measure to which Mr. Gray and the mayor agreed.

“It’s an immediate action until we have more permanent approaches,” Mr. Gray said Monday, adding that when it comes to cutting the 2011 budget, it’s already pretty much “down to the bone marrow.”

Mr. Gray and Mr. Fenty, who promised a smooth transition after losing the Sept. 14 Democratic primary to Mr. Gray, must still work with the council on other measures to trim spending. Mr. Gray, who drew heavy support from unions, said layoffs in city government employment rolls are on the table.

“I don’t rule out anything,” he said.

Talk about stemming the red ink follows two recent bits of bad economic news that has advocates for D.C.’s poor again pushing for income tax increases.

The U.S. Census Bureau said D.C. poverty rates are broadening and deepening, and the D.C. office of the chief financial officer warned of a pending $175 million deficit in fiscal 2011. The major problems are an estimated $100 million loss in sales and income tax revenue, and overspending on schools and human services.

Discussions on how to bridge both gaps could look like a replay of City Hall’s spring showdown, when safety-net proponents pushed tax increases and the mayor proposed increasing fees and parking rates as well.

A “good place” to start would be with tax increases on wealthier residents, suggests the D.C. Fiscal Policy Institute, a liberal think tank.

Asked whether the city can close a $175 million budget gap with program cuts alone, council member Phil Mendelson said, “No.”

Council member Michael A. Brown also is considering reintroducing his “millionaires tax” proposal, which the council voted down in the spring.

The lead role falls to the mayor because he remains the city’s chief executive. But Mr. Gray is the politician who has to reconcile any policy differences among his 12 colleagues — most of whom are, like him, in election-campaign mode.

Some of them, including council member Jim Graham, who is up for re-election, and Mr. Brown, who is not, support income tax increases.

Currently, D.C. residents who file individual taxes pay a tax rate of 4 percent on the first $10,000 earned and 6 percent if they earn between $10,001 and $40,000. Residents earning more than $40,000 pay 8.5 percent plus $2,200.

Mr. Brown’s proposal would create two new brackets — 8.9 percent for people earning at least $250,000 and 9.4 percent for residents earning $1 million or more.

“My legislation would sunset in better times,” Mr. Brown said Monday. “Jim’s would not.”

The D.C. taxes are paid on top of federal income tax rates, which run from 10 percent on the first $8,375 of income to 35 percent on income earned above $373,650.

While lawmakers struck down the income tax proposal, they did raise taxes earlier this year — the new bag and soda taxes. But first, lawmakers will seek consensus on budget cuts and funding social service programs.

Since 2007, the average D.C. income has risen 2.8 percent to nearly $59,300, and that is mostly attributed to young professionals moving into the city.

But poverty rates rose, too, particularly in those areas that helped to carry Mr. Gray to victory in Democratic primary.

Preliminary census data show that between 2007 and 2009, the D.C. childhood poverty rate rose from 22 percent to 29 percent, and the number of residents living in deep poverty, or annually earning under $11,000 a year for a family of four, rose from 8 percent in 2007 to 11 percent in 2009.

At the same time, earnings fell from $32,100 to $30,700 in Ward 7, Mr. Gray’s home district, and in Ward 8, the overwhelmingly black district that also is the city’s poorest.

The voters in those wards backed Mr. Gray by lopsided margins, and the council chairman also won strong support from unions, city workers and safety-net proponents.

Advocates to the left of fiscal conservatives are encouraging Mr. Gray and his colleagues to increase spending on work-force development, education, human services and affordable housing programs.

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