City Desk

Budget Shortfall: Finally Some Hard Choices for Fenty?

Is the District's financial honeymoon over?

This morning, Chief Financial Officer Natwar M. Gandhi told the mayor and the D.C. Council—and later reporters—that according to his estimates, the District will take in $131 million less in fiscal 2009 than originally anticipated. (The fiscal year starts Oct. 1 of this calendar year.)

The shortfall, Gandhi explained, is primarily, but not exclusively due, to a foreseen decline in revenue from capital gains taxes paid by individuals—a consequence, he said, of "the worst financial crisis since the Great Depression."

Gandhi, characteristically, went to great lengths to put the number in context, explaining that the District remains in far better budgetary shape than surrounding jurisdictions. At one point, he said, "Two point five percent is not that big a deal....I'm confident that this mayor, this council can manage this."

Later, Gandhi clarified his statement, saying that the cuts will indeed have to be substantial: "That will mean a real impact on services, a real impact on people."

Those are impacts that Mayor Adrian M. Fenty has thus far been able to avoid.

In March, Fenty released his fiscal 2009 budget, trumpeting a minuscule 0.7 percent growth rate in the annual financial plan. On closer examination, it wasn't quite the exercise in fiscal discipline he made it out to be. Virtually all of the savings were achieved through cutting unfilled employment vacancies, rejiggering financial instruments, and other accounting changes. No city program or agency saw a meaningful cut from the level of service it had provided the year before.

So will the revenue shortfall mean that Fenty will finally have to make a hard budgetary choice? There's optimists and pessimists on the matter.

In the optimist camp, count Ward 2 Councilmember Jack Evans, Fenty ally and chair of the finance and revenue committee. Evans says it's entirely possible that the economy will rebound in the coming months, making it unwise to slash the whole $130 million at once. His suggestion: Make the cuts "on a rolling basis" by splitting the deficit into quarterly chunks.

"Are there $30 million of projects that we can delay to the second quarter?" asks Evans. "Yes!"

And the $131 million total, he says, "is a very small amount" to make up. He points to the fiscal 2002 budget, which had to be slashed in fall 2001 by approximately $300 million in the wake of the Sept. 11 attacks. That, he says, was figured out in two weeks.

Call At-Large Councilmember David A. Catania a pessimist.

The $131 million figure, he says, is "a best-case scenario, frankly."

Evans' 2001 analog, Catania says, doesn't quite hold because there was more new spending that year to cut into, and inflationary pressures on wage hikes and fuel costs were not as great. Real sacrifices, he says, will have to be made in the coming weeks. "This is going to be really tight," he says.

Mayoral spokesperson Mafara Hobson just released a perfectly meaningless comment from Fenty on the matter: "With the U.S. economy facing threats of a recession, the District of Columbia has been impacted by the country’s economic slowdown. Recognizing this financial shift, we will work with the Council and take the necessary actions to ensure the District continues to produce balanced budgets."

Hobson agreed it was reasonable to have a new spending plan in place by the D.C. Council's October legislative meeting, on the 7th.

At-Large Councilmember Phil Mendelson isn't convinced Fenty will pull the trigger on necessary cuts. "I'm afraid the council's going to have to make the choices," he says. "Somebody's gotta step up."

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  • Adams Morgan

    Gadzooks...we're still getting crappy city services and now they are going to make cuts? Bet they won't be cutting anyone's property taxes anytime soon to go with the diminished services.

  • Stating the Obvious

    Cut the summer jobs program (fiasco) and you're already a quarter of the way there.

  • Si Kailian

    might help if we actually collect rent on the stadium, not give the feds 10 million for ford's theater & ask mother Harriet nicely for our money back. Oh and collect vacant property taxes off of slumbanking developers. That'd be nice.

  • David Schwartzman

    Some cuts in the FY2009 budget are in order, in particular the subsidies to the corporate sector, with corporate earmarks at the top of the list for elimination. The special funds hidden in the budget must be revealed and critically examined for potential cuts. But the social service budget must be increased, not cut, i.e. we need more funds for a whole lot of programs such as the Housing Production Trust Fund, TANF (directly linked to child poverty), Local Rent Supplement Program, child care, job training, substance abuse treatment etc. The Fair Budget Coalition proposed some $300 million in additional funding for this budget, with modest improvements, and very little was approved, with the budget not even keeping up with inflation. So we again should make our regressive DC tax structure both progressive and more capable of meeting this challenge, by hiking the tax rate on those who can afford to pay, not the middle/working class now sinking closer to poverty.

    The District’s rainy day fund has a couple of $hundred million, with $20 million withdrawn during the summer to cover the school job debacle, despite the restrictions that Congress has imposed on its use (go to DC Fiscal Policy Institute for details). We should demand this fund be used to cover any deficit WITHOUT hurtful budget cuts on an already austerity FY 2009 budget that shortchanges our working class majority especially the low income sector. We must not have a repeat of the Control Board days when the budget was balanced on the backs of the poor! So, now is the time to hike the income tax rate on DC millionaires as well as the top 5% to pump in supplementary funding to this budget. I warned about this in my Council testimony last January:

    David Schwartzman
    At-Large City Council Candidate
    DC Statehood Green Party

  • David Schwartzman

    Sorry, there was a typo in my comments above. Substitute "youth job debacle" for "school job debacle".