Fenty Alters Proposal To Close Budget Gap
Reserve, Stimulus Funds Would Be Used

By Nikita Stewart
Washington Post Staff Writer
Friday, July 17, 2009

D.C. Mayor Adrian M. Fenty will propose dipping into the city's contingency cash reserves and leaning on federal stimulus money to help close what is now a $666 million revenue shortfall over the next two years.

The gap would be filled by eliminating 250 positions in addition to the 1,631 Fenty (D) had proposed, selling a bus garage for $6 million, and moving tax revenue and special funds designated for specific policies into the general budget, officials said. About $125 million will come from the city's rainy-day fund and $188 million from President Obama's economic stimulus package.

"We want to thank our neighbor a block and a half away," Fenty said, pointing to the White House.

Fenty will submit a revised spending plan to the D.C. Council today, and the council is scheduled to vote on the budget July 31.

The deficit has been a moving target since the fall, when revenue estimates for fiscal 2009 were adjusted, causing city leaders to scramble to find money. They closed some of that $453 million gap, but $190 million lingered. Although the D.C. Council gave initial approval to the mayor's fiscal 2010 spending plan in May, Chief Financial Officer Natwar M. Gandhi said last month that the city would lose about $150 million more in revenue.

Fenty said yesterday that the city will create a $63 million shortfall for fiscal 2010 by tapping the reserves. By law, the city must replenish at least half of what it takes out of the reserves the next year.

"You don't cry over it," Fenty said yesterday at a news conference on the steps of the John A. Wilson Building. "You make the adjustments necessary and make sure the show goes on."

Ed Lazere, executive director of the D.C. Fiscal Policy Institute, said the law should be changed. States are not required to repay their reserve funds. He called the required repayment an "onerous restriction."

He said he agreed with tapping into the fund. "Every city sets aside money for a rainy day," he said.

The city's jumping through hoops about the budget, which is overseen by Congress, became evident this week. Some teachers and employees at 60 charter schools might not be paid today because the city missed a $103 million payment to them. The cash reserves will be used to funnel $57 million to the schools today until the city submits the fiscal 2010 budget to Congress. The $103 million will come out of the fiscal 2010 budget, but the city cannot, by law, advance funds from the budget until it is submitted.

Fenty said the charter schools are not in danger of losing out on a payment. "There's more than enough money to take care of the charter schools," he said.

Education has been the mayor's priority since he took office in 2007, and he said $36 million of the stimulus money will help maintain the city's level of spending per pupil in charter and traditional public schools.

But Fenty offered few specifics about his plan, including what taxes would be converted to local funds or which 250 jobs would be eliminated. Details will be put in a package for council members and the news media today, he said. But the mayor said he wanted to publicly announce his proposal yesterday because he, council Chairman Vincent C. Gray (D) and council member Jack Evans (D-Ward 2) will be in New York today to speak to bond-rating agencies about the city's finances.

Evans, chairman of the Committee on Finance and Revenue, said in an interview that agency savings, which total about $125 million over the two years, will be gained not only through job cuts but also other methods, such as freezing salaries.

Merav Bushlin, the mayor's new chief of budget execution, added in an interview that there were no blanket job eliminations, salary cuts or salary freezes. Each city agency recommended cuts to help fill the budget gap, she said.

Significant savings were found in the Corrections Department by reducing or eliminating contracts, Bushlin said.

Other departments were finding creative ways to save money, she said. When asked how she could be reached to answer additional questions, Bushlin said she had only a BlackBerry number. "We don't have any land lines in our office. That was our cost savings," she said.

Staff writer Bill Turque contributed to this report.

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