Fenty freezes D.C. spending as city targets $175 million budget gap

D.C. Mayor Adrian M. Fenty
D.C. Mayor Adrian M. Fenty (Bill O'Leary/The Washington Post)
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By Tim Craig
Washington Post Staff Writer
Monday, October 4, 2010; 10:08 PM

D.C. Mayor Adrian M. Fenty froze hiring and promotions in city government Monday and restricted discretionary spending within the agencies as he and the D.C. Council begin exploring ways to close a $175 million shortfall.

The order by Fenty (D), which comes three days after the start of fiscal 2011, also bans most employee travel and training and limits the amount of money available to agency leaders to buy supplies.

Last week, Chief Financial Officer Natwar M. Gandhi told Fenty and D.C. Council Chairman Vincent C. Gray that the sluggish national economy and overspending were hampering the District's efforts to balance the budget for the third consecutive year. The council approved the fiscal 2011 budget in June, hopeful that the economy was starting to rebound. But Gandhi said a decline in sales tax and capital gains tax revenue has created a shortfall just as the budget year is commencing.

Gray, the presumptive mayor after winning the Sept. 14 Democratic primary, and Fenty are expected to work closely in the coming weeks to see whether they can agree on a plan for bringing the budget into the black.

Gray called Fenty's hiring freeze, which affects all positions except those funded by federal grants, the first step toward "getting a handle" on city finances - but he predicted difficult negotiations in the weeks ahead.

Many agencies also would take a 10 percent cut in funds dedicated to supplies, contracts and other non-personnel expenses. Exceptions can be made for "the safety of the public or the essential functions of government." The administration estimates the moves will save $100 million, but some council members are skeptical.

Although city leaders say the District has fared far better than most cities and states in navigating the recession, the council and the mayor have had to make hundreds of millions of dollars in cuts in the past three years. The District also has increased dozens of fees, including parking-meter rates, as well as the sales, cigarette and gasoline taxes to try to keep the budget balanced.

"We have not only cut to the bone, we are down to the bone marrow," Gray said Monday.

To try to prevent further cuts to social programs, council members Jim Graham (D-Ward 1) and Michael A. Brown (I-At Large) are expected to renew their push to raise income taxes on the wealthy. Taxpayers who make $40,000 a year or more pay an 8.5 percent rate. Graham and Brown will probably offer competing proposals to create new rates for some wage earners with six- or seven-figure incomes.

Council members Jack Evans (D-Ward 2) and Mary M. Cheh (D-Ward 3), both of whom represent wealthy neighborhoods in Northwest Washington, are expected to resist calls to raise taxes on the wealthy. Gray also appears hesitant to raise taxes, although he didn't rule it out during a news conference Monday.

"I personally would like to look at the expenditure part of the budget before we look at revenues," Gray said.

But significant spending cuts could pit Gray against the public-employee unions that enthusiastically backed him in his race against Fenty. When asked whether the city might have to lay off employees, Gray said, "Everything is on the table."

Council member Phil Mendelson (D-At Large) said he thought the council would "look at spending" before it considered a tax increase.

"But I do think they will do some taxes," he quickly said.

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