District budget gap might mean a tax increase

By Tim Craig and Nikita Stewart
Washington Post Staff Writers
Monday, November 22, 2010; 8:27 PM

D.C. Mayor-elect Vincent C. Gray (D) said Monday he might propose higher property, income or sales taxes to close a budget shortfall expected to exceed $500 million in the next two years.

Gray's comments, made during a television address designed to communicate the magnitude of the city's financial challenges, were his most direct so far about what sacrifices he may ask from residents after he takes office Jan. 2.

"It's your money we're dealing with - you deserve honest talk about what's going on with it," Gray said.

Gray noted that three-fourths of the city's $5.3 billion operating budget are "fixed costs" such as salaries, federally mandated programs, Metro payments and interest on debt. And with 80 percent of District revenue coming from property, sales or income tax revenue, Gray said it is not possible "to raise significant revenue" unless he targets "one or more major tax categories."

"Let me be clear: All options will be on the table if we're going to fix this gap in our operating budget," Gray said. "But let me be equally clear about this: I know that many District families and businesses are hurting from the recession, as much as or even more than the District government. So I will not ask District residents to pay one single dollar in tax increases without first assuring them that we have scrubbed the budget and found every last dollar in savings."

Gray and the council will begin tackling the first part of the shortfall next month, when they begin work on a plan by outgoing Mayor Adrian M. Fenty (D) to eliminate a $185 million gap in the current year's budget gap.

The release of the much-anticipated gap-closing plan was delayed Monday evening after a back-and-forth between the Fenty administration and the Office of the Chief Financial Officer.

Chief Financial Officer Natwar M. Gandhi wanted to make sure some of Fenty's cost-savings reductions were adding up. He sent the plan back with questions, and Fenty's budget team was working on the answers Monday night, according to spokesmen in both offices. Gray said the council hoped to vote on Fenty's plan before Christmas.

Once he is sworn in as mayor in January, Gray has said his first budget will have to find ways to cover an additional $345 million gap in fiscal 2012, according to Eric Goulet, the council budget director.

Gray said the city was near its self-imposed debt ceiling - 12 percent of the budget - for spending on capital projects.

To begin addressing the problem, Gray said he was freezing all capital projects that were not yet underway while "a blue-ribbon panel of experts" reviewed which were necessary.

"It's time we distinguish between the projects we need versus the projects that we want," Gray said.

But Gray probably will be under considerable pressure in the coming weeks to spare some social service programs from deep budget cuts.

Minutes after Gray spoke, advocates for foster children gathered outside the John A. Wilson Building to demonstrate against recent budget cuts. Dr. Anniglo Boone - director of the Consortium for Child Welfare, which advocates in support of at-risk children - said there already had been more than $30 million in cuts to foster-care programs in the past year.

"Our hope is we can get some cuts repealed, because these are cuts that go directly for kids in foster care," Boone said. "Social workers will clearly be overloaded and caseloads will spike."

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