Facing $131 Million Shortfall in '09, D.C. Might Eliminate Vacant Jobs

Washington Post Staff Writer
Thursday, September 25, 2008; Page B01

Mayor Adrian M. Fenty is considering eliminating hundreds more unfilled government jobs as he seeks to close a $131 million budget gap, D.C. government sources said yesterday.

Fenty aides were scrambling to develop a list of budget cuts after D.C. Chief Financial Officer Natwar M. Gandhi announced that troubles in the national economy would mean reduced revenue for the District in fiscal 2009, which begins Wednesday.

Gandhi said the shortfall, which is about 2.5 percent of the city's $5.5 billion budget in local funds, was largely because of a drop in projected income taxes, a portion of which are tied to capital gains in the falling stock market. Deed and recordation taxes based on property sales also declined.

Fenty aides said they anticipated the problem and have been developing a list of possible cuts. The city is projected to have $17 million left over from fiscal 2008 that probably will be applied to the 2009 budget, but some program cuts or tax increases will be necessary.

The administration eliminated 650 vacant positions in spring while developing the 2009 budget, saving $40 million. Over the past few months, further examination of the city's payroll has identified several hundred more vacant positions that potentially could be eliminated, a government source said. The official spoke on condition of anonymity because the budget cut proposals are being hashed out.

Gandhi sought to tamp down concerns yesterday, saying the budget gap was "not a big deal" and noting that the District is in better shape than Virginia or Maryland. He said he expects the turmoil on Wall Street to stabilize if the federal government enacts a historic bailout, in which case the city's revenue should hold steady.

"It won't be pleasant, and it's not easy," Gandhi said of the need for budget cuts. "But I'm confident that this mayor and council can manage this."

The shortfall could have been worse. Real estate values remain strong and are expected to generate $77 million more in property taxes than anticipated three months ago. Without that revenue, the budget shortfall would have topped $200 million, Gandhi said.

Not everyone was satisfied with Gandhi's relatively upbeat assessment. At a breakfast briefing yesterday, D.C. Council member David A. Catania (I-At Large) challenged Gandhi and Treasurer Lasana Mack and suggested that the budget problems could worsen.

"We are looking at a train wreck," said Catania, a frequent critic of Gandhi's. "The fact that you try to put a smiley face on it . . . does not exactly get it done for me."

Aside from eliminating positions, government officials were mum about what cuts the Fenty administration might consider.

"With the U.S. economy facing threats of a recession, the District of Columbia has been impacted by the country's economic slowdown," Fenty (D) said in a statement yesterday. "Recognizing this financial shift, we will work with the Council and take the necessary actions to ensure the District continues to produce balanced budgets."

Ed Lazere, executive director of the D.C. Fiscal Policy Institute, said that when the city faced a $300 million revenue gap in 2002, it temporarily raised some taxes, including the deed and recordation taxes on property sales.

"It's not going to be easy," said Lazere, whose organization studies budget issues and pushes for greater investment in social services and housing. "There likely will be some real cuts in services. It's hard to know where they'll be."

Council Chairman Vincent C. Gray (D) said yesterday that he expects to receive the mayor's recommendations for the budget in time for the council's next legislative meeting Oct. 7.

"We want to apprise residents early of any impact this drop in revenue might have on services, if that proves to be the case," Gray said in a statement yesterday.

Gandhi also announced yesterday that his office moved $1.3 billion of city investments from prime money market funds to money market funds backed by federal securities, a reaction to protect the District's money in the wake of the Wall Street turmoil. The move means that 94 percent of the city's $2.6 billion in investments are in the latter category, he said.

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