As serious as they are, some of the budget and financial problems underlying the District of Columbia's current cash-flow crisis aren't that differnet from problems plaguing other older major cities.
In a misery-loves-company sense, this is a good news story.
In fact, according to some analysts, the District is better off than other similar cities because it has begun to address problems, including sloppy financial management, decentralized planning and the consequences of living on credit.
"Washington is different to the extent that there are still some cities around the country that haven't faced up to their problems," said James Hogan. Hogan is head of the government services group of Coopers & Lybrand, one of the Big Eight national accounting firms.
"At least D.C. is in the throes of doing that," said Hogan."Sooner or later everyone has to."
How well the city faces up is still another question.
The facing-up process began at least five year ago when Sen. Thomas A. eagleton (D-Mo.), chairman of the Senate Dictrict Committee, intervened as the city was moving toward marketing municipal bonds. The nation's comptroller general looked at the city's books at Eagleton's request and found them chaotic and impossible to audit.
That set in motion more studies of the city's financial management problems -- many of which already filled volumes of transcripts of congressional hearings and had not gone undetected by the city government. A Temporary Commission on Financial Oversight of the District of Columbia was completed; the groundwork began to get the city ready for an audit, and work began on an automated, rational financial management system.
Facing up to the budget problems lately has become a daily, painful activity over the past several months as a series of events has put the city in an accute cash-flow crisis and added to the large deficit officials already had expected.
When two judicial decisions went against the city and collections from parking tickets and water and sewer billings fell below estimated marks, a deficit initially anticipated a reach about $29 million soared to a possible $172 million.
Tremors went through taxpayers and city workers as politicians began casting about for solutions in increased taxes and service fees and reduced payrolls to meet the short-range problems.
The thousands of words already written about the "crisis" suggest an image: a cartoon character at his kitchen table, with his head buried in his hands, contemplating an empty checkbook and a towering stack of bills.
The same scene is being replayed in cities around the country. As a recent catalogue of municipal money woes pointed out, Chicago faces a deficit of $570 million, Cleveland has defaulted twice in the past two years, Philadelphia faces a deficit that may reach $93 million by 1981, San Francisco faces possible widespread layoffs of city workers, and Boston and Detroit cope with continuing budget problems. These are in addition to the even-more-publicized and severe problems of New York City.
Some of the underlying problems that brought the city to where it is include a cash accounting system, a huge unfunded pension liability and a failure to set aside reserves to meet unexpected shortfalls in revenue. Added to that were inefficiencies and a financial management system until recently unable to deliver even basic information about the city's books.
Not good -- but not unique.
Take cash accounting, for instance. With cash accounting, the books record how much money is actually spent and how much money is collected for a given year. Such accounting does not take into account obligations incurred but not paid.
The city adopted cash accounting in 1969. Before that, apparently from 1878 to 1969, the city had accounted for its money in a more conservative fashion using obligational or modified acrual accounting.
"We live pretty close to the margin." said Gladys Mack, the District's budget director. "The fact that we've had a cash-based budget for the past 10 years means we really have no protection against the kind of thing that happened this winter" when anticipated revenues did not materialize, she said.
In some respects cash accounting is a Scarlett O'Hara kind of bookkeeping, allowing administrations to worry about obligations tomorrow -- when a new administration may be around to take the rap if the money isn't there.
It is also the common type of accounting used by cities, states -- and the federal government, as well as most families.
Another budgt-breaking problem the city faces is a huge unfunded pension liability. For fiscal 1980, the figure is approximately $2.6 billion owed in future payments for time already worked by city employes.
The problem, simply stated, is that the District, as have most other cities, has paid pensioners their allotments each year but hasn't made any provision for the obligations piling up in the future. With the tremendous increases in hiring after World War II and in the 1960s, that means trouble ahead.
The District first identified the p roblem, created by the United States Congress which controlled the city's finances, in 1971. A congressional commission on the District of Columbia, the Nelsen Commission, later defined it in more detail.
In fiscal 1980, for the first time, the city's budget proposals include $12.5 million for a pension fund to begin getting ready for the drain on city resources. Provisions for creating a fund were part of a pension reform bill signed into law in November 1979 which also provides for the federal government to pick up a piece of the deficit it helped create.
"That's a big step," said Hogan. Unfunded pension liabilities are "the single most endemic financial problem that state and local governments have in this country, if you look for the thing most common and most severe in the magnitude of impact," he said.
Even Houston, the Sun Belt boom town, has future pension costs it hasn't yet provided for.
Coopers & Lybrand did a study of the 50 largest U.S. cities that revealed that 76 percent of the cities' annual statements didn't disclose that type of future liability and that about one-fourth of the cities never had figured out what they owe.
Another financial weakness the District shares with other cities is a failure to set aside reserves, relying instead on a kind of blue-sky budgeting that assumes nothing will go wrong. "It's uncommon for any city to set up reserves," said Hogan.
When the courts barred the city from collecting $14 million in property taxes early, when parking enforcement revenues fell short of their exptected total, when water and sewer bills were late getting out, and when another court decided that the city must refund more than $40 million it had collected through a tax on professionals and could not collect another $7.5 million it counted on for this year, there was no cushion.
The reasons are simple. "There are all kinds of political overtones in taking money away from the taxpayers before you actually have a need for it," said Hogan. "If you perpetuate that philosophy long enough, you get down to the issue of what generation of taxpayers pays for what services."
"A budget the size of the D.C. government should have a reserve built into it," said Comer Coppie, former budget director for the District. Coppie has gone from being the overseen to overseer as executive director of the City of New York's financial control board. "The problem is getting a reserve approved, because the Congress would take money from a reserve and reduce the federal payment," he said.
Congress, in short, "would react just like you and I as taxpayers" to that kind of long-range financial planning, said Hogan.
Also like other cities, the District is not a careful shopper and isn't able to take advantage of volume discounts and other efficiencies. "This city buys thousands of typewriters -- one at a time," said Carl Bergman of the D.C. auditor's office.
"In many cases things that are just good business practice just never get thought of" by city governments, said Hogan. In part the taxpayers are to blame. Usually they demand effetiveness rather than efficiency, he said. If a taxpayer hits a pothole, he will worry more about getting it fixed than how much the reparis cost.
"The newer major cities in the country tend to be in better shape than the older cities do. Maybe some of the newer cities just have yet to face these problems," said Hogan. "Cities like Boston, New York and Philadelphia -- it's no secret to anybody they have serious problems."
"The problem is to try to keep things together and patch things up till they get corrected." he said.