Local governments in the Washington area are going to have to pull their fiscal belts a notch tighter this year around emaciated revenue figures just to prevent disastrous budget shortfalls.
District, county and state officials contemplate a year of unpleasant choices that for some must involve deep cuts in basic programs and layoffs of employes--most often affecting the schools--or increases in taxes and user fees, or all of these elements.
Unlike the federal government, many state and local governments by law must balance their budgets each year. But it will take major action to make up for large projected revenue shortages. The District and Prince George's County face the greatest problems, while the financial dilemmas of the Northern Virginia jurisdictions are more manageable, according to recent government projections and financial experts.
The projected shortages are a result of interrelated and continuing economic problems: A nationwide recession that for once did not exclude the Washington area; federal layoffs that cut deepest here; cutbacks in federal spending on local programs; depressed real estate tax revenues because of declining property values, and lower sales tax receipts as consumers have bought less.
"Local governments were too optimistic on revenue projections all over the country," said Philip M. Dearborn, vice president of the Greater Washington Research Center, which recently did a study on D.C.-area government finances. "It's not as severe here in the Washington area but severe enough to upset budget estimates."
In addition to disappointing revenues, the local jurisdictions will have to deal with skyrocketing costs for the Metro transit system. And the way these expenses are divided among the local governments and riders will be a major issue.
The District is trying to avert a projected fiscal 1983 deficit of $110 million, about 5 percent of the city's $2 billion budget.
For Virginia, Gov. Charles S. Robb has projected a revenue gap of $305 million for the current fiscal 1982-84 budget.
Partly because of an unexpected rise in the cost of the state's pension system, Maryland is wrestling with a projected $125 million shortfall for the next fiscal year.
The states' fiscal problems will have their own trickle-down effect, too, because the states probably will have to cut assistance to local governments, adding to the squeeze at the county level.
Montgomery County officials already have warned of a possible $11 million deficit in the coming fiscal year, while Prince George's County is facing an anticipated $29 million to $38 million deficit.
Arlington County officials say they expect a $3 million surplus this fiscal year, but they are trying to deal with a projected $2.4 million shortfall for the coming fiscal year. Estimates Alexandria made last summer show a $2.4 million revenue shortfall for the 1983-84 fiscal year, but budget officials' assumptions about the economy have grown more pessimistic since then.
Fairfax County estimates a $2.2 million surplus for fiscal year 1983. The county is not exempted from financial concerns, however. Its annual revenue increases have slowed from more than 15 percent last year to less than 6 percent projected this year. And its Metro costs are due to rise rapidly as new stations open there. And, like other Northern Virginia jurisdictions, it does not know how much of a cutback in state aid--now $150 million for Fairfax--to expect.
The financial situation is likely to grow worse throughout the area over the next five years, according to the research center's report. That report showed a total revenue shortage of $605 million for the six major local jurisdictions by fiscal 1987, of which about half is in Metro operating deficits. Fairfax County officials strongly disagree with the report's projection of a $153 million deficit for the county by 1987, however.
This is budget-writing season, and all the jurisdictions are in the process of developing ways of dealing with their fiscal problems. Here is what they have done so far:
Washington Mayor Marion Barry originally ruled out tax increases or laying off city employes to balance the District's budget. He also had promised not to cut spending for education, prisons or the police and fire departments.
Barry later left the door open for a tax increase, although city officials said they will try to avoid raising income, property or sales taxes, which together generate about 75 percent of the city's revenues. (Because property assessments are expected to decline on average for the first time since the District has kept records of them, property tax revenues will fall unless a property tax rate increase is approved.)
City officials are looking first at user fees, such as parking meter charges and permits of various kinds, and may increase fines for traffic violations. But only about $3 million of the $14.6 million tax package proposed by the mayor was approved last year.
Maryland Gov. Harry Hughes is considering a one- or two-cent increase in the state property tax, from 21 cents per $100 of assessed value, a controversial step he can take without legislative approval.
Another possibility would be two new instant lotteries. Hughes' top aide has said the governor will not propose raising the state sales tax. And Hughes has said there will be no raises for state employes this year.
Last year Prince George's County had to lay off 507 teachers as an economy measure. County Executive Parris Glendening has warned that as many as 600 more layoffs will be necessary this year if no major new source of revenue is found.
All PG county's major labor unions start negotiating new contracts this year. The county doesn't have the option of increasing its property taxes because a county law strictly limits collections to the 1979 level of $143 million.
Glendening is considering proposing a one-cent add-on to the state's 5 percent sales tax for the county, an increase in county collections from the state income tax, or a telephone tax.
Montgomery County Executive Charles W. Gilchrist has ordered most county agencies to develop budgets with only one percent increases from last year. Several agencies probably will have to lay off employes as a result. The hardest hit will probably be the school system and the park and planning commission.
Virginia Gov. Robb last year said that he was not planning to propose a tax increase to make up the projected $305 million, two-year budget shortfall. He said he would instead institute a new round of drastic spending cuts that could "touch every item in the budget," to be unveiled Wednesday . The budget probably will include cuts in state aid to local governments--making their financial woes just that much worse this year.
Last summer Robb ordered a 5 percent, across-the-board spending reduction, but that was estimated to save just $55 million. In December, the governor announced the delay of $35 million in state construction, including the Alexandria waterfront project and a new humanities center at George Mason University.
Fairfax County has put a cap of 5.85 percent on spending increases for next year, to match the expected rise in revenues. The board of supervisers already has decided that property tax rates will not be increased in fiscal 1984 or 1985, so balancing the budget must be accomplished largely by spending limits such as a cap on employe raises.
The Fairfax County school superintendent has proposed the smallest increase in the system's budget in two decades, one which would limit employes' cost-of-living raises to 3 percent.
Arlington County got the welcome news in November that its projected deficit for the next fiscal year would be $2.4 million rather than $6.7 million, because of lower inflation, gasoline prices and workers compensation costs.
The county board has resolved not to increase its real estate tax and has directed the county manager to find other ways to keep within a $174.2 million budget, which represents a 5 percent increase.
Alexandria is focusing on user fees, such as higher charges for trash collection and parks, to make up its projected deficit and to take the pressure off property taxes. But officials also have said that some services probably will have to be cut and some employes laid off. In addition, the property tax rate may have to be raised.