The federal Office of Management and Budget refused yesterday to approve the District government's request for an additional $4.6 million federal payment this year, forcing Mayor Marion Barry to slash the city's Metro transit subsidy by almost that much to protect his authority to spend another $17.3 million in local tax revenues.
In a frantic afternoon of exchanges between the city and OMB, the federal agency also demanded -- and got -- assurances in writing from the mayor that the District would make its legally required payments into the pension funds for teachers, police officers and firefighters and make good any investment losses suffered by the funds through the city's failure to make earlier payments.
OMB's action on the federal payment, which caught the Barry administration by surprise, took the form of a refusal to transmit to Congress Barry's proposed $22.1 million supplemental budget for the current fiscal year.
The law requires that the city's budget be balanced. Barry proposed to cover most of the additional outlay with $17.3 million in local taxes, which are bringing in more money than originally expected. But he also asked that the annual federal payment be increased by $4.6 million, to the maximum of $300 million.
OMB's refusal to approve the federal payment increase unbalanced the entire supplemental spending program, which therefore could not be sent to Congress. Since yesterday was the deadline for sending such requests to Congress for this year, the city faced the loss of the authority to spend its own tax revenues unless it could rebalance the budget to satisfy OMB.
That obliged Barry to reduce his spending request by $4.6 million. Late in the afternoon, he notified OMB that he was taking almost all of it -- $4.432 million -- from the Metro transit subsidy. Since the supplemental budget already called for a reduction of $6.4 million in this $100 million spending category, the District is now proposing to reduce its subsidy to the regional transit system by nearly $11 million.
Barry said the cuts would be covered "by the proposed dropping of bus routes and other service reductions." It was not clear, however, whether the city's transportation Department has actually identified the service reductions that will have to be made.
Ironically, the supplemental budget had already been sent to Congress, and approved by the Senate Appropriations Committee, because the mayor assumed that OMB would approve it. When OMB refused to do so, the mayor was obliged to revise it almost on the spot, without any action by the City Council. That provoked Council Chairman Arrington Dixon to write Barry a letter, chastising him for bypassing the council. In a telephone interview, Dixon said he wanted the mayor to understand his "extreme outrage" at the procedure.
OMB's demand for payment into the pension funds was prompted by the revelation that the city has not made the required advance payments of $30 million per quarter this year, depriving the pension funds of money that would have earned interest.
Frank Higgins, chairman of the D.C. Retirement Board, told the City Council that the funds' potential loss was up to $21 million this year, but City Administrator Elijah Rogers said that figure was "grossly inflated." The real figure, he said, is closer to $2 million, and that will be made up before Oct. 1.