The District's financial situation has not improved, despite a round of program cuts last fall, and Mayor Anthony A. Williams said yesterday that an additional $68 million in reductions is needed to balance the budget.

Williams (D) and Chief Financial Officer Natwar M. Gandhi said the poor economy and rising security costs contributed to a potential $128 million shortfall in the budget for the current fiscal year. Even snowstorms took an unexpected $3 million chunk out of the budget, and that was before the weekend blizzard, they said.

The mayor's announcement came less than five months after city officials made cuts in education and social services and increased taxes on cigarettes and alcohol to close a $323 million gap in September. Williams plans to submit his budget for fiscal 2004 to the D.C. Council next month, and the administration expects to have identified funds to address the latest shortfall by then.

"States across the nation are facing very tough financial times due to the economy, and the District is no exception," Williams said.

For example, Maryland is struggling to close a $1.8 billion gap projected in the next 18 months, while Virginia has a $1.2 billion shortfall in its two-year budget.

"What sets us apart, however, is that we will face this challenge without gimmicks and without games," Williams said.

He did not outline specific areas to be cut, and council members have begun warning against further reductions in the budgets for schools, police and human services.

Gandhi said the economic recovery anticipated for the middle of this fiscal year, which began Oct. 1, may not happen until next year. The prospect of war has increased security costs and scared away tourists, a major source of income for the city. Of the $128 million potential shortfall, more than $52.5 million is the result of decreased revenue.

In addition to the revenue shortfall, increases in costs for Medicaid, health care and unemployment account for 63 percent of the budget pressures, according to the chief financial officer. The rest is the result of increased costs for court-ordered services for the mentally disabled; emergencies, such as the snow removal; overtime for police and corrections officers; and programs to support families and youths.

The city's budget for the current fiscal year is $5.8 billion.

Gandhi said the District hopes to use $28 million in reserve funds and about $29 million from its rainy-day fund. But the bulk of the shortfall, $68 million, would have to be made up by permanent spending cuts by city departments. Because schools, health care , human services and public safety make up 75 percent of the budget, some of the money could come from these areas.

"If you're going to make cuts, that's where your money is," said council member Jack Evans (D-Ward 2), who chairs the finance and revenue committee. "It would seem to me that you have to look at human services, because schools have such a tremendous lobby that you wouldn't be able to cut them. Every neighborhood is screaming for more police. If you take schools and police out of the equation, then all you have is health and human services. If you take them out, then you have nowhere to go. Everybody is going to be unhappy."

The city has $253 million in cash reserves that are mandated by Congress for emergencies, such as the snow removal, but any money used must be replaced during the next budget cycle.

"We simply have to find a remedy," Gandhi said. "It's going to be very hard. I'm confident that the mayor and council will balance the budget in 2003. When we told them we had a $323 million problem in September, within three weeks we resolved that problem."

Council member Carol Schwartz (R-At Large) said she does not want cuts in programs that provide basic services while "the beat goes on with the high-level executives and the consulting contracts. That's where they need to go first."

Although several council members praised the Williams administration for confronting the budget problems early enough in the year to allow the departments to look for cuts in their budgets, most were protective of the programs they oversee.

Council member Kevin P. Chavous (D-Ward 7), who chairs the education committee, said he would not support any cuts for schools, which received $30 million less than was initially budgeted for this year.

"I'm going to be hard-pressed to support any significant intrusion into their budget because of what they had to endure last fall," he said. "We've got to protect the kids."

Council member Sandy Allen (D-Ward 8) , who chairs the human services committee, said the administration will "need to look somewhere else."

"You have to take care of the most vulnerable," she said. "I'm not thinking about making any cuts."

Council Chairman Linda W. Cropp (D) said that "everything is on the table."

"We will take the steps necessary to stay on sound financial footing," she said. "We will take a look at all the programs and then justify why something should or should not be reduced."