IN THE LAST two weeks, three events marked the end of phase one -- the talk phase -- in the city's financial crisis and the start of phase two -- the reality phase. What the reality embodies is a shortage of money. The now-common press conferences dealing in cuts that might eventually have to be made in the city budget and guesses at the size of the budget deficit have abruptly been replaced by evidence that the money crisis is becoming a fact of daily life in the city.

The first such citywide evidence was found in the schools. Over 700 teachers have been laid off because of the budget trouble, and when school opened there were too few teachers in schools, and some classrooms were unattended while others were overcrowded. That problem continues. The second demonstration of the new reality occurred at the city jail and Lorton Reformatory. Guards went on strike, claiming that budget-inspired layoffs of other guards had reached the point of creating dangerous conditions. The strike ended when the guards decided the mayor was listening to their concerns.But whether Mayor Barry will be able to do anything about those concerns is another question. The money is simply not in the city treasury for hiring additional guards unless cuts are made elsewhere in the budget.

The third event that signaled a new phase in the budget struggle took place in the city's social services department. Many programs important to the health of city residents -- especially to the poor -- are being drained of people and supplies because of the money crisis. For example, D.C. Village, the city home for the elderly, recently ran out of milk, eggs and bread. Residents had to be fed with foodstuffs that other city facilities could share.

All these are signs of things to come in city life and politics. The major change in city life will be a competition for any dollar that falls into the city treasury. No longer can the District government be the employer of last resort or the rich uncle for any social program. Hard choices will have to be made that will put city politicians on the spot: for example, should the hospital get more money if that means taking dollars away from the school system? The politicians will have to answer. The hospital's board will be in the position of fighting the school board for money. Second, there will be increased pressure on city residents to do without some city services they are accustomed to. Trash services may be reduced to once a week; bus fares may go up. On the other side, city workers lucky enough to keep their jobs will have to do more with less staff and fewer supplies.

The big question concerning this second phase of the budget crisis will be how District politicians and residents handle the frustration of hearing that things cannot be done "because there is not enough money." More pressure will be put on charities and volunteer services, for example, to pick up programs that the city can no longer provide. Local politicians will also face a test. Can they pull District residents and workers -- black and white, rich and poor -- together? If the city government is not to become an ineffective bureaucracy, one that blames money problems for its failure to get things done, then people throughout the community must be made to understand that the trouble is touching everyone, across the board, and that reasonable and humane choices have been made to deal with a crisis that exists in reality -- not just on paper.