The District might have to raid its rainy day fund to balance the current budget, Chief Financial Officer Natwar Gandhi told city leaders, while projected gaps in future years have rapidly widened into the billions.
Gandhi’s newest revenue estimates, which he presented to Mayor Adrian Fenty and the D.C. Council in separate briefings Monday, paint a dismal picture of the District’s economy. Most pressing: A new $190 million deficit in fiscal 2009, the current budget year, thanks to sharp declines in property, sales and income tax revenues.
“We are doing better than others,” Gandhi told the council, “but nevertheless bad enough.”
A once-$800 million fiscal 2010 shortfall ballooned to $952.4 million, Gandhi reported, which will force D.C. leaders to reconsider next year’s budget only a month after it was adopted. In 2011, the projected deficit has grown to $1.2 billion and in 2012 to $1.3 billion.
Gandhi suggested using the $228 million contingency reserve to close the $190 million gap. The catch: D.C. law requires that the fund is repaid over the next two fiscal years. Using it would hike the projected deficits in both 2010 and 2011 by $95 million.
“The whole idea of the contingency fund is to use it when it rains,” Gandhi said. “Well, it’s pouring out there.”
Councilman Jack Evans agreed that the rainy day fund is the only option for closing a massive gap with three months left in the fiscal year. Balancing the budget in future years, however, will require “the cleaver, not the scalpel,” Evans said.
“It’s very, very serious but not alarming,” said Councilman Phil Mendelson. “The distinction is we can deal with it, but there will be some cuts.”
Other council members were not convinced that federal stimulus funds, rather than reserves, can’t be used as gap filler. Gandhi makes the problem “look much worse than I think it is” when other resources aren’t considered, said Councilman David Catania.
The Fenty administration “is currently examining all of its options” to balance the budget and “also protect critical services,” the mayor’s office said in a statement.
