Budget projections for city worsen and borrowing likely not an option The District’s budget deficit for this fiscal year could hit nearly $220 million and double during the next, but D.C. leaders have no cash surplus to play with and cannot borrow more without violating the city’s debt cap.
Unlike previous years there is virtually no wiggle room or extra cash to carry the government through another budget cycle, according to documents distributed by Chief Financial Officer Natwar Gandhi during a D.C. Council retreat last week. The District’s budget was balanced in fiscal 2009, the newly released Comprehensive Annual Financial Report concluded, but there was nothing left over.
Fiscal 2009 closed Sept. 30 with a $140 million “general fund budgetary surplus,” documents show, but that money is already dedicated to a litany of programs. The city actually has reserved $155 million for programs, leaving the fund $15 million short.
This year, the District faces a $17 million revenue shortfall and up to $202.1 million in “spending pressures” — a gap caused by overspending in various agencies. Among them: fixed costs, such as utilities and rent, could run up to $23.3 million over budget, fire department overtime $5.3 million, non-public tuition $38.4 million, and the Healthcare Alliance $29.5 million.
Council Chairman Vincent Gray will introduce legislation Tuesday directing Mayor Adrian Fenty to produce a plan by the end of February to reduce spending pressures.
“We’ve got to get on top of this now,” Gray said Monday.
Agency spending problems won’t be so bad at the end of the fiscal year “if we make difficult decisions today,” said Ward 2 Councilman Jack Evans, chairman of the finance and revenue committee.
But the challenges get harder next year.
The District faces a $473 million operating deficit in 2011, according to the CFO’s projections, and as much as $875 million may have to be culled from the Capital Improvement Plan to stay within D.C.’s statutory debt cap. The cap limits debt payments to less than 12 percent of general fund expenses.
The District must not violate the debt cap, Evans said, or risk the wrath of Wall Street lowering the city’s bond rating.
“It would be a significant black eye,” he said. “We can’t do that.”
Gandhi suggested he could restructure the District’s debt to hold the city under the cap, at least through 2014. That might be the only option: Council members are scoffing at cuts to capital projects in their wards, like the Skyland Town Center in Ward 7, the Southwest Waterfront in Ward 6 or the O Street Market in Ward 2.
