D.C. leaders on Wednesday described a projected $131 million budget deficit as “manageable,” while cautioning residents to prepare for spending cuts and additional swings in the stock market that could deliver more financial punishment.
Officials said everything is on the table to bridge the fiscal 2009 budget gap, which equals about 2.5 percent of the District’s $5.6 billion local funds budget. But there was a general reluctance to raise taxes and a sense that the $130.7 million shortfall could be closed without dire consequences.
“It’s a significant amount, but in our budget it’s a manageable amount,” said Ward 2 Councilman Jack Evans, chairman of the finance and revenue committee. “In the past we have shown the ability to close these gaps relatively easily.”
Mayor Adrian Fenty will take the actions necessary to keep the budget balanced, spokeswoman Mafara Hobson said. Fenty declined to discuss the issue.
The District’s budget “problem,” Chief Financial Officer Natwar Gandhi said, is due largely to falling income tax revenues, the stock market volatility and corresponding drop in capital gains. But the economy of the city is somewhat insulated from the “worst financial crisis since the Great Depression,” he said, thanks to a diverse revenue base, continually increasing property tax revenues and the “safety net” of the federal government.
“This is not what I would call a dire forecast yet,” Gandhi said during a briefing with reporters. “It’s pessimistic, indeed.”
Gandhi said he did not expect the shortfall to grow, but “you never know.” Needed cuts to meet the current shortfall, he added, “will have a real impact on services, a real impact on people.”
The city has enjoyed budget surpluses over the last five years.
Faced with uncertainty and a deepening economic crisis nationwide, several council members said merely cutting $131 million from the 2009 budget — and another $152 million in 2010 — is not sufficient to protect the city from wild economic swings.
“We’re not going to wait to see how this thing unfolds,” said Ward 3 Councilwoman Mary Cheh. “We have to get out in front.”
At-large Councilman David Catania said the council must act as if more reductions are coming and rethink its spending plan entirely in the face of “decreasing revenues and increasing costs.” The 2009 deficit is “substantial,” he said, but closing it is “doable.”
