Is the District’s financial honeymoon over?
This morning, Chief Financial Officer Natwar M. Gandhi told the mayor and the D.C. Council—-and later reporters—-that according to his estimates, the District will take in $131 million less in fiscal 2009 than originally anticipated. (The fiscal year starts Oct. 1 of this calendar year.)
The shortfall, Gandhi explained, is primarily, but not exclusively due, to a foreseen decline in revenue from capital gains taxes paid by individuals—-a consequence, he said, of “the worst financial crisis since the Great Depression.”
Gandhi, characteristically, went to great lengths to put the number in context, explaining that the District remains in far better budgetary shape than surrounding jurisdictions. At one point, he said, “Two point five percent is not that big a deal….I’m confident that this mayor, this council can manage this.”
Later, Gandhi clarified his statement, saying that the cuts will indeed have to be substantial: “That will mean a real impact on services, a real impact on people.”
Those are impacts that Mayor Adrian M. Fenty has thus far been able to avoid.
In March, Fenty released his fiscal 2009 budget, trumpeting a minuscule 0.7 percent growth rate in the annual financial plan. On closer examination, it wasn’t quite the exercise in fiscal discipline he made it out to be. Virtually all of the savings were achieved through cutting unfilled employment vacancies, rejiggering financial instruments, and other accounting changes. No city program or agency saw a meaningful cut from the level of service it had provided the year before.
So will the revenue shortfall mean that Fenty will finally have to make a hard budgetary choice? There’s optimists and pessimists on the matter.
In the optimist camp, count Ward 2 Councilmember Jack Evans, Fenty ally and chair of the finance and revenue committee. Evans says it’s entirely possible that the economy will rebound in the coming months, making it unwise to slash the whole $130 million at once. His suggestion: Make the cuts “on a rolling basis” by splitting the deficit into quarterly chunks.
“Are there $30 million of projects that we can delay to the second quarter?” asks Evans. “Yes!”
And the $131 million total, he says, “is a very small amount” to make up. He points to the fiscal 2002 budget, which had to be slashed in fall 2001 by approximately $300 million in the wake of the Sept. 11 attacks. That, he says, was figured out in two weeks.
Call At-Large Councilmember David A. Catania a pessimist.
The $131 million figure, he says, is “a best-case scenario, frankly.”
Evans’ 2001 analog, Catania says, doesn’t quite hold because there was more new spending that year to cut into, and inflationary pressures on wage hikes and fuel costs were not as great. Real sacrifices, he says, will have to be made in the coming weeks. “This is going to be really tight,” he says.
Mayoral spokesperson Mafara Hobson just released a perfectly meaningless comment from Fenty on the matter: “With the U.S. economy facing threats of a recession, the District of Columbia has been impacted by the country’s economic slowdown. Recognizing this financial shift, we will work with the Council and take the necessary actions to ensure the District continues to produce balanced budgets.”
Hobson agreed it was reasonable to have a new spending plan in place by the D.C. Council’s October legislative meeting, on the 7th.
At-Large Councilmember Phil Mendelson isn’t convinced Fenty will pull the trigger on necessary cuts. “I’m afraid the council’s going to have to make the choices,” he says. “Somebody’s gotta step up.”