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Council to Cut Another $50 Million from Budget

The D.C. Council is developing a plan to slash the District's budget by an additional $50 million above the $131 million in cuts proposed by Mayor Adrian M. Fenty, warning that the city must create a reserve fund to prepare for more bad economic news.

The proposal, details of which are still being worked out today, would put on hold new initiatives the mayor and council had added to the fiscal 2009 budget last spring. Some of the deepest cuts could come in areas of transportation and affordable housing, said Ed Lazere, executive director of the D.C. Fiscal Policy Institute, which studies city budget issues.

Council members said the cuts are painful but necessary to protect the city from being unprepared for continued revenue declines in the wake of the Wall Street meltdown and the continued property market slowdown. The $50 million reserve would be used to make up for future revenue shortfalls; if revenues hold steady or rise, the money would then be released to fund the initiatives that will be put on hold.

"We do not want to get caught flat-footed," council member Mary M. Cheh (D-Ward 3) said. "Then we'd have to cut mid-year and that would be double the cut because we'd have to make up for six months when we were overspending."

But Fenty said the council's cuts will harm services in a letter to Gray.

In September, D.C. Chief Financial Officer Natwar M. Gandhi announced the $131 million revenue shortfall, which prompted Fenty to propose eliminating hundreds of vacant jobs and taking money from special funds in bank accounts controlled by city agencies.

But council members warned that the revenue projections could get worse when Gandhi releases a new projection in December. David A. Catania (I-At Large) has developed a plan to create a $15 million reserve fund for health care, in part by delaying implementation of Healthy D.C., which he created to provide health insurance to low-income residents. The council's plan to find another $50 million appears to be on top of Catania's proposal.

Lazere said he understood the council's concerns, but added that critical services will be scaled back if the council follows through when it votes on the budget plan at a special legislative meeting Monday. Lazere sent a letter to council Chairman Vincent C. Gray (D), urging him to delay a vote until Nov. 18.

"When times are tough, you should be trying to protect services and do the least painful things as possible," Lazere said in an interview. "You can address the problems as they come up."

By David A Nakamura  |  November 7, 2008; 2:48 PM ET
Categories:  City Finances  
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