The District is at a cross roads when it comes to its finances, Ward 2 Council member Jack Evans warned last week, noting the responsibility of managing the deficit rests with new mayor and GW alumnus Vincent Gray before a budget proposal reaches the council this April.
Evans told members of the Foggy Bottom Association that although D.C.’s financial situation “remains strong,” bond ratings agencies are concerned with how the District is managing its finances. The city now faces a nearly $600 million budget gap for fiscal year 2012.
Added to that challenge is a potential cut to D.C.’s budget proposed by House Republicans in the Spending Reduction Act. The bill was proposed by members of the Republican Study Committee as a means of cutting the federal deficit by $2.5 trillion over the next 10 years and reverting back to D.C.’s 2008 spending levels.
The cut would snatch $210 million in federal funds categorized as “general assistance,” as well as another $150 million from the Washington Metropolitan Area Transit Authority – not part of D.C.’s budget but significant for the city – according to the bill. General assistance, an umbrella term, refers to funding for tuition support, school improvements and scholarships, education reform, emergency planning and security and other initiatives. Funding from Medicaid, prisons, and the courts would not be cut.
The proposed budget cuts may seem like a large gap to fill, but one economic professor at GW said D.C. has the ability to handle the situation.
“If that [2008 spending levels] is the standard being proposed for D.C. then it should be possible to accommodate the cuts,” Anthony M. Yezer, professor of economics, said in an e-mail.
Yezer emphasized that only a portion of D.C.’s budget comes from the national government.
Political science professor John Sides also said “it’s highly unlikely” the bill will pass Congress. Sides called the types of budget cuts favored by the Republicans “draconian.”
“The District’s budget may be trimmed but it won’t be as severe as this [proposal],” he said.
While D.C. has worked for years to pull itself out of debt – a control board was even put in charge of the city’s finances in 1995 – it is now running out of funding resources.
Evans said D.C. had $1.6 billion in its savings account in 2006, but since the recession began in 2007 that account has decreased.
“Year after year the budget would come down, not balanced, and we would use our savings account… all of the sudden by 2008 we had $920 million in the bank, down from $1.6 billion,” Evans said. “So we had actually burned through $700 million, balancing our budget year after year, maintaining the same level of services.”