WASHINGTON - Members of the D.C. Council and city finance officials yesterday outlined a grim financial future for the District of Columbia even as they sparred over how best to put the city on more solid financial footing.
The gloomy forecast came at a council hearing called by Chairman John Ray to lay groundwork for action in July on a plan by Mayor Sharon Pratt Kelly to eliminate a projected $152 million deficit in fiscal years 1993 and 1994. The city's fiscal years run from Oct. I through Sept. 30.
In launching the hearing, Ray said the city was at a "critical juncture" in history" because of a confluence of negative economic developments. For example, he said, the city has lost much of its middleclass tax base and has suffered eroding revenues as a result.
Ray also complained about government mismanagement and said the Kelly administration was guilty of providing a "wonderland of misinformation" that has clouded perceptions about the city's finances.
Ellen M. O'Connor, the city's chief financial officer, said she was aware of Ray's concerns. Flanked by other finance officials, O'Connor said the mayor's financial team pledged to be "as forthright and as open and as clear as is possible to be."
Ray did acknowledge the difficult task faced by the administration and suggested that assigning blame is counterproductive. "Make no mistake: This hole is deep, and we're all in it together," he said.
According to Ray, the city may have a $137 million negative cash balance at the end of fiscal 1994 unless corrective action is taken on the city's budget.
While quibbling with some of Ray's assumptions, O'Connor agreed with Ray that if the district does not deal with its cash problems now, "the result will be something like you've outlined."
O'Connor warned that the city may face a substantial cash shortage as early as next April. She also said that should the city find itself with substantial cash-flow problems next year, it may be difficult for the city to borrow money.
"It's unlikely we could borrow the money, because when you borrow you have to prove to the creditor that you're going to be able to pay it back," O'Connor told the council. If the city chooses to leave unresolved some of the budget issues responsible for future cash problems, she said, "people wouldn't have the faith that we'd be able to pay [loans] back."
But she said Mayor Kelly's plan for addressing the projected deficit, which includes the elimination of 1,700 funded positions from government, "would cure the cash problems for 94."
Ray and other council members, however, signaled they are not ready to endorse the mayor's recommendations. Ray said Kelly's proposal to ax 1,700 government employees is "like sending an elephant into a china shop." He said he is "all for" reducing the size of government, but "you have to use a razor blade and not just run in like an elephant." He said some agencies are net revenue raisers, and that reducing their work force would be counterproductive.
O'Connor said a number of studies by independent analysts have concluded that the city government is overstaffed.
O'Connor had a more heated exchange on the reduced staffing issue with Councilman Marion Barry Jr., who previously was the city's mayor. City government grew under Barry's tenure as mayor, and he is now reluctant to see it pared. Barry said the Kelly administration was remiss in not moving sooner to correct the city's fiscal 1993 and 1994 budget problems, adding that more timely action would have eliminated the need for job cuts. He also said the city's revenues are coming in higher than expected - a trend that, if continued through the rest of the year, would obviate the need for job reductions.
Barry also accused city officials of being insensitive to the plight of those who would lose their jobs under the Kelly plan.
O'Connor said that while revenues currently are exceeding expectations, she believes that by the end of the year, the current revenue estimate will prove correct. She also brushed off Barry's suggestion of insensitivity.
"I didn't say it was easy, "she said. "I think it's rotten. I know there is suffering."