WASHINGTON -- Mayor Sharon Pratt Kelly said emergency budget legislation passed last month by the District of Columbia Council to close a combined projected $152 million deficit in fiscal years 1993 and 1994 may still leave the city with a $22 million budget imbalance.

But rather than veto the measure, one of many included in the deficit reduction package, Kelly said she will allow it to become law without her signature and then take executive actions to eliminate the remaining deficit. Fiscal 1994 begins Oct. 1.

To erase the projected shortfall, Kelly said she would eliminate 586 positions from the city's government, on top of the 853 city jobs the council agreed to cut, for a savings of $9.6 million.

Kelly stressed she was pained by the cuts and sorry that the city cannot do more to help those who lose their jobs find new ones in the private sector.

"I don't get any kick out of firing people," she said. "But we're in a recession here. I don't have a Hou-dini-like magic to make more jobs in an economy that is not creating many jobs in the first place."

In addition to the firings, the mayor said she would privatize medical services in the corrections department, saving $4 million.

Administrative controls and other assorted actions would provide the remainder of the necessary savings.

Speaking to reporters yesterday, Kelly said the council made a "Herculean effort."

"We started in June with a $152 million problem and we were able to solve most of it in a constructive compromise with the council," she said. The deficit reduction package fell short of achieving its goals, she said.

On Monday, Kelly signed into law a supplemental fiscal 1993 budget; an omnibus spending reduction bill; and a measure calling on the mayor to undertake multi-year budget planning and to provide periodic reports to the council on the city's finances.

Kelly is allowing a property tax bill and the supplemental fiscal 1994 budget to become law without her signature because of deficit concerns.

"I know if you get caught in vetoes, the acrimony overwhelms all the many, many points of agreement," she said yesterday. "I felt it was better to let it become law, thank [the council], and take the steps I feel are necessary to bring the budget into balance."

In addition to setting real property tax rates, the properly tax legislation provides an exemption from higher rates for two abandoned properties in the city. Kelly and her advisers said the exemption might be claimed by others, draining up to $4.5 million from city offers.

Kelly said she was concerned that the fiscal 1994 supplemental budget relied too heavily on increased revenues from parking tickets.

"It's anti-business and it's not in the economic interest of the District of Columbia," she said of the plan. Moreover, given the locally famous efficiency of the city's parking enforcement efforts, it is unclear whether additional revenues are possible from ticket writing, Kelly said.

She also said the fiscal 1994 budget would not cut deeply enough into D.C. General Hospital's accumulated retained earnings deficit.

Over the past several years, the hospital has drained the city's general fund by about $54 million.

Kelly said she anticipated little trouble in Congress, which now must review and pass the supplemental budget plans, even though the fiscal 1994 budget technically is out of balance.

"We're sending a budget that is going to deal with the lion's share of the problem and avoids unnecessary gridlock," Kelly said, referring to the potential for a protracted battle if she had vetoed the 1994 budget. "I think if anyone would understand the need to avoid unnecessary acrimony between the executive branch and the legislative branch, it would be Congress."

She also said that by the time Congress gets around to dealing with the matter, the fiscal 1994 budget will be in balance because she will have implemented her corrective actions.

While Kelly appeared relieved at having the current fiscal crisis under control, she said she was under no illusions about the difficulties that remain.

"This country is going through a massive restructuring, the world is going through restructuring," Kelly said. "Over the next 10 years, the district will need to reassess what she can do and how she can do it."

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