Mayor Sharon Pratt Kelly is bracing residents of the District of Columbia for major budget cuts in light of her projections that the city faces a nearly $1 billion budget gap during the next two years.

The mayor is looking at cuts in funding for Medicaid, prisons, and benefits for district workers in addition to possible reductions for schools and city services.

The cost-cutting is necessary because of dismal revenue collections and spiraling costs. City officials now expect to collect $133 million less in taxes than they had counted on when writing the district budget. In addition, Congress killed a plan that would have provided higher sewer and water fees, while the Bush administration forced a reduction in federal moneys to be paid the city.

The city faces a $336 million budget gap in fiscal 1993, which began Oct. 1, and a $652 million gap in fiscal 1994.

Kelly has been outlining the city's financial predicament in a series of public meetings around the district.

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