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Councilmember Says City Leaders Must Heed Lessons from 1990’s
Washington, D.C. – Today, Councilmember David Catania (At-Large) released a detailed timeline of the city’s last major fiscal crisis, which lasted the better part of the 1990’s. In doing so, Catania warned against repeating mistakes that prolonged and deepened the city’s near collapse during this time period.
“Managing a fiscal crisis requires making tough decisions early,” said Catania. “The District’s financial problems in the 1990s deepened because promises to address budget deficits were continually deferred and, more often than not, abandoned altogether.”
The fiscal crisis of the 1990s eventually led to the suspension of D.C.’s Home Rule. By 1995, escalating budget deficits and unfunded pension liabilities in the District prompted Congress and the President to create a financial control board. The board’s mandate grew over time and ultimately reached the point where the Mayor and D.C. Council no longer controlled city finances. Decisions about spending priorities and budget cuts were made non-elected members of the financial control board.
“District leaders, including myself, have a special obligation to make sure that our financial house is in order,” said Catania. “Preserving Home Rule by balancing our budget is not an academic exercise. Barely a decade ago, District residents lost their right to be governed by the people of their choosing due to the city’s dismal fiscal condition.”
Last week, Catania called on the District’s Chief Financial Officer (CFO) to produce updated revenue estimates in time for the Council to consider the possibility of further budget cuts before the New Year. He disputed several of the assumptions used by the CFO to make his September 2008 revenue projection. These assumptions included low unemployment, gains in individual incomes, only slight declines in the stock market, and skyrocketing property tax revenues for the current year. Catania said that the fallibility of these assumptions combined with the timing of the revenue projection, which occurred before the recent Wall Street crisis, will result in further declines in District revenues this year.
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