In recent years, the District has experienced a healthy excess of revenues over expenditures and there has been little reason for concern. In the current 2002 fiscal year, however, it now appears possible that expenditures will exceed revenues for the first time since fiscal year 1996. There are also signs of a similar occurrence in the 2003 budget submitted to Congress. Expenditures exceeding revenues is a key warning sign of fiscal problems.
The solutions to the potential budget problem are limited at this time. Tax rate increases, other than deferring the reductions already enacted, are likely to be unacceptable, especially in view of the current concern over property tax assessment increases. One solution would be for the federal government to add to District revenues, as it did after September 11. Justifying additional revenue based on overspending the budget just submitted to Congress does not seem likely to get a favorable response, however. If no help is available on the revenue side, then the Mayor and the Chief Financial Officer must strictly enforce the budget limits contained in the 2003 budget, even if it means reducing important services such as education and public safety.