In a city still reeling from a series of school closures under the Fenty administration, education leaders in the District are abuzz over a controversial report on the school system released last week. Commissioned by the Deputy Mayor for Education, “Quality Schools: Every Child, Every School, Every Neighborhood,” also known as the IFF study, recommends that the city close or turnaround 38 traditional public schools and three public charter schools and encourages the replication of high-performing charter schools in  neighborhoods with  the greatest need. DC officials have issued reassurances that there will not be any dramatic transfer of the city school system to public charter schools, but the study has sparked tensions between advocates of traditional public school and public charter schools.

The study analyzes supply and demand for “performing schools” in DC and provides data on the ten neighborhoods that have the largest gap in education service. This is defined as the difference between the number of students living in the neighborhood and enrolled in K-12 public schools (the demand) and the number of seats available in high-performing schools as defined by IFF (the supply). The study relied on DC-CAS test results to measure the number of “performing seats” at each school. IFF developed a four-tier system to rank schools from highest performing (Tier 1) to lowest performing (Tier 4) across 39 neighborhood clusters in the city. Not surprisingly, the need for performing seats was highest in DC’s poorest neighborhoods and for elementary school grades. Over half of the Tier 4 schools are located in Wards 7 and 8 and out of the additional 39,758 Tier 1 seats needed to meet demand across neighborhoods, 21,164 are for kindergarten to fifth grade.

One of the report’s main recommendations is to close or turn around Tier 4 DCPS schools and replace them with high-performing public charter schools. The researchers go as far as to suggest an incentive to maximize existing building capacity – “With cooperation and coordination between DCPS and PCSB [Public Charter School Board], PCSB can use the buildings as incentives to recruit the highest performing charter school operators into the Top Ten priority neighborhood clusters.”

DCFPI’s take? Policymakers should take the analysis with a grain of salt. There have been numerous criticisms of the study, from the rigor of the supply and demand analysis technique to IFF’s ties to charter school funders. For example, the researchers base their definition of quality on a school’s test scores rather than on student achievement growth from year to year, a better predictor of how well equipped schools are at teaching at-risk student populations over time. IFF also did not make the link between performing seats and schools serving large numbers of special education or English language learner students or poverty rates across neighborhoods. Ignoring these critical factors when making policy decisions regarding school closure, turnaround, or expansion would be short-sighted.

Although DC is beginning to rebound from the recession, economic growth is uneven, as in the nation as a whole.  The District’s downtown commercial market is strong, yet record numbers of residents are looking for work.

The Fair Budget Coalition’s recommendations center on these two themes: Creating opportunities to live in the District and to find meaningful work. The coalition urges Mayor Gray to restore deep cuts that have been made in the recession, and in some cases, to make new investments in these areas.

Creating Opportunities to Live in the District: The Fair Budget Coalition’s recommendations to help residents afford to live in DC focus on creating opportunities for better housing and health outcomes. They include re-investing in core housing programs, like the Housing Production Trust Fund and the Local Rent Supplement Program, and maintaining the Home Purchase Assistance Programs. The recommendations also branch out to include health concerns, such as ensuring that DC residents maintain health insurance and protecting victims of domestic violence.

Creating Opportunities to Work in the District: With hopes that the District will tackle its high unemployment rate, the Fair Budget Coalition recommends investments and policy changes that will help resident build skills and create prime environments for employment.  The coalition recommends restoring cuts to adult literacy and child care, and creating a new pilot program to provide housing to homeless families in job training — making it more likely that the training can be completed.  Fair Budget also suggests that DC focus job training efforts on growth industries that offer higher wages.

The Fair Budget Coalition notes that making these investments is critical to DC’s future, and that policy makers should be open to raising revenues, if needed, to support these goals. They offer several revenue-generating ideas, such as requiring two-earner families to report their income together on their tax return, and raising penalties for violating worker protection laws.

The Fair Budget Coalition’s report can be found here.

Why? Tax season is the time when families can access one of the most effective anti-poverty programs around, the Earned Income Tax Credit (EITC).  And it is also the time that the DC Earned Income Tax Credit campaign ramps up, helping low-income families learn if they are eligible for this program and help them file their taxes for free. 

The EITC is a refundable tax credit designed to encourage work while also offsetting the payroll and federal taxes that take a huge bite out of low-income working families’ paychecks.  In 2010, the EITC lifted 6 million people out of poverty nationwide, half of them children.  Without the EITC, the national poverty rate would have been one-third higher.  

The EITC was started as a federal program in 1975. Since then, 25 states, including DC, have adopted their own state level EITCs.  The DC EITC is equal to 40 percent of the federal credit and is one of the largest refundable state-level EITC’s in the US.  In 2008, approximately one in six DC tax filers received the EITC. 

The EITC can provide a significant boost to low-income families’ earnings.  For example, a single parent with two children who had $10,000 in taxable income would be eligible for a $4,000 federal EITC and a $1,600 DC EITC, boosting their earnings by 56 percent.  

The DC EITC Campaign not only provides free tax preparation services to low-income families in the DC metro region but also works to provide outreach and awareness of the tax benefits that low-income families are eligible to claim. This is important because DCFPI estimates that as many as 11,000 DC residents who are eligible for the federal and DC EITC did not claim it. 

I volunteer as a tax preparer with the DC EITC campaign, and I see the difference the EITC can make for low-income families.  If you’re interested in joining the effort to help low-income families access the EITC and other low-income tax benefits, visit the DC EITC’s campaign website and sign up today.

While clearly this is good news, several questions about the surplus have been raised, including whether this means DC didn’t have to increase revenues for FY 2012, what will happen with the surplus, and how this news impacts the FY 2013 budget.

Here’s a quick Q&A. We’ll have more to say about the CAFR soon.

Does this mean the District should roll back the tax changes made last spring and fall? DCFPI agrees with Mayor Gray, who said at the CAFR press conference this morning that the District’s finances remain fragile. It’s important to keep in mind that the CAFR is for FY 2011, and that revenue changes such as the increase on high income earners were made to balance the budget for the current fiscal year, FY 2012, and beyond. District leaders construct the budget based on quarterly revenue projections from the Chief Financial Officer. Again, the surplus announced today only covers FY 2011. Dr. Gandhi’s next projection will arrive sometime in February, but the projections last December showed a loss of revenue in FY 2013 and beyond due to potentially significant cutbacks in the federal government.

In other words, right now it appears that the surplus in Fiscal Year 2011 was a one-time gain. As Mayor Gray said, it would not be prudent to make policy changes now based on funds that cannot be projected for FY 2013 and the four years beyond that DC is required to budget.

What will happen with the $240 million? Under current law, the funds will be sent to DC’s savings account, often referred to as the fund balance. Right now, any end-of-year surplus funds are devoted to two separate accounts in the city’s fund balance: Half goes to a “Working Capital” fund, helping ensure that DC has enough cash-on-hand to pay its bills without extensive short-term borrowing. The other half of any surplus goes to a budget reserve that is available to meet unanticipated needs, but—as credit card commercials often say—certain restrictions apply.

What could be done with the surplus? Mayor Gray and the DC Council have made clear that building up DC’s savings is a high priority, and Mayor Gray seemed to indicate that he favors keeping it in the fund balance. The mayor could propose to use some of the surplus funds, but this may not be prudent at this time for these reasons:

• Surplus funds are one-time and impact only FY 2011. If program funds are increased or taxes are lowered, it would impact FY 2012 and beyond.
• DC is facing spending pressures this year. Just four months into FY 2012, a number of agencies have spending needs that exceed their budget. Other spending pressures may arise as the year continues.
• We won’t have a clear sense of the city’s finances until the February revenue forecast.

For these reasons, it makes sense, for now at least, to let all of the surplus stay in the fund balance.

What does this mean for FY 2013? This may be a sign that agency spending is on a trend that is lower than expected and that revenues are on a higher than expected trend.  This could be good news for FY 2013, but we won’t know for sure until the revenue forecast is released and the CFO issues a “current services” baseline budget for 2013.

Stay tuned to the District Dime!

Too often, urban school districts like DC face the challenge of attracting and retaining high quality teachers to public schools plagued by high poverty rates and limited resources. Brown’s bill proposes a three-year pilot program to place a maximum of 20 teachers in four high-need schools with the following incentives:

• A bonus of $10,000 per year each year that the teacher remains in the high-need high school (in addition to any IMPACT bonuses);
• Homebuyer and other housing assistance;
• Tuition assistance;
• Loan repayment assistance; and
• Income tax credits.

Both DCPS and public charter schools would be eligible for the program, if passed.

The Office of the State Superintendent for Education reported that 38 of the 218 DC schools are currently identified as high-need, which is defined as schools of 200 or more students that have been in existence five or more years, where less than 40% of their students meet reading and math proficiency and more than 75% of students qualify for Free and Reduced Price Lunch. Earlier this week, Bill Turque noted the uneven distribution of effective teachers – of the 663 teachers deemed highly effective on the latest IMPACT evaluations, only 71 work in the 41 schools in Wards 7 and 8, while 135 teach in the 10 schools in Ward 3.

IMPACT, DC’s existing teacher evaluation system does reward highly effective teachers with bonuses up to $25,000 and base salary increases up to $20,000, but does not directly address the distribution of high quality teachers. DCPS Chancellor Kaya Henderson expressed support for the pilot program, after a provision to exempt participating highly effective teachers from IMPACT evaluations was removed. She and other witnesses pointed out that incentives alone do not cut it — that teachers also need a supportive environment with good principal leadership and parent engagement. Henderson also noted DCPS’ recent efforts to lure effective principals back from Montgomery County by adjusting their pay scale.

Some witnesses expressed concern that the IMPACT system is being used as the basis to identify highly effective teachers for the program, given its controversial nature in DC; others thought the timeline for the pilot program may be too short to see results in student performance.

It is becoming increasingly clear that effective teachers play a critical role in bridging achievement gaps and that the lack of a high quality teacher can adversely affect student success when stacked against poverty and other socio-economic factors. Whether or not financial incentives alone are the answer remains unclear, but it is good that DC’s leaders are thinking about how to address this important issue.

DCFPI’s take? Let’s not make rash spending decisions. We’re only four months into our fiscal year. Let’s put the additional money aside until we get a clearer picture of what our spending pressures will be for the entire fiscal year.

Our complete testimony is below:

Chairman Brown and members of the committee, thank you for the opportunity to testify today. My name is Jenny Reed, and I am a policy analyst with the DC Fiscal Policy Institute. DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on how policies impact low-and-moderate income families.

I am here today to testify on the Mayor’s FY 2012 Supplemental Budget request, more specifically to ask several questions that the mayor’s supplemental budget proposal raises and suggest an alternative to the Council.

Budgeting is not an exact science. Unexpected expenses occur over a fiscal year that cannot be anticipated, which makes it necessary to add and subtract funds to make the budget balanced.  From the information provided in the Mayor’s supplemental budget, the majority of these appear to be true spending pressures and amount to less than 1 percent of the District’s $6.4 billion local budget.

However, we are concerned that only four months into Fiscal Year 2012, the Mayor’s proposed supplemental budget would use the entire $42.2 million of additional FY 2012 revenue projected by Chief Financial Officer Natwar Gandhi.  This raises several important questions that the Council should consider:

1. Is this the full picture of the District’s spending pressures? Are there other spending pressures that are not being addressed in the Mayor’s proposed supplemental budget?
2. How would using all of the additional FY 2012 revenue now, impact the District’s ability to address future spending pressures?
3. How will this additional spending impact the budget gap already identified for FY 2013 and the remainder of the four-year financial plan?

First, is this the entirety of spending pressures for Fiscal Year 2012? I raise this question because when making decisions about scarce public resources it is important to make sure that we have as much information as possible.  It would be helpful to know if there are other spending pressures that are not covered in this supplemental budget, why they were not chosen to be funded with additional revenues, and how agencies plan to address them.  This would help the public and the Council assess whether these are the highest priority pressures to address.

Second, it is very likely that other spending pressures will arise since we are only one-third of the way through the current fiscal year.  If all of the additional revenue is devoted to the eight programs identified in this supplemental budget, it is unclear how the District would address other equally urgent spending pressures that arise later in the year.  Moreover, the CFO is expected to release another revenue forecast in late February, and if that reflects a downward revision of projected revenues, the District may no longer have the $42.2 million in additional funds for FY 2012 announced in December.

Third, how will the added spending on ongoing programs impact the budget in fiscal year 2013 and beyond?  In the most recent revenue estimate, Dr. Gandhi projected a revenue decline for FY 2013 when compared with the projections made at the time the current budget was adopted.  Any additional ongoing services funded this year would add to the anticipated budget gap in FY 2013.

Mr. Chairman, the DC Fiscal Policy Institute would like to propose an alternative approach to the current supplemental budget.  We recommend that the Mayor and Council set the $42 million in additional revenue for FY 2012 aside and wait until later in the fiscal year, perhaps three months from now, when the District can have a better sense of what spending pressures remain and what our revenue picture looks like.  In the meantime, the Mayor could work with agencies to address urgent needs through re-programming, and the Mayor and CFO could work with agencies to address some of the spending pressure internally.  DCFPI suggests that at that time, the Mayor provide an update of the spending pressures to the Council and public, as well as a plan for how to use any additional revenues to cover those urgent spending pressures that cannot be covered internally.

Lastly, the Mayor and Council should work to restore the operating reserve in each year’s annual budget.  Until a few years ago, the DC budget had a $50 million operating budget reserve to help cover these kinds of spending pressures that arise after the budget is adopted.  In order to make the use of the reserve more transparent, the Council could require that the proposed uses of the fund come before the Council for approval.

Thank you for the opportunity to testify, and I’m happy to answer any questions.

Monday January 23^rd

• 10:00am, Committee of the Whole, hearing on B19-0576 Highly Effective Teacher Incentive Act of 2011, Room 500. Click here for the witness list.

Tuesday January 24^th

• 10:00am, Committee of the Whole, public roundtable on B19-0654 Fiscal Year Revised Budget Request Emergency Adjustment Act of 2012, Room 500. The vote on the bill will be held on Tuesday, February 7^th.

Wednesday January 25^th

• 5:30pm, Next meeting of the Public Education Finance Reform Commission (PEFRC). Petworth Public Library, 4200 Kansas Ave, NW. For more information, visit www.pefrc.org.

Saturday February 11^th

• 9:30am, Mark your calendars to attend Mayor Gray’s “One City Summit”, a citywide town hall meeting, that will bring together 1,000 residents to discuss how to improve quality of life in the District for residents across neighborhoods, income levels, and backgrounds. Register here.

As you know, one of DCFPI’s wishes for 2012 is that the District fully implement its re-designed TANF program to help more families with children prepare for work and find jobs with good wages and benefits.  Today’s column highlights the indicators of progress we hope the District will measure and share on this new endeavor.  Given Dr. King’s focus on economic rights — the need to give poor families the tools to succeed — in addition to civil rights, this topic is especially relevant today. 

The District’s re-designed TANF program aims to do a better job identifying the barriers to work faced by DC’s families, and then provide a set of services tailored to the each family’s needs.  In return, all families will be expected to make progress on their “Individual Responsibility Plan.” 

So, how will we know how things are going?  The District’s Department of Human Services can let us know by sharing information in a timely way on different aspects of the new effort.  Some of the indicators are outputs — such as the number of families assessed and referred to new services.  Later on, it will be good to get information on outcomes — such as the number of parents completing training and getting jobs. 

 Here are some key indicators: 

• Number of families assessed and referred to services:  The starting point for the new program is a thorough assessment of every family’s strengths and employment barriers.  No one will be referred to new services before going through an assessment.  So it will be critical to know how many TANF families are being assessed and referred, on at least a quarterly basis. 
• Major types of needs identified:  How many TANF families are ready to look for work, how many need education or training, and how many have other barriers, such as mental illness?  Knowing the needs of DC’s TANF families is critical to designing an effective welfare-to-work program. 
• What kinds of services are families getting?  The District should provide information on the number of families referred to specific service providers, to get a sense of how the re-design is playing out on the ground level. 
• Are families getting jobs?  What kind?  Ultimately, the success of welfare reform will be measured by the number of parents who successfully move to work and keep their jobs.  Knowing how many parents find work — and the wages, hours, and fringe benefits of those jobs — is critical. 

This would be a great start. We look forward to learning more from the District on the success of its TANF re-design.

As the resource map shows, the District makes both large and small investments in workforce development through local dollars. By local dollars, we are referring to monies allocated from the General Fund, which come from sales, income, and property taxes and fees, among other sources. 

What is the largest single allocation of local tax dollars in workforce development?  The District’s Summer Youth Employment Program, which is run by the Department of Employment Services (DOES). Though the program has been significantly downsized over the last few years, it still receives the largest appropriation of local dollars for workforce development. The program provides a six-week subsidized job for District youth ages 14 to 21. 

Another DOES program that receives a large investment is the Transitional Employment Program. It is designed to help some of the hardest-to-employ District residents such as ex-offenders successfully enter or re-enter the workforce through job readiness, training and subsidized employment. 

As we mentioned in previous blogs, DOES isn’t the only game in town. The District also deploys significant dollars through the employment training program in TANF, Temporary Assistance for Needy Families. The Department of Disability Services also has a substantial employment readiness and placement program to help residents with disabilities. 

How successful are these programs in helping residents get and retain jobs? Unfortunately we don’t know as much about that as we should. We hope the collection of this kind of data and a focus on outcomes in determining how to use our precious local dollars will be a focus of our elected and appointed leaders. 

Want paper copies of the resource map? Contact Elissa Silverman at silverman@dcfpi.org or 202.325.8816.

In its efforts, the District uses both federal and local funds. So what are the main sources of federal funding? 

The Workforce Investment Act (WIA) is responsible for much of the federal workforce funding to the District. WIA, as it is known, was put in place to consolidate many of the services the federal government funds. Title I of the act funds training for adult workers, dislocated workers, seniors and youth. You can see where the funds land in DC by looking at the “Federal Grants” line in the map. For example, WIA adult funding goes toward DC Works! Career Centers— One-Stops, in the government lingo— as well as toward Employer Services and Program Performance Monitoring in within the Department of Employment Services. What is program performance monitoring? It is a catchall category in the local Department of Employment Services budget which includes federal as well as local monies for adult job training. 

WIA youth money funds the city’s year-round program for youth, and the Senior Community Service Employment grants helps low-income residents 55 and older find work. Once again, you can see this by looking in the “Federal Grants” line. 

Yet the Workforce Investment Act goes beyond adult and youth job training. Title II of the act authorizes funding for adult and family and literacy programs. The funding for this is found within the Office of the State Superintendent and comes through the U.S. Department of Education.                                                                                                                  

Title IV addresses training for adults with disabilities. The federal funds come through the Rehabilitation Act and fund work readiness and job training services within the District’s Department of Disability Services. 

Another source of federal funding is in the human services cluster. The employment program within the Temporary Assistance for Needy Families (TANF) uses some federal monies, though a majority is done with local dollars.  There is also a federal match for the employment program within the Supplemental Nutrition Assistance Program, formerly known as food stamps. 

Tomorrow we’ll go more in depth on how we spend local dollars on workforce development here in DC.