Gray Decreases Need for Cuts By Putting Stop to Pay-Go But Health and Housing Still Bear Burden of Reductions in Fiscal Year 2013 Proposed Budget

March 26th, 2012 | by Elissa Silverman

Mayor Gray’s Fiscal Year 2013 budget offers a balance of cuts and revenue to close a $172 million gap and compensate for reduced federal funding, but as happened in last year’s proposal, our initial analysis shows the cuts are heavily weighted toward programs in housing and human services. As part of his proposal, Mayor Gray includes a $120 million “wish list” that would restore many of these cuts, including funding for services for homeless families , but that money would only be available if the District experiences a further revenue jump and if the DC Council agrees to Gray’s priority list.

The proposed FY 2013 budget has $103 million in expenditure cuts as well as a $20 million cut to a dedicated trust fund to build affordable housing. There is one local expenditure “cut” that DCFPI applauds Mayor Gray for making: About half of the $103 million in local expenditure reductions in the FY 2013 budget are due to a decision to forgo putting $50 million in operating dollars toward pay-go. DCFPI has been supportive of this policy decision to avoid more severe cuts in next year’s budget.

However, the remaining $53 million in local expenditure cuts disproportionately impact programs that help keep families stable, both in terms of health and housing. About half of the $53 million comes from a $23 million reduction to DC’s Healthcare Alliance. DCFPI will have more in-depth analysis of this proposal in coming weeks. In addition, several reductions in federal funding that were not replaced with local funds on initial glance seem to fall heavily in health and human services, particularly housing for homeless residents.

The FY 2013 revenue proposals do not include tax rate changes, but Mayor Gray’s budget for next year does raise $70 million through increased traffic fines, expanded sales hours for alcohol and reducing an expected inflation adjustment that impacts income and property taxes. The reduction—which would index inflation only from the past year rather than for the full five years since they were frozen—would mean residents would pay more in taxes than if the scheduled five-year inflation adjustment had gone into effect.

Revenue

The mayor’s proposed budget includes $70 million in new revenue. Although the mayor’s budget documents state there are no new taxes or fees, the four revenue options will lead to increased payments to DC government and limit the need for cuts in services. The revenue comes from four sources:

$28.2 million comes from enhanced collection of existing taxes and fees. This includes a more vigorous collection of sales taxes and application of the vacant property tax.

• $24.8 million comes from new traffic enforcement penalties

$5.3 million comes from expanding the sales hours stores can sell alcohol

$12 million comes in a reduction in a legally required inflation adjustment for the standard deduction, personal exemption and homestead deduction. Instead of adjusting over a five year period, from when these levels were frozen, the adjustment would only occur for the last year.

Cuts

The Mayor’s budget also contains close to $53 million in local funding cuts, most of which would fall on human services and other programs that help low and moderate income families. This area of the budget has been hit hard during the last three years as numerous budget gap closings have relied heavily on cuts to these areas. Some of the programs that have been hit hard in this proposed budget include:

HEALTH CARE COVERAGE FOR LOW NCOME RESIDENTS The Mayor’s FY 2013 budget includes a $23 million reduction to DC’s Healthcare Alliance, which would limit benefits to primary and preventive care and not cover hospitalization. There is also an $8 million reduction to Medicaid from reduced Medicaid reimbursement rates for certain services. The Department of Health Care Finance must get a state plan amendment approved before this can take effect.

AFFORDABLE HOUSING Last year, Mayor Gray cut $18 million from the Housing Production Trust Fund — DC’s main source for affordable housing construction and renovation — to maintain funding for the local rent supplement program. This year, the trust fund will take an additional $2 million hit, for a total of a $20 million cut, the second year in a row the trust fund has faced significant funding reductions. This cut means that little progress will be made in building back up trust fund resources that can help DC build and renovate affordable housing in the District

HOMELESS SERVICES The budget includes a $7 million shortfall for homeless services, due to depletion of some federal funds that had been carried over from prior years. As proposed, the budget does not provide adequate funding to operate the shelter for homeless families at DC General, or to provide sufficient transitional housing subsidies to move families out of shelter. The Mayor’s “wish list” would use the first $7 million in additional revenue to restore this

CASH ASSISTANCE FOR FAMILIES WITH CHILDREN The proposed budget keeps in place steep cuts to income assistance for families that were adopted in last year’s budget and will go into effect in October 2012. Cash assistance benefits for 6,200 families who have received TANF assistance for more than 60 months — including 12,000 children — would be reduced to $257 per month for a family of three. While the Department of Human Services is implementing a promising re-design of its welfare-to-work services, city officials acknowledge that many families will see benefit cuts before being enrolled in the new program. It is not clear how these families, many of whom face low literacy and other barriers to work, will manage to make ends meet.


Funding Priority List

Mayor Gray included a funding wish list as part of his proposal, but this money is not currently available. According to the proposal, the programs would be funded in hierarchical order if the District experienced an uptick in revenue over the fiscal year. Many of the programs that would be restored first are services for low- and moderate-income families. The list, in order:

1. $7 million for Homeless Services loss of federal funding
2. $14.7 million for the Temporary Assistance for Needy Families (TANF) Employment Program
3. $23 million for Healthcare Alliance restoration
4. $20 million for Housing Production Trust Fund
5. $2.6 million for Victim Services
6. $1.1 million to repeal tax on out-of-state bonds 7. $8.6 million to Office of State Superintendent for infant and toddler services
8. $5 million for OSSE special education
9. $1.6 to Department of Human Services
10. $2.9 million to Housing Production Assistance Program
11. $1.9 million for mental health initiatives
12. $10 million for small business property tax relief

DCFPI will be working over the next few weeks to issue more detailed analyses of overall changes made in the FY 2013 budget, on both the revenue side and the budget cuts side. Please check our website, www.dcfpi.org, next week for more details.

2 Responses to “Gray Decreases Need for Cuts By Putting Stop to Pay-Go But Health and Housing Still Bear Burden of Reductions in Fiscal Year 2013 Proposed Budget”

  1. [...] | Mayor Gray release his proposed 2013 budget on Friday. The DC Fiscal Policy Institute analyzes the budget and identifies cuts that “disproportionately impact programs that help keep families [...]

  2. [...] I'm still digesting the $6 billion, no-new-taxes budget that Mayor Vince Gray dropped on Friday. The first headline grabbers were attempts to raise revenue: Extended hours for alcohol sales, new automatic speeding cameras, a centralized system to make sure you've paid your taxes and fines, and more performance parking. Then came the cuts: Healthcare for undocumented immigrants, the Housing Production Trust Fund, and locally-funded welfare programs. [...]