Mayor’s Proposed FY 2012 Budget Takes a Balanced Approach on Revenue, but Not on Budget Cuts: Budget Cuts Disproportionately Fall on Programs that Help Keep Families Stable and Healthy

April 1st, 2011 |

Mayor Gray took an important step toward a balanced approach to next year’s budget by proposing several sensible revenue raising proposals that help our growing city move forward. Yet the budget the Mayor presented to the DC Council today takes a less balanced approach when it comes to cuts, with a disproportionate amount of money being taken out of programs that help keep families stable and healthy.

We commend Mayor Gray for his revenue-raising proposals, which will help pay for the wide array of services DC provides — from teachers to police officers to housing for homeless families – to support  our dynamic city. Due to the devastating impact of the Great Recession, DC tax collections are hundreds of millions lower than they were only three years ago. Mayor Gray clearly understood a cuts-only approach would have jeopardized the District’s ability to invest in a prosperous future by making further reductions in areas that have already suffered through three years of budget cutting.

While we applaud Mayor Gray for a more balanced approach to revenue, we believe the same balance should apply on the cuts side as well.  Two of every three dollars cut from the budget would affect programs that serve low-income and vulnerable DC residents, even though these programs only make up about one quarter of the budget.  By reducing services that keep families stable – such as mental health services and eviction prevention — these cuts would undermine efforts to improve public education outcomes, reduced crime, and tackle unemployment. The DC Council should work to restore money for these important efforts, including proposals to further increase revenues if necessary.

Revenue

The mayor’s proposed budget includes $135 million in new revenue, including a number of tax proposals that represent sound public policy and mirror measures taken in many other states. The major revenue proposals include closing a large corporate tax shelter, broadening the sales tax to cover additional services, an increase in the off-street parking tax from 12 to 18 percent, and a new tax rate for high-income residents.

The new income tax bracket already has been the subject of much discussion, but it is important to note that it is a modest measure with limited impact on the District’s highest-earning residents — who represent about 5 percent of all DC households.  The new 8.9 percent rate, compared with the current top rate of 8.5 percent, would apply only to income over $200,000. This means that for an individual earning exactly $200,000, the change in income tax is zero.  Income tax for someone earning $300,000 would increase by $400, or one-eighth of one percent of income.  At $500,000, the increase would equal one-fourth of one percent of income.

Income $200,000 $250,000 $300,000 $500,000
Marginal tax increase $0 $200 $400 $1,200
     as percent of income 0% 0.08% 0.13% 0.24%

Budget Cuts

The Mayor’s budget also contains close to $190 million in cuts, most of which would fall on human services and other low-income programs.  Human services programs make up roughly 26 percent of the locally funded budget, yet they account for 67 percent of the cuts, or just over $130 million.  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:

  • Homeless services.  Homeless services funding is so strained already that the District will stop taking in new families with children at the DC General shelter starting today (April 1st),which means that many families with no safe alternative place to go will be turned away. The FY 2012 budget makes even deeper cuts to the already strained homeless services budget.
  • Cash assistance for families with children. The Mayor proposed further cuts, $8 million, to nearly 7,000 families with children participating in the Temporary Assistance for Needy Families program (TANF) – those who have received assistance for more than 60 months. The proposed cut would reduce monthly cash assistance – which for most TANF families is expected to cover housing, transportation, clothing, and other basic needs – to just $257 per month for a family of three.  It is not clear how these families, many of whom face low literacy and other barriers to work, will manage to make ends meet.
  • Affordable Housing.  The Mayor proposed taking $18 million in new revenue from the Housing Production Trust Fund (HPTF) — DC’s main source for affordable housing construction and renovation. This cut means that no progress will be made in building back up HPTF resources that can help it move forward with the more than $75 million of affordable housing projects stuck in DC’s development pipeline. 
  • Health care coverage for low-income DC residents.  The Mayor’s budget proposes to save $12 million in DC’s locally funded health care insurance program by limiting program eligibility and requiring more face-to-face re-certifications.  Not enough details are available at the moment to determine what the impact of those changes will be. 

DCFPI will be working over the next few weeks to issue more detailed analyses of overall changes made in the FY 2012 budget, on both the revenue side and the budget cuts side.  Please check our website, www.dcfpi.org, next week for more details.

10 Responses to “Mayor’s Proposed FY 2012 Budget Takes a Balanced Approach on Revenue, but Not on Budget Cuts: Budget Cuts Disproportionately Fall on Programs that Help Keep Families Stable and Healthy”

  1. Thanks Jenny for such a quick and incisive analysis!
    Yes, even this proposal for a very modest tax increase for wealthy residents is welcome news, the first such tax increase in many years. If only we had progressive DC taxes in the 1990s and targeted the revenue to low income programs, the poverty rate would now be much lower. Instead we got Tax Parity, tax cuts for the rich, and austerity budgets increasing the income gap and poverty rate. And as you emphasize the recommended cuts are very hurtful to those most in need. We must challenge this proposed budget and counter with a truly just tax and budget program. Go to the website provided and you will find the DC Statehood Green Party’s proposals: http://www.gp.org/press/pr-state.php?ID=407 We need a comprehensive approach including progressive tax restructuring, curbing corporate welfare including unjustified tax abatements and subsidies, campaigning for PILOTS. And how about a DC Municipal Bank?

  2. [...] the spending cuts are egregiously unbalanced. As the DC Fiscal Policy Institute reports, human services programs would lose $130 million — more than two and a half times their share [...]

  3. [...] – According to Women’s Foundation Grantee Partner the DC Fiscal Policy Institute, D.C. Mayor Vincent Gray’s budget for the 2012 fiscal year proposes that “a disproportionate amount of money [be] taken out of programs that help keep families stable and healthy.”  Click here to read more. [...]

  4. Dan Maceda says:

    I agree with the revenue increases and think a little higher would be better. I think the District needs to examine its’ real estate tax exemptions with the view to reducing the number of properties tax exempt.

  5. [...] | The DC Fiscal Policy Institute breaks down Mayor Gray’s budget and finds that “budget cuts disproportionately fall on programs that help keep families [...]

  6. [...] Gray proposed $130 million in revenue increases, but still slashed housing programs, small business technical assistance, and other programs that benefit low and [...]

  7. [...] came out last Friday. We’re still working to understand all that it means, but we know that the cuts are bad. Two out of every three dollars cut in the Mayor’s budget come from programs that support DC [...]

  8. [...] came out last Friday. We’re still working to understand all that it means, but we know that the cuts are bad. Two out of every three dollars cut in the Mayor’s budget come from programs that support DC [...]

  9. [...] make up roughly a quarter of the local budget, they are taking 67% of the Mayor’s proposed cuts. Early analysis suggests that homeless services, affordable housing, help for families in crisis, disability [...]

  10. [...] recreating the wheel, we need to build upon systems that already exist, particularly considering DC’s $322M budget crisis. Moving forward, we’re going to have several breakout conversations around technological [...]