A “10 Percent Savings” That Might Be Costly

The winter holiday season and New Year is approaching rapidly, but DC’s financial outlook for 2010 is nothing to celebrate.  In anticipation, Mayor Fenty already is telling government agencies to brace for a difficult year, budget-wise. 

An October 23rd letter from City Administrator Neil Albert to all agency directors projects an expected shortfall of $300 million for fiscal year 2011. The drop is due to lagging tax collections, expiring federal stimulus funds, and the drying up of many one-time funding sources.  

The letter asks agencies to: 

  • “Dig Deeply.” Each DC agency is expected to reduce their FY 2011 budget by 10 percent from their current level when they submit their request to the Mayor in early December.
  • Look for “expense reductions” or “revenue-generating” ideas.  Mayor Fenty has vowed not to raise taxes, which severely limits how the city can create new sources of revenue in these cash-strapped times.  Some agencies might choose to raise fees for certain services, but the ability to do so varies given the agency mission. Departments such as public works or transportation charge user fees more than human services, for example.

After more than a year of budget cutting and scouring for change in the proverbial sofa, the ability to scale back expenses through greater efficiency gets harder and harder.  The impact of budget cuts is being felt by almost every resident.  For example, DC public libraries and motor vehicles offices have cut hours. For the more vulnerable, homeless services may be curtailed after hypothermia season.  There’s probably a lot more you’ll notice in upcoming months.

It’s important to note that City Administrator Albert’s 10 percent mandate is only a starting point. Not every agency’s budget will be cut by 10 percent.  Instead, this exercise will give Mayor Fenty a range of options for scaling back.  The big questions on balancing the budget will not be made until early next year.  (Click here for information on the DC budget timeline.)

These questions include:

  • What programs will the Mayor pledge to protect?
  • Will he try again to use the rainy day fund?  (The Council rejected this proposal last summer.)
  • Will he find ways to raise revenues ‘ while keeping the pledge to not raise taxes?

There’s also the possibility ‘ likelihood even ‘ that the budget outlook will change.  New revenue forecasts could reveal an even deeper hole.  On the positive side, some are calling for a new round of federal stimulus aid to states, since many are still in dire financial straits.

This means there are good reasons to stay tuned over the coming months.  And for letting the Mayor and DC Council know about any services that you think are important to protect.