A Budget that Made Lemonade Out of Lemons: DC’s Final Budget Protects Many Services — and Even Expands Some — Without Any Regressive Tax Increases

Going into the FY 2010 budget season, the District faced a revenue shortfall of $800 million or 14 percent of the local budget. Two months later, DC has a balanced budget that largely protects services and even includes some modest increases for affordable housing and other low-income programs.

It’s a pretty amazing outcome, and both the Mayor and the Council deserve credit for balancing the District’s budget in difficult economic times.

The Mayor proposed a budget that used a combination of federal stimulus funding, reductions in hundreds of government positions, and revenue increases (though some of them, unfortunately, were regressive proposals that would have hit low income families hardest)

As we mentioned in our last post, the Council removed many of the rough edges of the Mayor’s proposal and added some nice touches. On the revenue side, the Council eliminated a proposed streetlight maintenance fee and maintained cost-of-living increases for the standard deduction and personal exemption. (The COLA for the homestead deduction was restored beginning in FY 2011.) On the program side, the Council found a way to give a cost-of-living increase to cash assistance benefits for needy families with children, to eliminate the waitlist for adult literacy services and expand adult job training programs, and to create 180 units of affordable housing through the Local Rent Supplement Program.

However, the news isn’t all good. DC’s affordable housing programs have taken a significant hit, even with the welcome boost to LRSP, losing nearly one third of their local resources since the start of FY 2009. The decline includes cuts to the first-time homebuyer program and rapidly falling resources for the Housing Production Trust Fund – DC’s primary source for affordable housing construction and rehabilitation.

The Council also left several key education issues unresolved, including how charter school facilities funding will be determined after FY 2010. The Council also set $27.5 million of DC Public School funds in an escrow account because it believed the DCPS enrollment projection is unrealistically high. DCPS would have access to the funds in the fall, if enrollment audits show they need it. But Chancellor Rhee says that would come too late – and that she would have to make cuts now to deal with the restriction on those funds.

Look for updates to our Budget Toolkit summaries next week to find out how the Council’s final budget vote will affect key programs.

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