The District is facing its first major budget shortfall since FY 2003, joining 46 other states that have budget gaps this fiscal year or projected shortfalls for FY 2010. DC’s budget troubles stem from declining revenues, particularly in its business income and property taxes and individual income taxes, which are related to the national economic downturn. DC’s expected revenue collections for FY 2009 have fallen by nearly $400 million in recent months, and the FY 2010 shortfall is $800 million. The FY 2010 shortfall equals roughly 14 percent of the local budget – making it the largest fiscal crisis since the mid-1990s.
While DC’s problems are severe, there are resources that will help the city close the budget gap, including a surplus from 2008 and federal stimulus funds. The current unresolved shortfall for FY 2009 and FY 2010 – the shortfall after actions taken to date to this year – totals more than $900 million. Stimulus funds and other available resources will cover only about half of what is needed to close these shortfalls. Stimulus funds and other resources to address the gap are roughly $500 million, but still leave a budget gap of more than $400 million.
This report describes the extent of DC’s budget shortfall, the resources that can be used to address it, and factors that could lead to future budget gaps.
 Elizabeth McNicol and Iris J. Lav, “State Budget Troubles Worsen,” Center on Budget and Policy Priorities, Updated February 10, 2009, http://www.cbpp.org/9-8-08sfp.htm.