New Estimates Show Widening Gaps in District’s Budget

The District is facing a total budget shortfall of more than $800 million in FY 2010 and  FY 2011, according to new estimates from DC’s Chief Financial Officer.  Falling tax revenue, expiring stimulus funding, and agency “spending pressures” are combining to make this another tough budget year for the city.  Here are the challenges DC is facing, by the numbers.  

Total shortfall for FY 2010: $223 million

    According to the CFO’s December revenue forecast, the District faces a revenue shortfall of $17 million, meaning that DC will collect $17 million less in taxes than it projected this year. 

    In addition to the revenue shortfall, nearly a dozen District agencies are reporting that they will exceed their budgets in FY 2010.  These “spending pressures” are estimated to total $206 million and reflect both an increased demand for services and expected savings that have not been realized.  Some of these spending pressures are quite large, as in the case of DC Public Schools, where spending on special education tuition and transportation is predicted to exceed its budget by at least $43 million. 

   The large amount of spending pressures for FY 2010 raises the question about whether the FY 2010 budget reflected unrealistic assumptions about agencies’ ability to operate with shrinking budgets.  In the case of the Fire and Emergency Medical Services Department, the freezing of approximately 110 positions contributed to the department overspending its overtime budget by $5 million.  The funding allotted for some agencies in the FY 2010 budget, such as the Department of Youth Rehabilitation Services, is the same amount that was budgeted in FY 2008.     

Total shortfall for FY 2011 $514 million

    The picture doesn’t get any better in FY 2011.  The CFO’s December revenue forecast predicted a shortfall of $104 million in District revenues in FY 2011.  Much of the stimulus funding that DC used to help close its budget last year will be expiring at the end of FY 2010. 

    At the same time that revenues are falling, budget needs are increasing.  The difference between the amount of revenue the District expects to collect and the amount that it will need to continue services at their current level equals a $514 million shortfall for FY 2011.  Much of this shortfall can be attributed to expiring funding stimulus funding, spending pressures from FY 2010, and increased costs for special education tuition and transportation.  President Obama’s budget could provide DC with more than $100 million to help narrow this gap.

Closing the Budget Gap

    To close a gap this large, the Mayor and Council should pursue a balanced approach that includes revenue increases and the use of reserves, in addition to budget cuts.  The Mayor already has ordered $99 million in spending cuts for FY 2010.  These cuts impact agencies like the Department of Human Services that already have experienced significant cuts and are struggling to meet the rising demand for their services.  Without identifying additional resources, it will be impossible to maintain support for education, health care, and other services residents rely upon.