Testimony of Ed Lazere, Executive Director, on the FY 2011 Second Revised Budget Request Emergency Declaration Resolution of 2011, District of Columbia Committee of the Whole

Chairman Brown and other members of the DC Council, thank you for the opportunity to speak today.  My name is Ed Lazere, and I am the executive director of the DC Fiscal Policy Institute.  DCFPI engages in research and public education on the fiscal and economic health of the District of Columbia, with a particular emphasis on policies that affect low- and moderate-income residents.

The DC Fiscal Policy Institute largely supports Mayor Gray’s revised budget plan, which has been made possible by an upward revision in the District’s revenue forecast for fiscal year 2011.  The proposal would use additional revenues in fiscal year 2011 to address a number of current-year spending pressures and to fund a number of items in fiscal year 2012 from a priority list in the approved fiscal year 2012 budget. The Mayor’s plan, which largely follows the priority list adopted by the Council in June, is a fiscally responsible approach to address the District’s current-year budget needs and to support a number of important services in fiscal year 2012 that were not covered by the approved 2012 budget.

The recent revenue forecast also identified an increase in revenues for the next fiscal year, FY 2012, which will allow further items from the priority list to be funded.

At the same time, the upward revision to the revenue forecast is not sufficient to fund all of the items on the priority list, which means that a number of programs will continue to face cuts in 2012 unless subsequent revenue forecasts show even further revenue increases.  Roughly $35 million from the priorities list, which mostly would serve to restore budget cuts in the adopted fiscal year 2012 budget, would remain unfunded.  Because a provision of the fiscal year 2012 Budget Request Act requires half of future revenues in fiscal year 2012 be set aside in as savings in the city’s working capital fund, revenues will have to grow an additional $70 million for all of these priority list items to be funded.  The unfunded items include (the following. (They are not listed in the same order as in the 2012 budget):

  • The Housing First program, which provides permanent supportive housing to chronically homeless residents ($1.6 million).
  • DC’s Homeless Services Continuum, which has been strained in recent years by a rapid increase in homelessness among families with children ($2.5 million).
  • Interim Disability Assistance, which under current funding levels will have to terminate cash assistance in October for a number of residents with disabilities who are waiting for federal disability benefits to be approved ($3 million).
  • Housing Production Trust Fund.   A recession-related drop in deed tax collections, the source of funding for the Trust Fund, left the District unable to support tenant purchase efforts in recent years and contributed to a large backlog of affordable housing construction or rehab projects ($18 million).
  • Children’s Mental Health Services, which still face a cut of roughly $1 million ($900,000).
  • DC Public Libraries, where additional funding is needed for book acquisitions and to keep the central MLK library open on Sundays ($1.7 million).
  • Child Care, which has faced reductions of more than one-fifth during the recession ($2 million).

In short, while the increase in revenues for 2011 and 2012 is promising, it still will leave in place a number of reductions in services.  This suggests that the District should stick with plans adopted in the 2012 budget to make restoration of these services the next priority should revenues grow further.

In particular, the Council should not adjust the restorations list to re-instate a tax exemption for current investments in out-of-state bonds, as some Council members have suggested.  As shown in the attached fact sheet, DC residents with out-of-state bonds generally are not retirees and are not low income. Moreover, the impact of eliminating the tax break would be relatively modest — under 1 percent of income for most taxpayers.

A poll conducted by the DC Fiscal Policy Institute during this year’s budget season found that DC residents strongly support using budget resources to maintain services.  Residents strongly opposed many of the cuts in the FY 2012 budget, and they supported modest revenue increases to help maintain services at current levels.

Thank you again for the opportunity to testify.