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Press Release: DC Spending Up Only 3 Percent Since 1990: But Funding for Services to Low-income Residents Has Fallen Sharply

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Contrary to widespread perceptions, the portion of the DC budget supported by local revenues has risen only 3 percent since 1990 after adjusting for inflation, according to a new report from the DC Fiscal Policy Institute.  The DC budget grew far more slowly than the District’s economy during this period ‘ and now consumes a smaller share of the city’s economic resources.

The report’s examination of long-term budget trends also finds that a number of agencies and programs have been cut deeply since 1990.  Especially hard hit have been services for low-income and other vulnerable populations, in areas such as housing, human services, and employment services.

“Our analysis shows that local government spending in DC has been fairly well restrained since 1990,” said Ed Lazere, executive director of the DC Fiscal Policy Institute. “On the other hand, the impacts of efforts to limit spending are deeply troubling.  Many of the programs aimed at the District’s neediest residents have been cut severely.”

Spending Cuts Concentrated in Programs for Vulnerable Populations

Comparing fiscal year 2004 funding in the “local funds” budget (the budget supported by local taxes and fees) with the 1990 level adjusted for inflation reveals large cuts in services for low-income and vulnerable residents:

  • Employment services funding has declined 80 percent.  (While federal funding has increased, total funding for employment services has fallen 20 percent.)
  • Affordable housing funding has declined 54 percent.
  • Human services funding, such as for child care, homelessness, emergency assistance, and welfare, has declined 33 percent.
  • Mental health funding has declined 21 percent.

Significant cuts have occurred in other areas as well.  Funding for the University of the District of Columbia has declined 57 percent, for example, and Parks and Recreation Department funding has declined 26 percent.

Large Increases in Medicaid, Education, Child Welfare, City Management

While local spending has grown substantially in a few agencies over the 1990-2004 period, “many of the big spending increases have come either in areas that are largely beyond the District’s control ‘ like Medicaid, which has grown in every state ‘ or as part of efforts to address highly dysfunctional systems in areas such as child welfare,” Lazere said.

Medicaid funding has risen 72 percent since 1990.  The report notes that rising Medicaid costs are a national phenomenon and that the District’s Medicaid program grew more slowly than that of all but four states during the 1990s.

K-12 education funding has risen 23 percent, primarily because of large increases in the number of special education students (and the per-pupil cost of educating them).

Child welfare funding has risen 67 percent.  This largely reflects efforts to address failings in the child welfare system, which was under a federal receivership from 1997 to 2001.

Three agencies that support basic government functions ‘ the Chief Financial Office, the Office of the Inspector General, and the Corporation Counsel ‘ have risen 34 percent.   Most of these increases occurred after 1996 and appear to reflect efforts following DC’s fiscal crisis of the mid-1990s to improve management of the DC government.

District’s Budget Has Grown Slower than Its Economy

The local funds budget rose substantially during the economic boom of the late 1990s, creating fears that spending was reaching excessive levels.  “But these increases followed large cuts earlier in the decade caused by DC’s fiscal crisis,” Lazere said.  “Moreover, spending has risen little in inflation-adjusted terms since the economic downturn started in 2001.”

For 2004, the local funds budget is $3.6 billion, or 3.1 percent higher after adjusting for inflation than the 1990 budget, which totaled $3.49 billion in 2004 dollars.

By contrast, the District’s economy (expressed in terms of personal income) grew 15 percent during this period, after adjusting for inflation.  As a result, the local funds budget fell from 15.2 percent of the economy to 13.7 percent.  The fiscal year 2004 budget is $400 million lower than if spending had grown just at the same rate as income since 1990.

“The notion that runaway spending on social services is at the core of DC’s budget problems is misguided,” Lazere said.  “The reality is that low-income residents already have suffered from substantial cuts in the name of fiscal discipline.”

The DCFPI report, “The Untold Story of the DC Budget:  Overall Spending Has Grown Only Modestly Since 1990 but Support for Services to Low-income Residents Has Fallen Sharply