GUEST POST: DC’s budget hole, Part I by Elissa Silverman, DC Fiscal Policy Institute
FYI- Ward 8 has the highest unemployment rate in the city according to estimates from the DC Department of Employment Services. More than one out of four Ward 8 residents, 28%, are jobless. Many of our neighbors are looking to help from the DC government as they weather these tough times….We need to think about that as we take a butcher knife to the budget.
Wednesday, February 24th, 2010
by Elissa Silverman
April is known as the cruelest month, but February is turning out to be quite a doozy in the District—and that’s not even counting Snowmaggedon. We’re referring to this month’s news about the fiscal year 2010 and 2011 budgets, of course. Now more than ever, DC leaders need to take a tactical, balanced approach to funding our government.
Here’s why. Last Friday, DC Councilmembers heard about a $200 million shortfall for the current fiscal year, and Fenty administration plans to deal with it. In the next day or so, city leaders likely will hear more bad news from Chief Financial Officer Natwar Gandhi when he releases his quarterly revenue forecast. If conventional wisdom holds true, this will mean less money for the 2011 budget and the services and programs that rely on those dollars.
First things first, however: How did the city get $200 million in the hole this year?
Between $165 million and $185 million is overspending, according to City Administrator Neil Albert. (About $17 million is due to a revenue shortfall announced in December.) Several councilmembers asked whether these expenses could have been anticipated or reduced —a fair question, indeed.
In some cases the answer is pretty clearly “No.” About half of the projected $80 million deficit in human services is due to increased outlays for health care and unemployment compensation. Albert called it “recession-driven growth.” In other words, as DC residents have lost jobs and income like many Americans have during the Great Recession, they have turned to the government for help to meet their basic needs.
Yet other areas facing budget pressures are frustratingly familiar. Spending on special education — including tuition payments for DC students placed in private schools and related transportation — is running $43 million to $53 million over budget. This wasn’t recession-driven growth. Schooling and transporting DC’s special ed students are perennial budget busters. A detailed chart of the spending pressures is available here. The city’s failure to put processes in place to receive our full federal Medicaid reimbursement ( an expected $21 million this year) has been a longtime problem as well.
Some councilmembers asked if the so-called “spending pressures” resulted from unrealistic budgeting. This is where the mayor and council, as well as DC residents, need to consider our priorities and make tactical decisions. During a recession, government resources shrink due to declining tax revenue at the same time demand for some programs and services increases. Greater scrutiny will be needed in the upcoming budget round to make sure we authorize a level of services that we can afford —and raise revenues if needed to fund the services we want.
So what is Mayor Fenty’s plan? Albert presented a three-pronged approach to the $200 million shortfall: He said the city will restructure debt, which will save about $50 million; take about $100 million from dedicated revenues and put them toward the general fund; and reduce spending in about 40 agencies to a total of $99.4 million.
Albert said this “high level plan” is subject to changes, but basically the $99 million is made up of unfilled positions and unspent dollars. We’ll talk about solutions to the shortfall furtherin the blog tomorrow, so stay tuned for Part II.
DC Fiscal Policy Institute
820 First Street, NE
Suite 460
Washington, DC 20002
Phone: (202) 408-1080
Fax: (202) 408-8173
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