Didn’t get your Washington Post delivered Saturday morning due to Snowmaggedon?

We don’t want you to miss the Post’s coverage of our new report, “Nowhere to Go: As DC Housing Costs Rise, Residents Are Left With Fewer Affordable Housing Options.”

Read the Washington Post coverage of the report.

Our review of Census Bureau data shows that since 2000, rents have grown faster in the District of Columbia than in most major cities and have outpaced the incomes of most DC households. Combined with sharply rising home values and the conversion of many rental units to condominiums, a growing number of DC residents are faced with housing affordability problems.

According to the report:

• DC’s low-cost rental stock has shrunk by more than one-third since 2000. The number of rental units with rent and utility costs of $750 or less fell from 69,000 in 2000 to 45,000 in 2007.
• The number of DC homes valued at $250,000 or less fell from 58,000 to 15,000 between 2000 and 2007.
• Nearly 100,000 DC households–or two of five–spent more than 30 percent of income on housing in 2007, exceeding the federal housing affordability standard.

Read the entire report.

Like the U.S. Postal Service, neither rain nor snow, heat nor gloom of night, Snowpocalypse nor Snowmaggedon, DCFPI always has our eye on the DC budget…..

Here’s what we’re looking at the snowy week of February 8 to 12

Monday, Feb. 8
• 10 am: Roundtable on United Medical Center (Canceled Due To Weather),
Room 500

Thursday, Feb. 11
•10am: Hearing on B18-572, “Disposition of Property Formerly Designated as Federal Reservations 129, 130 and 299 Approval Act of 2009”
Committee on the Environment and Government Operations, Room 412

This bill will approve the disposition of real property owned by the District of Columbia and formerly designated as federal reservations 129, 130, and 299 to 1333 M Street, SE, LLC. http://www.capitolriverfront.org/go/1333-m-st

•2 pm: Hearing on three bills in the Committee on Economic Development

B18-050, “Mixed-Income Housing Amendment Act of 2009”
This bill would amend an Act authorizing the sale of certain real estate in the District of Columbia no longer required for public purposes to provide for an affordable housing requirement as part of the disposition of certain real property; and to amend the Office of Property Management Establishment Act of 1998 to require the Office of Property Management to secure an affordable housing requirement as part of certain disposition of real property.

B18-250, “Senior Housing Modernization Grant Fund Act of 2009”
This bill would establish a Senior Citizens Housing Modernization Grant Fund and to authorize the Deputy Mayor for Economic Development to make grants from the Fund to qualified senior citizens who reside in an area affected by a planned unit development for repairs and improvements to their single family dwellings.

B18-399, “Pennsylvania Avenue-Minnesota Avenue SE Eminent Domain Authorization Act of 2009”
This bill would authorize the Mayor to exercise eminent domain authority to acquire property in the area of the intersection of Pennsylvania Avenue and Minnesota Avenue, S.E.

According to the bill: ….The Pennsylvania Avenue-Minnesota Avenue S.E. Intersection Area is afflicted with buildings and improvements that are obsolete, dilapidated, and deteriorated to the point of being nuisances to the community, which also contribute to juvenile delinquency, poverty, and crime and have impeded the provision or expansion of safe,sanitary neighborhoods with thriving local businesses….

Online websites such as Priceline, Expedia and Travelocity offer bargains for travelers. But they’re not such a good deal for the District and other hospitality-focused cities and states. That’s because when you reserve a hotel room through these online travel companies, they avoid paying a share of the state and local taxes sales taxes they owe on the rooms they book, thereby depriving local jurisdictions of this revenue.

The District has taken action to stop this unfair practice. The DC Council took a step this week to join other cities and states eager to collect their share of hotel taxes from online travel companies. With the recession continuing to batter the city’s finances, this move came none too soon.

How does this tax avoidance scheme work? Let’s say you’re willing to spend $200 a night. If you book a room directly with a hotel, you’ll pay the local hotel tax on $200. But that’s not true for the online travel companies. Since they pay a discounted rate for the room—let’s say they pay $150 but charge you $200—they only pay tax on three-quarters of the total room rate. They pocket the $50 difference as a broker’s fee and do not pay taxes on it.

Many states and cities argue that the tax should apply to the online retail price of the room, and that the online companies owe tax on the so-called “broker’s fee.” New York, for example, has passed laws to make clear that taxes are due on the full room charge paid by the consumer. Some others are suing the online travel sites for back taxes.

The Fenty Administration has not taken legal action, but this week the DC Council took an important step to make sure we at least collect full hotel taxes going forward. A bill to do that was introduced by Council members Michael Brown (I-At-Large), Jack Evans (D-Ward 2), and Kwame Brown (D-At-Large) on February 2, and six other members co-sponsored the legislation.

This is a good step for the District. DC’s heavy reliance on tourism makes it especially important that we collect all the hotel taxes due to us.

Like savvy shoppers, DC needs to get the best hotel deal it can.

Join DCFPI at

Creating a Stronger Workforce in the District: Helping More Families Move from Welfare to Work

Forum sponsored by the Fair Budget Coalition
Friday, February 5, 9:30 – 11:00 AM
John A. Wilson Building, 1st Floor

DC’s Temporary Assistance to Needy Families (TANF) program provides cash assistance, job training, and supportive services to 16,000 low-income families with children, including one in three District children. However, too often families don’t receive the assistance they need to transition successfully from welfare to work. Learn more about the opportunities and barriers faced by low-income families in DC, and what can be done during the current recession to help more families successfully prepare to enter the workforce.

Featured Speakers:

• Yaida Ford, Legal Aid Society of the District of Columbia
• Katie Kerstetter, DC Fiscal Policy Institute
• Halona Agouda, Wider Opportunities for Women
• Jeff Carter, DC LEARNs
• Marina Streznewski, DC Jobs Council
• Emily Appel, Capital Area Asset Builders

Here’s what’s on tap for the week of February 1 to 5

Tuesday, Feb. 2: DC Council legislative session, Room 500, 10 am

Bills of Interest

• Real Property Tax Reform Emergency Amendment Act of 2010
• Woodridge Neighborhood Development Tax Relief Emergency Act of 2010

Friday, Feb. 5: Committee of the Whole Briefing on the FY 2009 Comprehensive Annual Financial Report (CAFR), Room 500, 10 am

A look ahead…..

Monday, Feb. 8: Roundtable on United Medical Center, Room 500, 10 am

Nothing says the start of budget season like the release of the schedule for the agency performance oversight hearings and budget oversight hearings from the Council.  The hearings are an excellent opportunity for the public to raise questions, concerns, or suggestions for a particular program or agency.  They also provide a chance for the public to learn more about how an agency’s budget will be spent and what the agency plans to focus on in the coming year.

The full list of performance oversight hearings can be found here, and the full list of budget oversight hearings can be found here.  The Council’s website will list the schedules starting on Friday.  A word of caution: these schedules often change, so please check the Council’s website for any updates or changes to hearing dates.

Below are some highlights from the budget schedule:

February 17^th to March 19^th — Agency Performance Oversight Hearings

April 1^st — Mayor Fenty releases his proposed budget

April 12^th — Committee of the Whole briefing on the Mayor’s budget

April 13^th to May 7^th — Agency Budget Oversight Hearings

May 11^th to May 13^th — Committee Mark-Ups

May 25^th — Council votes on the FY 2011 budget

More than 600,000 people on Tuesday made it known that they want to raise taxes to preserve critical government services. No, it wasn’t in DC, but we hope that the District’s elected officials take notice.

The voters of Oregon approved by referendum two bills that endorsed a balanced approach to budgeting. Measure 66 raised income taxes on families with incomes above $250,000, and individuals with incomes above $150,000. Measure 67 increased taxes on certain corporations. The bills directed legislators to put the money toward education, health-care, and other important public assets.

The vote demonstrated that many Americans understand the need to raise revenue in these difficult economic times and disagree with an all-cuts, slash-and-burn method to make state and local government work.
We hope Mayor Fenty and DC Councilmembers take note of what happened in Oregon. The District also faces a challenging budget for next year, and we believe many voters in our city agree with our West Coast brethren.

DCFPI supports similar measures to balance the District’s budget. A bill is currently being considered by the DC Council to raise income taxes on households earning above $500,000, and DCFPI supports other revenue-raising measures as well. (If you want to learn more, join DCFPI and the Fair Budget Coalition at a forum tomorrow at 9:30 in Room 120 at the John A. Wilson Building.)

A balanced approach to budgeting involves new revenue, not just cuts. Oregon voters recognized that deep cuts would diminish the quality of life in the Pacific Northwest and slow down recovery from the Great Recession. That’s true for DC as well.

Next Thursday and Friday mornings, January 28 and 29, national and local budget experts will cover what you need to know about DC’s budget in two important forums. What is the process to fund this $10 billion government? Are other states tapping into sources of revenue we aren’t?

Budget 101:
Everything You Want To Know (And We Want You To Ask!)

Thursday, January 28, 9:30-11:00 AM

John A. Wilson Building (1350 Pennsylvania Avenue NW), Room 123

Learn the nuts and bolts of the DC budget process from budget experts and Wilson Building veterans.  Find out how you can get involved to protect and improve the programs you care about. DC Council staff and advocates will describe successful advocacy strategies, while DC Fiscal Policy Institute staff will break down the budget process step-by-step and highlight specific ways you can get involved. 

Speakers include:

• Kilin Boardman-Schroyer, Legislative Director, Office of Councilmember Michael A. Brown
• Jason Shedlock, Chief of Staff, Office of Councilmember Phil Mendelson
• Jennifer Mezey, Supervising Attorney, Legal Aid Society of DC

_________________________________

Budgeting With Balance:
An In-Depth Discussion of How DC Can Raise Revenue

Sponsored by the Fair Budget Coalition

Friday, January 29,  9:30 – 11:30 AM

John A. Wilson Building, 1^st Floor

What are other states doing to raise revenue in these tough times? Is there an alternative to a cuts-only approach? (Yes. Definitely.)

Even though economists say the Great Recession ended last year, the economic impact of the downturn continues to shrink government resources at precisely the time when they’re most needed. DC’s Chief Financial Officer projects a $400 million shortfall for next year. Jon Shure of the Center on Budget and Policy Priorities and several national experts will explain how leaders across the country are taking a balanced approach to this budget crisis by finding ways to add revenue. Specific topics will include use of the rainy day fund, reforming income taxes, and bringing equity to sales taxes.

Other speakers include:

• Michael Mazerov, Center on Budget and Policy Priorities
• Jeff McLynch, Institute on Taxation and Economic Policy
• Ed Lazere, DC Fiscal Policy Institute

Please RSVP to Tina Marshall at marshall@cbpp.org or 202-408-1080. These events are sponsored by the Fair Budget Coalition and the DC Fiscal Policy Institute.

The District’s unemployment rate hit another record high in December, peaking at 12.1 percent, according to new government data released Friday. That means nearly one-out-of-eight DC residents are actively looking for work.

But isn’t the recession over?

According to economists it is, but for many of our neighbors things have not gotten better. Some are having a tougher time than others. According to a new report by the Economic Policy Institute, unemployment in the District among African-Americans is three times that of whites. African American unemployment in the third quarter of 2009 was 17.6 percent, while the white unemployment rate in DC during that time was 5.7 percent. 

Disparities between men and women continue to grow as well. In the District, males were unemployed at a rate of 11.3 percent, while women were at 10.8.

These numbers remind us while the effects of the recession are widespread, some groups of residents have been hit especially hard. The new unemployment figures also show that much work needs to be done to put residents back on the road to recovery. Job training and literacy programs will be crucial to the rebound, especially in eastern parts of the city where many African-American live. Yet these programs are often on the chopping block in tough budget times. We need to think about our budget in terms of investments and what will give us the biggest returns in the future. Helping our residents–Black, White, Latino and Asian, male and female, east and west of the Anacostia River — return to work will boost us all.

Balance is defined as equilibrium, an equalizing of weights. We believe that balancing a budget should also involve a weighing of options, which means adding revenue in these difficult times.

Local governments in our region all face difficult fiscal conditions. DC’s shortfall for next year is projected at $400 million, and Virginia and Maryland estimate a deficit in the billions.

There are sensible steps all three jurisdictions can take to add revenue and help ease the pain of these challenging economic times. If you haven’t already, read about them in this Washington Post Op-Ed from the DC Fiscal Policy Institute, the Commonwealth Institute for Fiscal Policy, and the Maryland Budget and Tax Policy Institute.

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/23/AR2010012302680.html

Tuesday, Jan. 26

Committee of the Whole Meeting, 10 AM, John A. Wilson Building, Room 500, Agenda here.

Public Hearing on ”District Facilities Plan Amendment Act of 2009,” Committee on Government Operations and the Environment, 10:30 AM, John A. Wilson Building, Room 120.  

“Priority Needs in Our Community” discussion sponsored by DC Regional Council of United Way of the National Capital Area and Metropolitan Washington Council of Governments, 4-6 PM, 777 North Capitol Street NE, RSVP to DCUWCouncil@gmail.com. 

Wednesday, Jan. 27

Joint Public Hearing on “Neighborhood Preservation Amendment Act of 2009”and “Blighted Properties Abatement Reform Act of 2009,” Committee on Public Services and Consumer Affairs and Committee on Finance and Revenue, 2 PM, John A. Wilson Building, Room 412.

Thursday, Jan. 28

Budget 101: Everything You Want to Know (And We Want You to Ask!)  sponsored by DCFPI, 9:30-11 AM, John A. Wilson Building (1350 Pennsylvania Ave NW), Room 123.  Learn the nuts and bolts of the DC budget process from budget experts and Wilson Building veterans. Find out how you can get involved to protect and improve the programs you care about.  RSVP to Tina Marshall at marshall@cbpp.org or 202-408-1080.

Friday, Jan. 29

Budgeting with Balance: An In-Depth Discussion of How DC Can Raise Revenue sponsored by DCFPI and the Fair Budget Coalition, 9:30-11:30 AM, John A. Wilson Building, 1st Floor.  RSVP to Tina Marshall at marshall@cbpp.org or 202-408-1080.

Public Oversight Roundtable on “The Performance of the HIV/AIDS, Hepatitis, STD, and Tuberculosis Administration,” Committee on Health, 2 PM, John A. Wilson Building, Room 123.

Offering tax incentives to lure businesses into the District has gotten a lot of attention recently.  Late in 2009, DC engaged in a high-profile effort to get the Costar Group to move from Bethesda to DC, and the city is now competing with Virginia and Maryland to attract Northrop Grumman as they move their headquarters to the Washington area. 

This is a good time to review the literature on how well tax incentives work to affect business location decisions —  and to take a hard look at DC’s “NET 2000” tax incentives that were used to lure CoStar and are being marketed to Northrop Grumman.  The fact is that there is a lot of research saying that tax incentives are not particularly effective, and the little evidence we have on NET 2000 is not encouraging. 

DC provided $16 million in tax breaks to 89 companies under NET 2000 in 2007.  The program offers qualifying high-tech businesses 5 years with no corporate income taxes and a reduced corporate income tax rate after that.  It also includes tax credits tied to wages paid and to employees who move to the District, as well as reduced capital gains taxes, and sales tax exemptions on products they sell.

Just because companies are claiming DC’s tax incentives, though, doesn’t mean they are working, because we don’t know if those businesses would have come here anyway.  After 10 years of operation, NET 2000 has a record that can be assessed, but the District’s leaders haven’t done that. 

A 2008 report from the DC Fiscal Policy Institute suggested that NET 2000 is not doing much.  It found that high-tech employment in DC grew more slowly than overall employment in the city between 2000 and 2006.  It also found that high-tech employment grew more slowly in DC than in the rest of the region.  These don’t prove that NET 2000 is a flop, but they certainly don’t point to success.

Why might this be the case?  There is a good amount of research showing that tax incentives generally don’t play a large role in business location decisions because other factors matter a lot more — like the quality and costs of labor, the quality of public services, and the proximity to business markets.  A recent report from Good Jobs First concludes that tax incentives are “crude tools” that “exert a very small marginal influence on corporate investment decisions.”

It makes sense that companies locate in markets that work for them, and that financial incentives alone wouldn’t lure a business to an otherwise unappealing location.  In DC’s case, the NET 2000 tax incentives average less than $200,000 per company.  It’s a big loss of revenue for the city, but not necessarily a big change in any one company’s bottom line.  

Whether or not DC successfully competes for Northrop Grumman or not, the Mayor and Council should call for a review of how effective NET 2000 has been in bringing businesses that we otherwise wouldn’t expect to have.  It is worth investigating to see if DC is getting its money’s worth.

It’s the start of budget season, and that means that the DC Council will soon hold performance and oversight hearings on the DC government agencies they oversee.  These hearings give the public a chance to testify and air concerns and questions, and to offer suggestions they have for a particular agency.  But did you know that now — before the hearings even begin — is a great time to ask and possibly get answers to some of those questions you may have about an agency? 

This is because Council committees are currently doing a lot of work to gather information in preparation for the hearings.  This includes submitting a detailed set of questions to each agency focusing on its performance over the past year (Once the Mayor’s proposed budget is submitted, the committees will submit another round of questions.) The committees then use the agency’s responses to develop questions that will be asked at the actual hearing. 

You can get involved by submitting your questions about an agency to the relevant Committee.  All you have to do is contact the committee clerk.  There is no guarantee that your questions will be passed on, but there is a good chance they will if the committee staff thinks they are worth getting answers to.  The questions can be as simple as “How much was spent on program X?” or, “How many people were served by program Y in fiscal year Z?”   Some committees have already started submitting their questions for the oversight hearings, so you may want to move quickly.  Submitting questions gives advocates and members of the public another tool to help them prepare for the hearings and advocate for programs they are concerned about.

The list of questions submitted, and the answers the agency provides are available to the public.  Where do you find the questions and answers?  The Council will post them to their website (see last year’s questions here), but you can also contact the committee directly to find out when they plan to submit and receive their questions back from the agency.  Many committees will let you review the answers in their office or make copies for you to take.  Committee contact information can be found here.

DC’s budget season is upon us. To help you get informed and involved, the DC Fiscal Policy Institute is holding a training  on the budget process —  a Budget 101 —  and the Fair Budget Coalition is holding a series of briefings focusing on how to address many of the challenges facing low-income families in the District.  DCFPI is leading one of the Fair Budget Coalition briefings — on the importance of addressing the District’s budget problems through revenue increases as well as budget cuts, rather than on spending cuts alone.

Service providers, advocates, policymakers and their staff members, and members of the public are invited to attend. 

Budget 101 — January 28, 9:30-11:00 AM, John A. Wilson Building (1350 Pennsylvania Avenue NW), Room 123

Learn about the nuts and bolts of the DC budget process and find out how you can get involved to protect and improve the programs you care about. 

Fair Budget Coalition Briefings

The schedule for the issue briefings is:

• January 22 – Hunger & Nutrition
• January 29 – Tax and Revenue (led by DC Fiscal Policy Institute)
• Feb. 5 – Workforce Development and Income Support
• Feb 12 – Youth and Families
• Feb. 19 – Housing
• Feb. 26 – Health

Briefings will be held from 9:00-11:30 AM and are tentatively scheduled to be held in Rooms 103 or 104 of the Wilson Building – 1350 Pennsylvania Avenue, NW.  (Organizers are hoping to secure a bigger room at the Wilson Building to accommodate all interested parties.)  A light breakfast will be served. 

Instead of spending precious daytime hours searching for jobs, many DC residents have been forced to wait for days at DC social service centers simply to apply for food stamps or get their health insurance renewed, according to a Washington Post article published on Tuesday. The long delays stem from staffing cuts made despite growing demand for services, and they are another sign that recent budget cuts are having real impacts on DC residents. This highlights the importance of preserving core public services in the midst of the recession.

The economic downturn has led to increased need for cash assistance, food stamps, and public health insurance. However, in the midst of a 22 percent increase in food stamp caseloads, the District closed two of its seven service centers and eliminated 99 eligibility determination services positions as budget savings steps.

The Post article and the recent homeless services funding controversy underscore the human impact of recent budget cuts. Over the past year, local funding for the Department of Human Services has been cut 15 percent, largely in response to the city’s big budget shortfalls.

DCFPI has raised concerns about the elimination of eligibility determination services. When questioned, DHS officials responded that that they were working to improve their business processes, with the hope that the cuts would not affect residents’ abilities to access aid.

Looking for efficiencies is important, but this situation shows that it is unrealistic to expect to do more with a lot less. According to the Post article and the experiences of DC legal service providers and their clients, some residents are waiting days just to be seen because DHS does not have enough staff.

The Department of Human Services is taking some steps to respond — hiring 20 more workers, installing self-service kiosks, and improving the layout of one of the service centers. But with the District facing record-high unemployment, this is unlikely to be sufficient.

With budget oversight hearings on the horizon, both advocates and Councilmembers need to learn more about how budget cuts have affected the ability to maintain services across all District agencies. In particular, we should push the Mayor and the Council to develop a plan — and provide funding — to make sure that residents can get the assistance they need to weather the recession.

Tuesday, Jan. 19

Committee of the Whole Meeting, 10 AM, John A. Wilson Building, Room 500, Agenda

Additional Legislative Meeting, 11 AM, John A. Wilson Building, Room 500, Agenda

Wednesday, Jan. 20

Reaching the Marginalized: Is a Quality Education Possible for All?, 3-5 PM, The Brookings Institution, Falk Auditorium, 1775 Massachusetts Ave, NW, RSVP: 202.797.6105 or click here

Thursday, Jan. 21

Public Oversight Roundtable on “DC Statehood and Self-Determination: The Perspective of Local Law Students,” Committee on Statehood and Self-Determination, 2 PM, University of the District of Columbia, 4200 Connecticut Avenue, NW, Building 44, Room A-03 

Public Hearing on “Prepaid Calling Card Consumer Protection Disclosure Act of 2009,” Committee on Public Services and Consumer Affairs, 2 PM, John A. Wilson Building, Room 412

Friday, Jan. 22

Public Oversight Roundtable on “Yes Youth Can: Confronting the Challenges of Aging Out,” Committee on Human Services, 11 AM, John A. Wilson Building, Room 412

Public Oversight Roundtable on “The Performance of HIV/AIDS, Hepatitis, STD, and Tuberculosis Administration,” Committee on Health, 2 PM, John A. Wilson Building, Room 123

A lot of people might think that once the DC Council passes the budget in the spring, it doesn’t change all that much during the year.  The budget, after all, is the result of months of hearings, debates, and advocacy around what the Districts priorities should be.

How wrong they are.  In 2009 alone, almost $700 million in changes were made during the year to the approved budgets of numerous agencies.  Changes to the budget aren’t unheard of, or necessarily bad, but in DC they have been pretty un-transparent.  As a result of this, the DC Council has introduced a bill to make the process clearer.  DCFPI testified at the bill’s hearing yesterday on the importance of improving the transparency of these budget changes. 

The Mayor can make changes to the budget through “reprogrammings” — changes that move money from one purpose to another — and through “intra-district transfers” — changes that move funding from one agency to another but that are intended to serve the same purpose.  It is important to allow the Mayor the flexibility to make changes. After all, emergencies arise and costs can change.  Nevertheless, all changes should be made visible to the public and substantial changes should have a review process before the Council.

The Council’s bill would address this by lowering the threshold for reprogrammings that need to come to the Council for review — from $1 million to $500,000 — and by adding Council review of intra-district transfers over $500,000.  The bill would also require the CFO’s office to issue a quarterly report summarizing any changes made to the budget over $50,000.  These are important steps that can help make the budget more transparent throughout the year. 

DCFPI’s testimony also included suggestions for making this information more transparent and accessible to the public such as adding a summary of the purpose of the funds being moved and placing all of the detailed requests online.  These changes can help the public locate and understand when changes to the budget are being made and allows them the opportunity to weigh in on the use of taxpayer dollars.

Unemployment has spiked throughout the country during the Great Recession, but record-breaking joblessness in the District is not just due to the downturn. Recently released data shows that a large percentage of the jobless in DC have been unemployed for a very long time, and that suggests that returning residents to the labor force might take more investment than just waiting for the economic recovery. The DC Council is considering legislation to expand unemployment benefits to those receiving training, a key step in putting our jobless neighbors back to work. Other efforts to improve education and training are important as well.

DC is in the top quarter of states that had jobless residents unemployed for 15 weeks or longer in 2009, according to the Bureau of Labor Statistics. But the data also shows that the city has a relatively low rate of people who recently lost their jobs or completed a temporary job. This is because most of DC’s long-term unemployed residents are people who have been out of the job market for a while and are trying to back get in. In other words, while most communities are suffering from people recently losing their jobs in the recession, many DC residents were having trouble finding a job even before the recession began.

Another possible sign of DC’s long-term unemployment problem is the fact that just one of four jobless DC residents collects unemployment benefits, one of the lowest rates in the country. This reflects a number of factors, but one reason could be that so many of our jobless have been out of work for a long time. Under federal rules, unemployed workers have to have some recent work experience to qualify for unemployment benefits.

Legislation is being considered right now by the DC Council to expand unemployment benefits, including allowing residents getting training to receive extended benefits. That’s a step in the right direction, addressing both training needs and DC’s low unemployment insurance coverage.

As the District tries to move forward toward economic recovery— probably over the next year — we must address the problems of the long-term unemployment in our community. That should include investments in literacy and job training to put all our residents back to work.

Here’s what we’re watching this week at DCFPI:

Monday, Jan. 11

Public Hearing on “Procurement Efficiency Act of 2009,” Committee on Government Operations and the Environment
11 AM
John A. Wilson Building, Room 500

Tuesday, Jan. 12

Public Hearing on “Reprogramming Policy Reform Act of 2009,” Committee of the Whole
11:30 AM
John A. Wilson Building, Room 500

Thursday, Jan. 14

Budgeting, the Next Generation: Federal and State Investments in Children After ARRA
9-10:30 AM
Urban Institute
2100 M Street NW, 5th Floor
Register

Public Hearing on “District Facility Plan Amendment Act of 2009,” Committee on Government Operations and the Environment
11 AM
John A. Wilson Building, Room 412

Friday, Jan. 15

Capital Area Foodbank at 30: History, Hunger, Hope
A Policy Forum at The Washington Post Moderated by NPR’s Michael Martin
1-4 PM
1150 15th St., NW

Public Roundtable on “The Performance of the HIV/AIDS, Hepatitis, STD and Tuberculosis Administration,” Committee on Health
2 PM
John A. Wilson Building, Room 500

The DC Council this week approved a multi-million dollar tax break to lure a for-profit company — the CoStar Group — from Bethesda to downtown DC, legislation the DC Fiscal Policy Institute, a number of small businesses, and other local organizations opposed as a corporate tax giveaway that is unfair to small and existing businesses in our city.

A silver lining is that the CoStar deal sparked a healthy Council debate about the appropriateness of handing out large tax breaks to individual businesses, and specific community benefits were included in the final bill.  The debate also made it clear that the District should approve pending legislation that would require more rigorous analysis to determine when property tax abatements are really in the city’s best interest.

When the Council first debated the CoStar tax break in December, many councilmembers were concerned that the city would be giving a lot to the for-profit company— a $7 million property tax abatement as well as an estimated $12 to $15 million in other incentives— with little benefit to city residents. At the time, CoStar had offered nothing beyond moving existing employees into DC’s already strong downtown office market.

The concern is very valid. The number of tax abatement bills coming before the DC Council recently has exploded. On the same day the Council approved the CoStar abatement, it also approved a 20-year property tax break for housing developments in the bustling Columbia Heights and Petworth neighborhoods. These come at a time when the city’s resources are tight, as the economic downturn has caused high unemployment and declining tax revenues, and has led to cuts in education, public safety and health care.

That’s why we support a bill sponsored by Councilmember Michael Brown to require financial accountability from businesses seeking tax breaks from the city. In essence, the bill calls for independent analysis to show that a business truly needs a tax subsidy and to identify what benefits the District will get in return.

Unfortunately, Brown’s bill has not even had a hearing yet.

In the absence of this legislation, the Council took some steps to toward more accountability in the CoStar deal. At its vote on Tuesday, the Council reduced the abatement by almost $1 million and amended the bill to require CoStar to hire 100 DC residents before it could start claiming the property tax break.  But this accountability effort happened on the fly — the amendment was written from the Council dais.  And it’s not such a great deal:  $20 million in tax breaks for 100 jobs works out to $200,000 in subsidies for every new job.

We agree with those who voted against this bill — Chairman Vincent Gray, Phil Mendelson (D-At-Large), Michael Brown (I-At-Large), and Harry Thomas, Jr. (D-Ward 5)— that economic incentives such as tax abatements should not be given on an ad hoc, first come, first served basis. This important tool should be part of a comprehensive economic growth strategy that will benefit the city as a whole and not just one company.

An interesting new report shows that one way to fight hunger among children is to make sure their families have affordable housing.  These findings suggest that recent cutbacks in affordable housing funding in DC, coupled with the severe recession, have contributed to an increase in hunger among DC families.

The report, by Children’s Health Watch and Medical Legal Partnership, showed that children in subsidized housing are less likely to go hungry and less likely to be seriously underweight than children in families on a housing waiting list.  How does affordable housing play such a critical role?  For many low-income families, housing costs eat up the majority of their limited budgets.  This is especially true in high-cost cities such as DC, where more than half of low-income households spend more than 50 percent of their income on housing.

In DC where 1 in 10 households are on the waiting list for affordable housing, it’s no coincidence that 1 in 8 households reported having trouble putting food on the table in 2008.  Hunger in DC has likely become worse since then, as the recession pushed unemployment to an all-time high in 2009.

When families receive a housing subsidy however, they typically pay 30 percent of their income for housing.  The housing assistance frees up some of a family’s limited budget, making it easier to afford food and other necessities.

The report raises new concerns about recent cuts in funding for housing in DC.  The District’s investment in affordable housing grew substantially from 2000-2008, supporting thousands of new affordable homes.  However, since 2008 local funding for affordable housing has fallen nearly in half, and only a small number of affordable units will be built this year.  This means little reductions to DC’s affordable housing wait list and a greater chance that more DC families could go hungry.

It’s a new year, and there’s a new DC budget on the horizon.  Mayor Fenty will release his proposed fiscal year 2011 budget on April 1, 2010.  While April may seem like a long way away, much of the important work to determine how much funding will be provided for education, housing, healthcare, and other services is happening right now. 

Here are some ways you can get involved in the process:

Advocacy Tip #1: Tell the Mayor what you think. 

As we wrote last week, this is going to be another tough budget year.  To deal with falling tax collections and expiring stimulus funds, the Mayor’s office has asked all agencies to identify possible cuts of up to 10 percent from the current year’s budget.  The City Administrator’s Office soon will start working with agencies to determine which of the cuts will be made and how much funding will be kept for services like child care and libraries next year.

Now is a great time to check in with agencies and City Administrator Neil Albert to learn what they are proposing and, most importantly, to let them know what you think should be included — and preserved — in the FY 2011 budget. 

Advocacy Tip #2: Prepare to Testify at a Council Performance Oversight Hearing.  

Starting in February, the DC Council will hold oversight hearings for every agency to determine how well they performed last fiscal year and how well they are doing so far this year.  Testifying at a performance oversight hearing for an agency you care about is a great way to highlight programs that are working well and areas that can be improved.  The schedule for the hearings has not yet been set, but they should be posted to the Council’s website within the next few weeks. 

Here are some questions you may want to consider when developing your testimony, with some tips about where to find helpful information:

• Did the budget for your program change from the previous year?  Check out DCFPI’s budget spreadsheet and issue area summaries or go straight to the approved budget. 
• If the budget decreased, what impact did this have on services?  (e.g., were fewer people able to receive services?  Were certain benefits cut?  Did it take longer to receive services?)  This is a great opportunity to share your experiences or the experiences of others who use DC’s services. 
• What can be done to improve the performance of the agency?  The Mayor’s office recently released performance plans, which outline the goals for each agency and how agencies’ performance will be measured in FY 2010.

The DC Council is back from its recess and so is The Week Ahead.  Here’s what we’re keeping an eye on this week:

Tuesday, January 5th

Legislative Meeting, 10 AM, John A. Wilson Building, Room 500.  Check here for updates to the agenda. 

Friday, January 8th

Continuation of a Public Oversight Roundtable on Government Contracting and Reform in the District, the Committee on Government Operations and the Environment, 10 AM, John A. Wilson Building, Room 412

Roundtable on the Performance of the HIV/AIDS, Hepatitis, STD, and Tuberculosis Administration, the Committee on Health, 2 PM, John A. Wilson Building, Room 500

Each December, as many of us eagerly anticipate the gift-giving holidays, DC budget watchers look forward to the Chief Financial Officer’s quarterly report on the city’s economy and its finances.  We hope for a bountiful package, but in the last few years we’ve received quite a bit of bad news.

CFO Dr. Natwar Gandhi’s latest report, delivered earlier this month, shows the recession continues to pummel city finances.  Revenue will fall another $104 million next year.  As for the economy, Gandhi pointed to some signs that the worst of the downturn might be behind us.  But sadly, the road to full recovery likely will be long and winding.  This means that for many DC families, 2010 will prove to be another very challenging year.

Take unemployment.  Gandhi projected that DC’s unemployment rate, which reached a 34-year high in 2009, will continue to rise in early FY 2010, peaking at 12.4%. It will start to fall after that but slowly.  The forecast shows unemployment won’t fall below 10 percent for two more years.

According to Gandhi, more than 18,000 District residents lost their jobs in 2009.  And those jobs will be lost for a while.  The new figures suggest employment among DC residents won’t return to the pre-recession level until 2013.

Not surprisingly, the loss of jobs has taken a lot of money from DC families and the DC economy.   Work-related earnings fell more in DC than in the rest of the nation in 2009.  The wage loss totaled $800 million, which equals an average of $2,000 for every household.

What can we learn from these numbers? The economy doesn’t rebound immediately from a downturn.  When economists declare a recession over, it simply means we’ve hit bottom. It doesn’t mean the problems for DC residents are over.  Recovery takes time.  It will be important over the next year to continue supporting families and individuals who are struggling from the effects of the recession. The District also should invest in its workforce by funding programs that help people stay or move into jobs. That’s important to moving faster down the road to recovery.

DC’s Chief Financial Officer recently released his December revenue forecast with some bad news: the national recession is continuing its negative impact on the District’s finances.  The CFO’s latest prediction has the District government collecting $104 million less than expected in taxes in the next fiscal year. 

The Mayor’s team already has identified $300 million in budget problems going into FY 2011, due to the loss of federal stimulus funds (many of which expire at the end of FY 2010) and the use of reserve funds that had accumulated over prior years. 

The CFO’s recent news will make it even harder for the District to pay for services like schools, libraries, and snow removal.  It also suggests the need to take a balanced approach to weathering the recession, one that considers revenue-raising options rather than simply relying on cuts to services. 

The CFO attributes the additional $104 million revenue shortfall to the continuing negative impact of the national recession on DC’s economy.  Preliminary information from FY 2009 shows that tax collections fell dramatically due to weak home sales, declining investment income, and falling business profits. 

The forecast is gloomy, but there are ways that the Mayor and Council can build a balanced budget in the midst of a large revenue shortfall.   These include using the District’s “rainy day” reserve fund, applying for additional federal stimulus funds, and balancing cuts with sensible revenue-raising options like expanding the sales tax base and removing the income tax exemption on out-of-state bonds.  Many of these will be outlined in our next monthly column in Hill Rag, East of the River, and DC North.  We’ll be sure to share the link as soon as the January column is published.

Unemployment in the District declined slightly in November, a hopeful sign that perhaps we have reached the bottom of the economic downturn and are moving toward recovery.

Data released Friday by the U.S. Bureau of Labor Statistics reported an 11.8 percent unemployment rate in the District last month, a drop of one-tenth of a percentage from October.  The national unemployment rate in November was 10 percent, two-tenths of a percent drop from October.

It is a sign of how bad the economy has gotten when we celebrate the fact that unemployment has stopped increasing. Yet it’s important to keep in mind that nearly one-out-of-eight DC residents are still out of work despite actively searching for a job—the highest level since records have been kept.

It is a terrible fact of recessions that just as residents’ needs are increasing, the ability of the government to respond to these needs is decreasing.  We need to make sure we are not penny wise and pound foolish  as we address this difficult situation.  This includes making sure there’s money in the budget next year for our out-of-work neighbors to keep food on the table and pay their rent while they search aggressively for a job.  Funding for education and workforce development is vitally important to maintain as well.

Economic research shows unemployment insurance is particularly effective in stabilizing and stimulating the local economy during a downturn.  A study conducted by Mark Zandi of moodyseconomy.com estimated that every $1 spent on increased unemployment benefits spurred economic activity by $1.63.  That’s because the assistance is used for food, rent, and other day-to-day expenses, which goes directly back into the coffers of local businesses.

The DC Council is considering two bills that will not only give a boost to unemployed workers but to the District itself at this critical time.  One bill, which will give a $15 per dependent allowance and extend benefits for those enrolled in training, will allow the District to collect $18 million from the federal government as part of the stimulus package. The other bill will increase the weekly maximum benefit to $379 a week, from $359. Currently, this is the lowest maximum benefit rate in the metropolitan area. Virginia has a maximum of $378, and Maryland’s is $380.

These are smart ways to help plan for a more productive and prosperous DC.

The Week Ahead, along with the DC Council*, is going on recess.  Please check back after the holidays for your weekly update on forums, hearings, and other events of interest.

*The DC Council will be on recess from December 23 through December 31 and will be observing the New Year’s holiday on January 1.  Look for the Council to be back in action on January 4.

Along with boosting the economy and saving and creating jobs, seven provisions of the American Recovery and Reinvestment Act  of 2009 (ARRA) passed in February also are protecting about 12,000 DC residents from living in poverty this year according to a new report from the Center on Budget and Policy Priorities. 

The study looked at the Recovery Act’s increase in food stamp benefits, expansions of the Child Tax Credit and Earned Income Tax Credit, its new Making Work Pay tax credit for workers, two forms of help for unemployed workers (extra weeks of jobless benefits for the long-term unemployed and an additional $25 per week of jobless benefits), and its one-time payment to many elderly people, veterans, and people with disabilities. 

In addition, ARRA-funded services are providing help to 113,000 poor DC residents.  Even though these residents remain in poverty, the Recovery Act is easing some of the challenges they currently are facing.

The Recovery Act as a whole is likely keeping many more DC residents out of poverty, since these seven provisions account for only about one-fourth of the act’s total funding.

These findings offer good news that the Recovery Act is working as intended to help cushion the impact of the recession on families and individuals.

By Judith Sandalow, Executive Director, Childrens Law Center

Children do best when they are raised in stable homes. Sadly, too many children in the District are stuck in the foster care system.  Even worse, current DC law sometimes results in children remaining in foster care when a family is willing to adopt.  Fortunately, new legislation recently introduced in the DC Council could help turn this around.

The Adoption Reform Amendment Act of 2009 (B18-547), introduced by Councilmembers Tommy Wells, Michael Brown, and Phil Mendelson, is an effective way to help get children out of the foster care system by encouraging more adoptions.

Families that adopt children or provide temporary care as foster parents receive financial assistance from the District to help with the additional costs of raising a child.  But adoption assistance ends when the child turns 18, while foster care assistance continues until the child turns 21. This disparity sometimes leads caring families to forgo adoption, keeping children in foster care, because the family needs the continued financial support to adequately raise their children.

The new bill would end this disparity by extending adoption assistance until the child turns 21.  The bill would also extend assistance for another form of permanent placement known as guardianship, which is a form of legal custody for foster children.  These changes will make it easier for families that want to adopt children to do so.  In fact, a study of DC’s foster care system found that the proposed changes would lead to 110 to 190 more children being adopted or permanent guardianships every year.

That alone is great news.  But not only does the bill benefit children in foster care, it also would save the District money — up to $3.9 million over the next four years. How?

• Children in the foster care system are in the care of the Child and Family Services Agency; this means costs for social workers and supervisors from CFSA.
• There are a number of legal costs when a neglect case is kept open, including salaries for judges, lawyers and court personnel.
• There a number of costs the District must pay for foster children that live outside of DC such as education, health care and mental health care.

Once a child lives with a permanent family, through either guardianship or adoption, these costs no longer exist.  Especially in the midst of a terrible budget crisis, the District must act swiftly to achieve these cost savings.

The bottom-line is simple: Permanency pays, both for children and for the District’s budget.

Here is what we are watching this week at DCFPI:

Tuesday, December 15^th

• Committee of the Whole Meeting, 10am.  The agenda can be found here.
  • Items we’re watching:
    • PR 18-600, “Fiscal Year 2011 Budget Submission Requirements Resolution of 2009″
    • Bill 18-231, “Park Place at Petworth, Highland Park and Highland Park Phase II Economic Development Act of 2009″
    • Bill 18-476, “High Technology Commercial Real Estate Database and Service Providers Tax Abatement Act of 2009″
    • Waiver of Committee of the Whole Rule 403 to consider Bill 18-45, “Heights on Georgia Avenue Tax Abatement Act of 2009″ & Bill 18-45, “Heights on Georgia Avenue Tax Abatement Act of 2009″

Wednesday, December 16^th

• 2009 Every KID COUNTS in the District of Columbia Fact Book release forum, hosted by the Urban Institute (2100 M St. NW, 5th Floor), 9:30am-11:30am.  The fact book will contain the most recent indicators of child well-being in the District.  To RSVP, email: kfranks@urban.org or call 202-261-5849.

• Roundtable on Implementation of the Proactive Inspections Program, the Department of Consumer and Regulatory Affairs, 3pm, John A. Wilson Building.

• Continuation of a Public Oversight Roundtable on Government Contracting and Reform in the District, the Committee on Government Operations and the Environment, 3pm, John A. Wilson Building.

Thursday, December 17^th

• Roundtable, on the Performance of the HIV/AIDS, Hepatitis, STD, and Tuberculosis Administration, the Committee on Health, 10 am, John A. Wilson Building.

Two weeks ago, we wrote about a proposal to give a 100 percent, $700,000 per year property tax break to one company —  CoStar —  if it moves to downtown DC office space.  This bill is still alive and could be voted on by the DC Council next Tuesday, December 15.

At a time when the District faces a $300 million budget shortfall for the coming year, it just doesn’t make sense to take some of DC’s most valuable real estate off the tax rolls.

 You can help speak out against this questionable tax break!  The DC Fiscal Policy Institute has drafted a sign-on letter that will be shared with the DC Council and Mayor Fenty before next Tuesday’s vote.  To sign on, send an email today to  lazere@dcfpi.org.  List your name, organization (if relevant), and Ward.

What’s wrong with this bill?

Downtown Does Not Need Tax breaks:  DC has the second lowest office vacancy rate in the U.S. and is one of few markets where office rents are rising.

CoStar Will Not Help DC’s Eeconomy:  The bill does not require CoStar to hire new DC residents — they only have to move existing workers.  And moving one company will not change DC’s downtown already –strong downtown office climate

CoStar tax breaks will make DC’s budget shortfall even larger   Adding new tax breaks could force even more budget cuts.

As we reported earlier this year, the District cut $12 million from this year’s homeless services budget — a cut that came as a surprise to Councilmembers, advocates, and even homeless service providers.  A recent Washington Post editorial — “Cold Out There” — reminds us that it still is not clear whether nonprofit homeless services providers will have enough to keep shelters open all year.  The editorial calls on the Fenty Administration to find additional resources and to work with the organizations to make sure they get what they need.

In the aftermath of the announced cuts, DC’s Department of Human Services (DHS) promised to fully fund homeless services for the duration of hypothermia season.  Less clear was how much funding would be available to organizations after the winter months.  DHS committed to meeting with providers, finding “efficiencies,” and applying for stimulus funding to make up at least part of the shortfall.

That was in October.  It’s now December, over two months into the fiscal year, and providers are still in the dark about how much funding they can expect from the District this year.  The Washington Post editorial points out that without this information, organizations are having a difficult time planning their programs and deciding whether they’ll have to scale back services like mental health assistance and job counseling.  The editorial applauds the city’s efforts to find additional funds and to look for efficiencies, and it calls on the city to “give providers a clearer picture of how much money they can expect and when it will be available.”

We couldn’t agree more.  It’s time for DHS to communicate to providers — and the public — to what extent homeless services will be funded this year.

Here is what we are watching this week at DCFPI:

Wednesday, December 9^th

• Public Hearing on DC’s FY 2009 Consolidated Annual Performance Evaluation Report, 6:30pm-8:30pm, at the Department of Housing and Community Development (1800 MLK Avenue SE, 1^st floor conference room).  More information can be found here.

Thursday, December 10^th

• Roundtable, the Committee on Government Relations and the Environment, 11:30 am, on Government Contracting Reform in the District of Columbia.

Friday, December 11^th

• Public Hearing, the Committee on Health, 2pm, on the Performance of the HIV/AIDS, Hepatitis, STD, and Tuberculosis Administration

There are thousands more people looking for work in DC than there are jobs for them to take.  That’s what happens in a recession.  It means that many workers cannot find a job no matter how hard they try.  In DC, nearly 40,000 residents are unemployed, up from 18,000 in 2008.  Our unemployment rate — now at nearly 12 percent, is the highest on record.

In the midst of this bad news is some good news:  the District is taking steps to make sure that workers who lose their jobs can get the help they need.  The DC Fiscal Policy Institute recently testified on two pieces of legislation to strengthen the city’s unemployment insurance program, which will come with $18 million in federal stimulus funds to help cover the costs.

What will the bills do?

• Provide additional unemployment benefits for unemployed workers with children or other dependents. The first bill provides $15 per week for each dependent, or $50 for those with more than three dependents.

• Benefits for workers in training programs. The first bill will also help workers acquire skills that will help them compete for jobs when the economy improves.

• Increase DC’s maximum unemployment benefits. A second bill would increase the maximum weekly benefit from $359 to $379.  DCFPI testified that this proposal will help workers with prior jobs that paid about $35,000 or more, but won’t help workers who were in lower-paying jobs.  We recommend altering the formula so that all unemployed workers get more.

Unemployment insurance not only helps workers pay the rent and keep food on the table for their families; it also keeps dollars in circulation in the local economy.  Money spent on rent, groceries, clothing, and other necessities keeps the economy from declining further.  In fact, Mark Zandi of moodyseconomy.com estimates that every $1 spent on unemployment benefits creates $1.63 in economic activity as those benefits get spent.[1]

There may not be much the city can do to end the recession, but taking advantage of federal stimulus funds to soften the blow for laid-off workers is an important response.

Our recent report examines the effectiveness of the District’s welfare-to-work program through the eyes of program participants.   In this video, you can hear three women discuss their experiences with the job training, supportive services, and cash assistance benefits they receive from DC’s Temporary Assistance for Need Families (TANF) program.

Get the latest Flash Player to see this player.

A little-noticed — but disconcerting — trend in DC this year has been the steady stream of businesses seeking special tax treatment from the District — usually in the form of 10-year breaks from paying property taxes.  Nearly 20 tax abatement proposals have been introduced in 2009 — including two in the past month — for projects ranging from housing developments to grocery stores to high technology commercial real estate companies.

Each time, the developers claim they cannot move their projects forward without a city subsidy.  Yet no one in the District government takes a look to see if that is actually true. Considering that some of the projects seeking help are in strong real estate markets — such as a boutique hotel in West End —more scrutiny is needed.

The newest tax abatement proposals are for a hotel in the massive Constitution Square development in NoMa and a large mixed-use project at 3^rd and H Sts. NE, along the developing H Street Corridor.  The H street development would include 210 condos or apartments, a 250-270 space garage, and 42,000 square feet of retail, mostly occupied by a grocery store.

But is it not entirely clear these developments actually need tax help to move forward.  The H street development would already qualify for the District’s supermarket tax breaks — a 10 year property tax abatement.  And the Constitution Square development is already receiving $ 6 million in property tax breaks.

It is in the District’s financial interest to examine the economics behind each of these tax break requests — to see whether a city subsidy is warranted and to assess what the city will get out of the deal.  But it doesn’t happen because there are no rules requiring an analysis of whether or not the subsidy is needed when awarding this kind of selected tax break.

That could change, though, with the passage of “The Exemptions and Abatements Information Act of 2009” introduced by Councilmember Michael Brown.  This bill would require the Chief Financial Officer (CFO) to conduct a financial analysis of any tax abatement proposal, something that already occurs for some economic development programs, like tax increment financing.  Introduced back in the summer, this bill has yet to have a hearing in front of the Committee on Finance and Revenue.

With a possible $300 million budget shortfall looming around the corner, the District should be taking steps to assess whether or not a subsidy is actually needed for any project seeking tax breaks.

Here is what we are watching this week at DCFPI:

Monday, November 30^th

Public Hearing, the Committee on Housing and Workforce Development, 11:00 AM

• B18-104, the “Tenant Access to Justice Reform Act of 2009″
• B18-179, the “Tenant Opportunity to Purchase Preservation Clarification Act of 2009″

Tuesday, December 1^st

Legislative Meeting: for the agenda, click here.

Wednesday, December 2^nd

Roundtable, The Contracting Process related to Parks and Recreation Projects, 2:00 PM

Held jointly by:

• Kwame R. Brown, Chairperson
• Mary M. Cheh, Chairperson
• Harry Thomas Jr., Chairperson
• Marion Barry, Chairperson

Friday, December 4^th

Public Meeting, the Committee on Health, 2pm

• The Performance of the HIV/AIDS, Hepatitis, STD, and Tuberculosis Administration

Public Hearing, the Committee on Government Operations and the Environment, 2pm

• Bill 18-492, the “Clean and Affordable Energy Act Energy Efficiency Program Fund Balance Transfer Authorization Amendment Act of 2009″
• Bill 18-493, the “Residential Aid Discount Subsidy Stabilization Amendment Act of 2009″

It’s that time of year.  Politicians are giving away turkeys.  Airports are crowded with travelers.  Grocery stores are selling out of cranberry sauce and stuffing.

But in the midst of all this plenty, the U.S. Department of Agriculture reports that many families are going hungry.  In fact, more families had trouble providing food for their households last year than at any point since the agency started collecting this information in 1995. 

In DC, one in eight households struggled to provide enough food to feed their households last year.  Rising unemployment and a lack of jobs have forced many DC families to tighten their belts.  But, as this report shows, too many families in the District face challenges that go beyond belt-tightening — they are struggling to provide for their families’ most basic needs.

One way DC families can get help with food costs is by applying for assistance from the District’s Supplemental Nutritional Assistance Program (SNAP).  DC’s SNAP program has been responding to the increased need for assistance, serving nearly 109,000 families in August 2009, compared to 93,000 families at the same time last year.  Legislation recently passed by the DC Council will make it easier for families with modest savings, such as those who have recently lost their jobs, to access food assistance.  DC’s Income Maintenance Administration should move quickly to implement this legislation so that more families can get the help they need during this difficult economic time.

Our readers are speaking, and we’re listening.

Some want more information about homelessness rates.  For others, it’s more engagement with other blogs and news stories that they are eager to see.  Still others want more data about the impact of budget cuts. 

Now it’s your turn!  

The DC Fiscal Policy Institute is seeking your feedback to help us understand how our work is used and how it can be improved.  We’ve developed a brief survey to collect your thoughts about our Budget Toolkit, what other topics we should research, and much more.  

If you have a few minutes today or tomorrow, please visit our survey and let us know your thoughts.  The survey will be up through close of business tomorrow (November 25).  Thanks in advance for your feedback!

Happy Thanksgiving!

Here’s what we’re watching this week at DCFPI: 

Monday, Nov. 23

Committee on Housing and Workforce Development, 11 amB18-350, the “Stimulus Accountability Act of 2009″ To require all jobs created by the American Recovery and Reinvestment Act of 2009 are advertised through the Department of Employment Services, and to require the Mayor to maintain a list of all jobs created and filled by District residents as a result of the American Recovery and Reinvestment Act of 2009.

 B18-420, the “Unemployment Compensation Administrative Modernization Amendment Act of 2009″  To amend the District of Columbia Unemployment Compensation Act to improve the administration of the unemployment compensation program and qualify for federal modernization funding pursuant to Public Law 111-5.

 B18-455, the” Unemployment Compensation Reform Act of 2009″  To amend the District of Columbia Unemployment Compensation Act to extend the length of time to file an appeal of an initial determination with respect to benefit eligibility, enhance the maximum weekly benefit provided, and expand eligibility to those who had to leave jobs for compelling family reasons.

Committee of the Whole, 3 pm

PR 18-568, “Fiscal year 2010 Income Tax Secured Revenue Bond and General Obligation Bond Issuance Approval Resolution of 2009″

Happy Thanksgiving!!

What would you think about a tax system in which lower-income families pay a greater share of their income in taxes than better-off families? Most of us would say that is unfair, right?

Yet that is precisely how DC’s tax system works, according to a new study from the Institute for Taxation and Economic Policy.  It finds that DC taxes fall most heavily on moderate-income families — and that taxes paid by wealthier families are a lot smaller as a share of income.    

• Moderate-Income DC Families Face the Highest Tax Rates:  Families with incomes of $20,000 to $60,000 pay about 10 percent of their incomes in DC property, sales, and income taxes.
• The Wealthiest DC Families Pay Much Less:  The richest one percent of DC households — those with incomes above $1.5 million — paid 6.4 percent of income in DC taxes in 2007.  This is lower than the tax rate for any other income group, other than the poorest families.

The difference in tax rates is significant.  If families in the middle of DC’s income distribution — $45,000 — faced the same tax rate as the richest one percent of families, they would pay $1,900 less.

The new analysis has one important bright spot — that the city’s poorest families face the lowest combined DC taxes — 6.2 percent — largely due to a substantial DC Earned Income Tax Credit for the working poor. But for all other families, taxes as a share of income get smaller as incomes get larger.

The main reason for the unfairness of DC taxes is the city’s reliance on regressive sales and excise taxes.  The sales tax falls most heavily on low-income residents because they spend a greater portion of their income on goods and services than higher income residents.  DC’s property tax is regressive, too.  DC’s income tax is progressive, with rates that get higher as income rises, but not enough to offset the unfair impact of other taxes.  Also, the new study shows that DC is not alone and that most states have tax systems.)

This information is important as the District struggles with a projected budget shortfall of $300 million for fiscal year 2011 — and the possibility of raising taxes to partly address it.  It will be important to consider whether any proposed increases would make DC’s tax system more regressive.

But when a mix of taxes were put on the table last July to close the city’s $330 million gap for FY 2010, our elected officials chose largely regressive options.  At that time, the DC Council adopted $42 million in revenue increases, including increases in sales, cigarette, and gasoline taxes. While these tax increases helped limit the need for cuts in services, all of the increases fall most heavily on lower-income households.  There were no progressive tax increases for 2010.

DC’s tax system is changing all the time.  We hope the new report will keep elected leaders mindful of who is paying for DC government and how we can make sure that the tax systems is as fair as possible.

We have a winner!

From now on you can say you read about progressive revenue ideas or expensive economic development tax giveaways or really cool budget stuff at “The District’s Dime,” the new name for DCFPI’s blog!

The winner of the DCFPI mug and homemade lunch is….drumroll, please…..Bryan Martin Firvida! We also decided that another of Bryan’s submissions, “Beyond the Budget Book,” is perfect as a “tagline” for our blog. So many kudos Bryan, and please send us an email to coordinate lunch!

Thanks very much to all who submitted. We had many great names to choose from, and we even pulled in a new media pro or two to help us decide.

Coming up next in “The District’s Dime”: Ed Lazere on new research showing that it isn’t the wealthiest who bear the biggest local tax burden but DC’s middle class.

Fiscal year 2011 is shaping up to be a tough year for many District government agencies.  But it could be a good year to be a “high technology commercial real estate database and service provider.”

Why?  Because under a new bill introduced in the DC Council, these businesses would get up to $700,000 in annual property tax breaks for 10 years —  a $7 million subsidy.  Considering that the District is already anticipating a $300 million budget shortfall for FY 2011 now seems to be an especially bad time to be giving up precious tax dollars.

Moreover, a close look at this bill raises a number of questions:

• Why these companies — or this company? The criteria for eligible recipients of the proposed tax abatement are very specific.  No companies are named in the legislation, but in testimony before the DC Council a representative from the Deputy Mayor for Planning and Economic Development  testified that they are actively recruiting one company, which was not named.
• What does DC get out of this deal? The deputy mayor’s office said that these subsidies were important because office vacancy rates are high in the District.  Yet, despite an increase over the past year, DC’s office vacancy rate is still the second lowest in the nation.  And DC’s vacancy rate is much lower than our suburban counterparts in Maryland and Virginia indicating that DC is still a more attractive place to be for many companies.

The deputy mayor’s office also talked about DC’s unemployment rate being very high, which is true.  But the unnamed company being recruited will simply relocate 400 employees at first (with hopes but no commitment to expand to 1,000).  Relocating jobs is not creating new jobs for DC residents.

This raises another big question:

• Won’t they already qualify for incentives? The deputy mayor’s office testified that the unnamed company will likely also qualify for a rich set of tax breaks under the Net 2000 legislation.  This means they are eligible to get up to $250,000 a year for just moving their employees to DC, up to $1 million a year if they can get enough of their employees to move their residence to DC, plus potential reductions to franchise, personal property, sales and use and capital gains taxes.

Fiscal times are tough.  Given the enormous challenge still ahead for balancing the FY 2011 budget, elected officials should think twice about giving away so much tax revenue and what they will actually get in return from paying one “high technology commercial real estate database and service provider” to move into the District.

The DC Fiscal Policy Institute is seeking your feedback to help us understand how our work is used and how it can be improved.   We’ve developed a brief survey to collect your thoughts about our Budget Toolkit, what other topics we should research, and much more.  

If you have a few minutes this week or early next week, please visit our survey and let us know your thoughts.  The survey will be up through close of business next Wednesday, November 25.  Thanks in advance for your feedback!

Last week, DCFPI testified at an oversight hearing on the implementation of the “Pre-K  Enhancement and Expansion Act of 2008,” which calls for both universal Pre-K services in the District by 2015 and improvements in the quality of existing and newly constructed Pre-K facilities. 

There are a lot of questions about how well the implementation is going.  DCFPI’s testimony focused on one of the reasons why it is so difficult to tell: The budget for Pre-K — like many DC agency budgets — lacks clear, detailed, and useful information on what is being spent on various programs and how services are being delivered. 

Some of the major problems DCFPI’s testimony identified:

Lack of spending detail.  Approximately $8.3 million is slated to be spent on Pre-K in FY 2010.  Yet despite the importance of Pre-K services, the budget has just one single line item for Pre-K.  To make the problem worse, the descriptions of the line items are not always clear or well explained.  This makes it nearly impossible to tell what taxpayer dollars are actually being spent on. 

In order to provide more spending detail, the District should switch from its current performance based budget structure to program budgeting.  This can help the public to see how funding is being spent on real programs and services. 

Lack of meaningful performance data.  In FY 2010 budget documents, there is only one measure in the FY 2010 budget that relates to Pre-K: the percent of Pre-K classrooms “deemed exemplary according to the program quality report card.”  While this is important, other critical information such as the number of children being served by Pre-K or school readiness measure are not provided.  Without meaningful performance data, it is difficult to know how effectively and efficiently taxpayer dollars are being spent. 

The new FY 2010 performance plan for OSSE includes four new performance measures which should provide more information on both Pre-K services and child care — this is encouraging.  But there are still critical areas — like the number of new Pre-K slots added each year — where information should be added. 

These are just a few ways that transparency of the DC budget could be improved.  With more transparency and meaningful information, both elected officials and the public could have a better idea of how critical programs are being implemented in the District.

Here’s what DCFPI is watching for this week:

DC Council

Monday, Nov. 16

Committee on Economic Development, 10 amB18-399, “Pennsylvania Avenue-Minnesota Avenue SE Eminent Domain Authorization Act of 2009”  This bill would authorize the city to use eminent domain to acquire properties in the area of Pennsylvania and Minnesota Avenues SE.

B18-457, “Small Business Stabilization and Job Creation Strategy Act of 2009″  This bill establishes volunteer mentoring and such with Certified Businesses and such. On my radar because of Workforce Development, but there shouldn’t be a fiscal impact.

Joint Committee Roundtable, 10 am, Room 412

“The Committee Process Related to Parks and Recreation Projects”

Committee on Health, 1 pm, Room 500

Roundtable on the Performance of the HIV/AIDs, STD, and Tuberculosis Administration

Tuesday, Nov. 17

Committee of the Whole, 10 am

B18-491 “Disclosure of Information to the Council Amendment Act of 2009”

To amend the Council of the District of Columbia Independence Act of 1982 to clarify that notwithstanding any other statutory privilege an agency is required to provide information to the Council and its committees upon request to ensure that they are able to fulfill their oversight responsibilities; and that the disclosure of information to the Council or the D.C. Auditor is not to be treated as disclosure to a third party, and that such communications maintain any privileges or exemptions that would otherwise apply.

 Wednesday, Nov. 18

Committee on Finance and Revenue, 10 am

PR18-544, “The River School Revenue Bonds Project Approval Resolution of 2009”

Authorizes sale of $4.5 million in District revenue bonds for acquisition and enhancement of 4880 MacArthur Blvd. for the River School.

PR18-564, “Apple Tree Early Learning Public Charter School Construction Revenue Bonds Project Approval Resolution of 2009”

Authorizes sale of $5 million in school construction revenue bonds for properties at 138 12^th St. NE and 2015 Savannah Terrace SE.

PR18-565, “Qualified Zone Academy Revenue Bonds Project Approval Resolution of 2009”

PR18-566, “Hyde Leadership Public Charter School of Washington, DC Inc. Qualified School Construction Revenue Bonds Project Approval Resolution of 2009”

This legislation is not available online.

PR18-567, “EL Haynes Public Charter School Qualified  School Construction Revenue Bonds Project Approval Resolution of 2009”

Authorizes sale of $13.4 million in school construction revenue bonds for EL Haynes school.

Friday, Nov. 20

Committee of the Whole, 11:30, Room 412

Roundtable on the Implementation of an Independent Community College in the District of Columbia.

Sixteen-thousand DC families—including one of three children in the city—participate in DC’s Temporary Assistance for Needy Families (TANF) program.  While TANF is critically important to the future of DC’s children, families often don’t receive the help they need to move successfully to work, according to a new report by SOME, Inc. (So Others Might Eat) and the DC Fiscal Policy Institute. The report, Voices for Change: Perspectives on Strengthening Welfare-to-Work from DC TANF Recipients, comes at a time when rising unemployment is making it particularly difficult for families to find work.

The report is based on focus groups with TANF recipients, interviews with service providers, and administrative data from the District’s Income Maintenance Administration (IMA). Its examination of the DC TANF program’s performance finds: 

• TANF employment services are one-size-fits-all and don’t address individuals’ specific skills, barriers, and goals.  DC, like many states, uses a “work first” approach, which emphasizes moving TANF recipients into jobs quickly. But this often steers parents to low-wage jobs—$9 an hour, on average—and more than half who find a job are no longer employed within six months.
• Most TANF recipients do not know about or have access to services to address barriers to work. TANF recipients often face multiple problems affecting their ability to obtain stable employment, including domestic violence, substance abuse, or physical and mental health issues. Yet focus group recipients said that they are often not informed about TANF-funded support services, and most do not get the help they need.   For example, 20 percent of TANF recipients are victims of domestic violence, but only one percent receives domestic violence services.

• Families cannot meet their basic needs on the TANF benefit. DC’s maximum monthly TANF benefit is just $428 for a family of three. Even with food stamps and careful budgeting, focus group participants explained that they run out of funds before the end of the month. Among the two-thirds of DC TANF recipients who get no housing assistance, many use their entire TANF grant for rent.  

The report recommends a number of steps that can be taken to help TANF families, including: 

• Ensuring all TANF recipients receive an assessment, orientation, and referrals to appropriate services. IMA should improve its orientation to make all applicants aware of their options within TANF, and implement enhanced assessments, using specialized staff, to connect recipients with services.
• Expanding options beyond “work first” to include additional vocational job training and education services.  IMA will revise its TANF employment vendor contracts in 2010, an opportunity it should use to increase the availability of education and hard skills training.
• Providing an adequate income for TANF recipients. The District should increase TANF cash benefits to help families meet their basic living costs and provide continuing support to families as they transition to employment.

      Implementing these recommendations will help to ensure that TANF recipients have access to programs and services necessary to meet their long-term goals — employment in a career track with an adequate wage, stable housing, and increased opportunities for their children.

One in three children in DC rely on the District’s Temporary Assistance for Needy Families (TANF) program. A successful TANF program is critical to DC’s future. Yet too often, TANF families do not get the support they need to move from welfare to work.

Join us this Thursday, Nov. 12 for a forum and release of a new report by DCFPI and SOME, Inc. about how to strengthen the District’s TANF program. In the report, DC TANF recipients share their experiences and recommendations for improving the program. Forum participants include:

• Councilmember Tommy Wells (Ward 6), Chair of Committee on Human Services

• Clarence Carter, Director, DC Department of Human Services (invited)

• Peter Edelman, Georgetown Law Center • Donna Pavetti, national welfare expert at the Center on Budget and Policy Priorities

• Dionisia Martin, Former TANF Recipient You can find all the event details here.

Hello DCFPI blog readers! Only a few more days to submit your names for the DCFPI blog-naming contest!

Here’s what we’re watching at DCFPI from Nov. 9 through 13:

DC Council

Thursday at 10 am, Committee on Economic Development

Bill 18-431, the “OTO Hotel at Constitution Square Economic Development Act of 2009″ This bill would exempt the OTO Hotel, a 205 room Hilton Garden Inn with underground parking in the Constitution Square development in Northeast, from real property taxation for 10 years and as well as make the project exempt from 50 percent of the undedicated proportion of the 10.05 percent gross sales tax pertaining to hotel accommodations for a period of 10 years.

Bill 18-432, the “THIRD & H STREETS, N.E. ECONOMIC DEVELOPMENT ACT OF 2009″ This bill would give tax exemptions, not to exceed $5 million, to a mixed-use project slated to have 210 condos, 42,000 square feet of retail , and a 250 car underground garage being developed by Steuart Investment Co. The bill would give a 100 percent real property tax exemption for any value above the FY 2010 assessment for 10 years, and then increase it by 10 percent for the next 10 years until it reached 100 percent of assessed value.

Both bills were introduced by Ward 6 Councilmember Tommy Wells.

 Bill 18-475,  the “Arthur Capper/ Carrollsburg Public Improvements Revenue Bonds Amendment Act of 2009″ This bill would alter the financing of the revenue bonds for Arthur Capper/Carrollsburg development in Southeast near Nationals stadium. This bill was introduced by Chairman Gray, at the request of the mayor.

Thursday at 2 pm, Committee on Health

Roundtable on the Implementation of the Healthy DC program The purpose of this roundtable is to hear a presentation by the Department of Health Care Finance about its implementation plan for the Healthy DC Program.

Thursday at 4 pm, Committee on Public Services and Consumer Affairs The committee will consider two bills dealing with tenant rights.

Bill 18-407, the “Tenant Advisory Council Clarification Amendment Act of 2009″ This bill outlines the role of the Tenant Advisory Council to monitor the progress of the Office of the Tenant Advocate and reports its findings to the mayor and DC Council within 45 years of the close of the fiscal year. Jim Graham (D-Ward 1) introduced this bill.

Bill 18-484, the “Tenant Bill of Rights Amendment Act of 2009″ This bill authorizes the drafting of a tenant bill of rights.

Friday at 10 am, Committee of the Whole

Roundtable on the Progress of the Implementation of the Pre-K Enhancement and Expansion Act.

Events:

Please join DCFPI Thursday morning at:

Voices For Change: Perspectives on Strengthening Welfare-to-Work From DC TANF Recipients

9:30 am, Georgetown Law School, 120 F Street NW, 12^th Floor.

The report release will also include video interviews of TANF recipients. Speakers will include:

Ward 6 Councilmember Tommy Wells, Chair of the Committee on Human Services

Peter Edelman, Georgetown Law School

Donna Pavetti, Center on Budget and Policy Priorities

Clarence Carter, Director of the Department of Human Services (invited)

The winter holiday season and New Year is approaching rapidly, but DC’s financial outlook for 2010 is nothing to celebrate.  In anticipation, Mayor Fenty already is telling government agencies to brace for a difficult year, budget-wise. 

An October 23rd letter from City Administrator Neil Albert to all agency directors projects an expected shortfall of $300 million for fiscal year 2011. The drop is due to lagging tax collections, expiring federal stimulus funds, and the drying up of many one-time funding sources.  

The letter asks agencies to: 

• “Dig Deeply.” Each DC agency is expected to reduce their FY 2011 budget by 10 percent from their current level when they submit their request to the Mayor in early December.
• Look for “expense reductions” or “revenue-generating” ideas.  Mayor Fenty has vowed not to raise taxes, which severely limits how the city can create new sources of revenue in these cash-strapped times.  Some agencies might choose to raise fees for certain services, but the ability to do so varies given the agency mission. Departments such as public works or transportation charge user fees more than human services, for example.

After more than a year of budget cutting and scouring for change in the proverbial sofa, the ability to scale back expenses through greater efficiency gets harder and harder.  The impact of budget cuts is being felt by almost every resident.  For example, DC public libraries and motor vehicles offices have cut hours. For the more vulnerable, homeless services may be curtailed after hypothermia season.  There’s probably a lot more you’ll notice in upcoming months.

It’s important to note that City Administrator Albert’s 10 percent mandate is only a starting point. Not every agency’s budget will be cut by 10 percent.  Instead, this exercise will give Mayor Fenty a range of options for scaling back.  The big questions on balancing the budget will not be made until early next year.  (Click here for information on the DC budget timeline.)

These questions include:

• What programs will the Mayor pledge to protect?
• Will he try again to use the rainy day fund?  (The Council rejected this proposal last summer.)
• Will he find ways to raise revenues — while keeping the pledge to not raise taxes?

There’s also the possibility — likelihood even — that the budget outlook will change.  New revenue forecasts could reveal an even deeper hole.  On the positive side, some are calling for a new round of federal stimulus aid to states, since many are still in dire financial straits.

This means there are good reasons to stay tuned over the coming months.  And for letting the Mayor and DC Council know about any services that you think are important to protect.

A reminder to our devoted blog readers: You have until next Friday–yes, that’s Friday the 13th–to submit your suggestions on what to name our blog!

“Tax Is Not A Four-Letter Word”?

“Between The Lines”?

“Follow The Money”?

Keep ‘em coming….

Where do old DC tax incentives go to die when they are no longer needed?  That was a trick question.  Many tax subsidies never die — they stay on the books even if they’ve proven to be ineffective or outlived their usefulness.

The latest example is a 10-year property tax exemption for new grocery stores, an incentive DC has offered for more than a decade.  City policymakers have pushed legislation to make sure that Ellwood Thompson’s, a high-end organic grocer, gets this tax benefit package for a store in the DC-USA shopping center in Columbia Heights.

Forget the fact that there is a Giant supermarket a block away. That the shopping mall already received more than $40 million in taxpayer subsidies.  That Columbia Heights is one of the most rapidly gentrifying parts of town.  They apparently still need tax breaks.

The supermarket tax incentive was well-intended when it was created — encouraging new stores to enter DC’s under-served markets. But it never worked very well.  Only one grocery store has been built east of the Anacostia River in the past decade.  Instead, the supermarket tax breaks have gone to stores that probably would have been built anyway in higher-income parts of town.  The tax incentive is not eligible citywide, but it is available in much of wards 1, 2, 5, 6, 7, and 8, as well as Georgia Avenue in Ward 4. 

Now that much of DC is developing and the city has many more supermarkets, it’s not clear why DC leaders are pushing to keep this tax incentive — or why they aren’t at least looking to narrow its scope to cover truly under-served areas.

We’d vote for elimination.  A generous tax break for supermarkets but not other businesses doesn’t seem fair.  And the bulk of available research suggests that tax incentives don’t affect business location decisions much.  Not surprisingly, businesses locate where their markets are strongest, and a tax break won’t turn a bad market into a good one.

Thinking more broadly, DC leaders would do themselves well to undertake a review of all tax incentives to see if they are accomplishing their aims.  They might find some tax subsidies that can be eliminated, which could generate new revenues at a time when the city sorely needs it.  In particular, we’d like to point them to the “E-conomy” tax incentive for high-tech businesses.  Our research shows that it hasn’t done much boost DC’s high-tech sector.

Tax incentives deserve as much scrutiny as any program or service funded by the District.  The tax break for supermarket is a good place to start.

Hello DCFPI blog readers!
Remember, submit your names for our blog this week!

Here’s some of what we’re tracking for the week of Nov. 2 through Nov. 6:
In the DC Council

Tuesday, Nov. 3 at the John A. Wilson Building
Legislative Meeting
Final Readings on Temporary Legislation
Bill 18-479: Neighborhood Supermarket Tax Relief Clarification Temporary Amendment Act of 2009This bill provides for real property tax abatements for supermarkets
Bill 18-468: First Congregational United Church of Christ Property Tax Abatement Temporary Act of 2009

First Readings (Non-Consent)
Bill 18-299: Waterfront Park at the Yards Act of 2009
This bill would establish a waterfront park maintenace fund into which certain designated revenues, including certain sales tax revenue, shall deposited and impose a special assessment on properties specially benefited by the park
Bill 18-303: Street NW Downtown Retail Priority Area Clarification Amendment Act of 2009
This bill would extend a special tax district west to 15th Street NW.
Bill 18-304: Affordable Housing For-Sale and Rental Distribution Amendment Act of 2009
This bill “provides flexibility in the distribution between affordable for-sale and rental housing units in certain development projects.”

Events of Interest:
WHO MOVES, WHO STAYS, AND
THE RESILIENCE OF LOW-INCOME COMMUNITIES
Tuesday, November 3, 2009
Noon–1:30 p.m. ET
To attend in Washington, D.C., RSVP at

http://www.urban.org/events/FirstTuesdays/rsvp.cfm,

e-mail paffairs@urban.org, or call (202) 261-5709.

Panelists will discuss
• whether low-income families move because of financial and other problems or to find better homes or communities;
• whether mobility supports or undermines neighborhood stability;
• how federal neighborhood revitalization initiatives should respond to high rates of family mobility; and
• what role cities and nonprofits should play in serving families that move and those that stay.

At the Urban Institute
2100 M Street N.W., 5th Floor, Washington, D.C.
Lunch will be provided at 11:45 a.m. The forum begins promptly at noon.

Voices for Change:
Perspectives on Strengthening Welfare-to-Work
From DC TANF Recipients

Thursday, November 12
9:30 – 11:00 AM

Georgetown Law Center – Gewirz Student Center

120 F Street, NW

12th Floor

16,000 DC families — including one of three children in the city — rely on the Temporary Assistance for Needy Families (TANF) program for cash assistance, job readiness training, and support services. A successful TANF program is critical to DC’s future. Yet too often, DC’s TANF families say they do not get the support they need to move from welfare to work.

Please join us on Thursday, November 12 to hear the key findings and recommendations from a new report by SOME, Inc. (So Others Might Eat) and the DC Fiscal Policy Institute about improving services for TANF families. The release will feature a video of DC TANF recipients discussing their experiences with the program and a discussion and Q&A with a panel including:

• Councilmember Tommy Wells (Ward 6),
  Chair of the Committee on Human Services
• Clarence Carter, Director, DC Department of Human Services (invited)
• Peter Edelman, Georgetown Law School
• Donna Pavetti, national welfare expert at the Center on Budget and Policy Priorities

Please RSVP by November 9 to Tina Marshall at marshall@cbpp.org or 202-408-1080. Light refreshments will be served.

“People need to be dealt with case by case. And more services brought in and information that can help people with different issues…because it’s not just adults. We’re talking about children and families.”
- TANF Recipient

This event is co-sponsored by the Georgetown Center on Poverty, Inequality and Public Policy.

The latest unemployment data for DC tell two conflicting stories.   Over the past year, DC the city is not losing jobs, while most states across the nation are losing thousands.  But DC residents are falling into unemployment at an incredibly historically high rate.  It may be yet another sign that the skills of many DC residents are not well matched to the jobs created in the city — and a call for stepped-up workforce training.

DC’s unemployment rate has quickly climbed to 11.4 percent in September.  Some 37,500 DC residents are out of work and actively looking for a job but cannot find one.  In just one year, the unemployment rate has risen from 7.4 percent to 11.4 percent, a 50 percent increase. 

When people say DC is weathering the economic recession better than most places, it is clearly not the case for everyone. 

What they may have in mind is the fact that DC as a city is not losing jobs the way other places are.  Data from the Bureau of Labor Statistics show employment in DC has been flat over the past year.   That’s good news, actually.  Nearly every other state has seen big drops.        

But the flat employment doesn’t mean some areas have not shed jobs over the year.  In fact, DC’s construction industry lost 7,000 jobs in the last year.  Trade, transportation and utilities, manufacturing, and professional and business services also had large losses.  Only two industries had net gains— education and health services (200) and the government — including federal and DC (5,400).  

What do these numbers tell us?  While the District appears to be holding on to its jobs, thousands of DC residents are losing theirs.  And even though jobs are being added to the market, it does not seem that they are going to unemployed DC residents.  This suggests that the skills of unemployed DC residents may not be matching the skills required by the industries that are adding jobs. 

The District could help reverse the skyrocketing trend in unemployment by really focusing on improving its workforce development programs.  This could help get DC residents into the jobs that are available now — and those that will become available as the economy recovers.

“The Bottom Line”?

“Checks and Balances”?

“Combined Reporting”?

Ok, we admit it: We need help naming our blog. Earlier this year, we jumped headfirst into the blogosphere without christening our new online baby. We need to call it something.

So what will you get for entering the best submission? A DCFPI mug, a homemade lunch with the DCFPI gang, and access to all the DC budget books you can imagine.

There’s no penalty for entering one, two, or even 20 times. As long as they’re good.

Send your entries to silverman@dcfpi.org by Friday, Nov. 13.

The DC Fiscal Policy Institute testified on the lead panel at a recent DC Council hearing on the DC Public Schools Reduction in Force (RIF).  Mary Levy and Iris Toyer also testified on that panel, starting off a hearing that would last 16 hours and include union officials, teachers, parents, and others. 

DCFPI’s Ed Lazere noted in his testimony that there are many unanswered questions about the budget shortfall — particularly why it wasn’t revealed and addressed earlier — and he offered suggestions for avoiding such problems in the future.

The issues raised by Lazere are relevant this week, as DCPS Chancellor Michelle Rhee prepares for an October 29 hearing to discuss the factors behind her surprise announcement of a budget shortfall and the RIF.  DCFPI’s testimony focused on three key points:

• The Budget Shortfall Should Have Been Identified and Addressed Earlier:  DCPS says the budget gap partly reflects the costs of teachers who were left without a classroom due to school closings — in 2007 — but remained on the DCPS payroll.  That should have been evident this spring as the 2009-2010 budget was being developed.   If the only way to reduce the number of excess teachers is a RIF in the middle of the school year, the city has a serious problem on its hands.

• Council Budget Cuts Made Things Worse:  On July 31, the DC Council cut $17 million from DCPS as part of a plan to close a city-wide budget shortfall.  While this alone did not create the need for a RIF, no one should pretend that budget cuts don’t matter, especially when they come just weeks before the start of the school year.  The Council’s action added to any fiscal problems DCPS was facing and forced them to look for savings.

• DC Needs More Budget Transparency:  The DCPS budget, like the budget of many District agencies, is opaque.  The budget line items often don’t make sense, there are bizarre unexplained swings in funding from year to year in many line items, and there is little description of what DC is buying with its large investment in DCPS.  If the furor over the RIF leads DCPS to think more about how it shares budget information with residents and the DC Council, that would be an important silver lining to this cloud.

Meetings, hearings, and other events we thought you should know about

Wednesday, Oct. 28

Housing in the Nation’s Capital Report Release

Join the Urban Institute for a discussion on how the foreclosure crisis has been affecting the Washington region.  Speakers include DC Department of Housing and Community Development Director Leila Edmonds.

9:30 AM – 2:30 PM
The Urban Institute
2100 M St. NW, 5^th Floor
RSVP: jdilworth@lgwdc.org or 202-777-4491

Thursday, Oct. 29

Public Oversight Roundtable: “District of Columbia Schools Leadership”
DC Council Committee of the Whole
10:00 AM
Council Chamber, Room 500

Friday, Oct. 30

1.) “The State Fiscal Crisis: Where It Came From, How to Solve It”

Join Tax Analysts for a roundtable discussion about what factors caused the fiscal crisis that states continue to face and what steps can be taken to address it.  Speakers include representatives from the National Association of State Budget Officers, the Center on Budget and Policy Priorities, the Tax Foundation, and the Council on State Taxation. 

9:00 – 11:00 AM (continental breakfast at 8:30 AM)
National Press Club
529 14th Street NW
Washington, DC
Register here. 

2.) Joint Public Oversight Roundtable: “The Contracting Process Related to Parks and Recreation Projects”
DC Council (multiple committees)
11:00 AM
Council Chamber, Room 500

Should a local, DC-based business be taxed more than a branch of a national retailer?

Of course, the answer is no.  But that is precisely what has been happening, because national corporations have been allowed to engage in complicated tax-avoidance strategies that artificially shift profits they earn in DC to places with lower taxes or no taxes at all. That gives a distinct and unfair advantage to them over local DC businesses.

Until now, that is.  Last summer, the District approved an important reform to the District’s corporate income tax —known as “combined reporting” — which economists and tax experts agree is the most comprehensive way to stop corporations from abusing tax shelters. DC’s Chief Financial Officer has concluded the law, which goes into effect in 2011, will raise $20 million in revenue annually.

Not surprisingly, combined reporting often faces business opposition. The DC law has been attacked by the DC Chamber of Commerce and the Council on State Taxation, a trade association of multistate corporations, as well as by individual corporations such as Verizon, Pfizer, and Home Depot.

A new DCFPI policy brief explains why combined reporting is good tax policy.  First, it levels the tax-paying field between national and local companies.  Without combined reporting, large national and multinationals have a tax advantage by shifting profits earned in DC to states with lower taxes­­—or no taxes at all. While small businesses and local companies that operate only in DC have to pay their fair share of taxes, larger corporations often don’t.

Of the 45 states with a corporate income tax, 23 already have combined reporting. Sixteen have operated with combined reporting for more than 20 years, including California and Illinois. Studies suggest that combined reporting has not affected their economic competitiveness.

Eliminating combined reporting, as groups such as the Chamber of Commerce are lobbying to do, would create a $20 million budget gap in FY 2012 and beyond.  Recent budget deliberations in the District have focused on the need to promote long-term fiscal stability in the face of the recession.  Getting rid of combined reporting would require cutting local services or raising other local taxes, while keeping taxes low for large national corporations.

Mayor Fenty and the DC Council made the right move to join 23 other states which use combined reporting. They need to remain steadfast in their decision.

Earlier this week, DCFPI wrote about how critical transparency in the DC government is.   And tonight, you can join local experts for a discussion about just how hard it can be to access public government information in DC, what the consequences are, and what we can do to improve transparency of DC’s government. 

DCFPI’s own Ed Lazere will be joining a panel discussion, moderated by Colbert King of The Washington Post, that includes Kathy Patterson, Lucy Dalglish of the Reporters Committee for Freedom of the Press, Bill Myers from The Examiner, and Mark Segraves from WTOP.  The event is organized by the D.C. Open Government Coalition, a group of individuals and organizations (DCFPI is a member) working towards a more open and transparent government in DC.  The event is free and open to the public; details are below. 

Date: Wednesday October 21, 2009, 6:30 PM – 8:30 PM

Location: Charles Sumner School at 17^th and M Streets NW

Hope to see you there!

Last week, Councilmember Mary Cheh held a public roundtable to discuss transparency in the DC government — and her timing couldn’t have been better. 

Government transparency is critical.  Take the DC budget for example, which is arguably the most important document the government publishes.  The DC budget is the main way to figure out the city’s real priorities and how taxpayers’ dollars will be spent.  But, as DCFPI testified, there are significant shortcomings when it comes to DC’s budget transparency, and these shortcomings can have serious consequences. 

The recent cuts to homeless service programs show just how critical transparency can be.  Because of a lack of clear budget information, the DC Council voted on a budget that they didn’t know contained nearly $12 million in cuts to homeless service programs.  These cuts risked closing shelters right before hypothermia season and cut the budgets of service providers at a time when homelessness is on the rise.     

It’s pretty amazing that DHS’s budget would provide no detail on a $12 million cut to homeless services.  But, unfortunately, it’s an all too familiar story because DC’s budget lacks clarity in two key areas: spending on real programs and services, and federal block grants.  Currently, the DC budget is structured in a way that doesn’t tell the public how funding is spent on individual programs and services. Instead, programs are bundled into often arbitrary line items that confuse even the most veteran budget readers.  And, there is hardly any detail on how our federal block grants get spent — like the $92 million Temporary Assistance to Needy Families (TANF) block grant — even though they fund a variety of critical programs and services.

Improving transparency wouldn’t have necessarily prevented the homeless services cuts, but knowing they were on the table would have at least given the Council and public a chance to have a healthy discussion about the public’s budget priorities.  And from the recent discussions around the cuts, it’s pretty clear that homeless services are a priority of both the Council and the public. 

We are glad Councilmember Cheh is taking on this important issue and look forward to the steps her committee and the Council will take to improve transparency in the DC government. 

DC’s Department of Human Services (DHS) has had a rough going lately.  Its locally funded budget was slashed by $24 million from FY 2009 to FY 2010.  The department has closed two of its seven service centers to save money, making it harder for needy families to apply for cash assistance, health insurance, and food assistance.  DHS has cut nearly 100 of the employees who determine whether families are eligible for assistance, at a time when more and more residents are seeking aid.  And now, the agency is short $12 million for homeless services. 

This is an agency in dire need of some cash.

Enter the Temporary Assistance for Needy Families (TANF) Emergency Contingency Fund.  This fund is part of the federal stimulus package and helps states by covering 80 percent of increased spending in their TANF programs, so they can serve the growing number of families in need.  The District is eligible for $46 million from this fund.   

While many states are moving to claim their share, the District has applied for less than $1 million in TANF stimulus funds.  During an October hearing, DHS Director Clarence Carter testified that claiming stimulus dollars “may not be possible in light of the existing economic realities” and that the department was focusing on accessing an older TANF contingency fund.  However, those funds are expected to run out this December.  We may not have time to apply.  

The better approach is to seek the remaining $45 million from the new emergency contingency fund.  To do that, the District must show that it has increased spending on low-income families with children in one of three categories: cash assistance, subsidized employment, or short-term assistance.  There are a number of programs that could qualify, including DC’s Emergency Rental Assistance Program, Summer Youth Employment Program, and Grandparent Caregiver Subsidy Program.  The District also can partner with nonprofit and private organizations, as New York recently did, to use their rising expenditures to claim additional stimulus funds.  This would be a great way to help social service providers meet the rising demands they are facing.

DHS cannot afford to leave its remaining $45 million on the table.  The Fenty administration should ensure that DHS has the support it needs to submit its application as soon as possible.

What is the District’s Class 3 property tax?

That’s not an easy question to answer. Class 3 is a property tax that at times has applied to vacant buildings and empty lots. But in the last two years it has been subject to legislative ping-pong.

At its Sept. 22 session, the DC Council approved a measure which changed both the Class 3 definition and tax rate. Now, only vacant properties considered “blighted” will be classified as Class 3, and the tax rate will be doubled, from $5 to $10 per $100 of assessed value, or from 5 percent to 10 percent. Vacant properties that are not defined as blighted will see a tax cut — from the current 5 percent to either 0.85 percent or 1.85 percent depending on whether they are residential or commercial.

That’s the third time the Council has tinkered with Class 3 in two years. A year ago, the Council increased the Class 3 rate from 5 percent to 10 percent. Then three months ago, the Council cut the Class 3 rate back down to 5 percent. In September it was back up to 10 percent.

Confused? We don’t blame you. Tax policy shouldn’t be a test of logic.

It also shouldn’t be taken lightly. It should be considered with careful and thorough analysis, because every definition and rate change impacts how much money the city will collect in revenue. And that affects how much money is available for all types of District programs and services.

The reason Class 3 is debated so much is because some want to use the tax as an incentive to get “nuisance” properties fixed up by making the cost of holding onto them burdensome. However, others argue that owners shouldn’t be punished for a vacant lot if the property is well-maintained. The real estate industry has been especially vocal in opposition, given the number of developers with land they cannot develop due to the economic downturn.

With its latest action, the Council raised the tax rate on some vacant properties but cut it for others. In other words, if your property is vacant but not considered blighted, you will pay either the Class 1 residential rate of 0.85 percent or the Class 2 commercial rate of 1.85 percent instead of 5 percent. That’s a pretty big tax cut for some. But if your property is now classified as blighted you pay 10 percent. That’s a sizable tax hike for others.

How many properties will this effect? What is the impact on the budget?

It is unclear.

Yet instead of reviewing the data and analyzing the impact, the Council approved the change after a quick calculation from its budget director during the meeting. The final proposal was an amendment, and Councilmembers did not have documents showing the fiscal impact of the change.

Tax cutting on the fly is generally a bad practice. But changing taxes on the fly in a time when resources and budget money is precious is just plain irresponsible.

One Councilmember objected to this approach. We agree with Phil Mendelson (D-At-Large), who argued that the implications of the tax change need more scrutiny. Our financial needs are certainly urgent, but tax policy should not be crafted all of a sudden on the dais. It is important, and it needs careful and deliberate analysis and consideration.

Mendelson told his colleagues he needed time to look at the fiscal impact of the change. Unfortunately, he didn’t get it. We urge his colleagues listen to him the next time a tax change is proposed.

Sometimes something happens that makes you say “what the hell is going on?”  Late in September, dozens of the District’s homeless service providers were notified that their funding from the city was being cut substantially.  The cuts were announced just days before the start of the fiscal year and a month before the start of hypothermia season.  No one — not the DC Council, the Interagency Council on Homelessness, the providers, or those experiencing homelessness — saw these cuts coming.  Confusion and concern are rampant.

Mayor Fenty’s administration says the cut is $12 million: a $900,000 reduction in local funds for the Permanent Supportive Housing program that had been designated as one-time funds in FY 2009 and $11.5 million in federal TANF block grant funds.  That’s about 20 percent of the city’s homeless services budget, and some advocates say the cut could be even greater. 

Why is this happening?

The reduction to homeless services isn’t coming because the District is losing TANF funds — federal block grant funding to DC remains unchanged.  What the Department of Human Services has lost is local funding — $25 million in FY 2010 — due to budget cuts.  To make this up, the District chose to use federal TANF funds to fill gaps in other programs like the Emergency Rental Assistance Program and energy assistance.    

These are important programs, especially during an economic downturn.  But why did the city, in its race to use every penny of TANF funds, fail to set aside TANF funds for homeless services as it had for years?  The choices to fund some programs and not others were made largely outside the view of the Council and the public.  The DC budget has just a single line for TANF and a single line for homeless services — and no detail about how the funds are spent.  No wonder no one saw the homeless cuts coming.

Lack of budget transparency has real — human — costs.

The reductions in funding to homeless services — which Councilmember Tommy Wells hopes to reverse, at least partly — will hurt the District’s most vulnerable residents.  More than 100 families with children, 485 women, and 1,332 men could be harmed — not including the people who already cannot access emergency shelter because the system is at capacity.  Even if providers figure out a way to keep shelters open, they will be forced to reduce services to help people move out of shelters and supplies, such as sheets and toiletries, which are already sparse.

Street outreach this winter will be significantly reduced, which means fewer blankets and warm drinks to people on the street and fewer people coaxed into shelters.  DC is almost guaranteed to violate its legal — and moral — obligation to shelter its residents from cold weather this winter.

Less than a month into the school year, DC parents, principals, and teachers received some shocking news; up to $40 million would be cut from the DC Public School budget, mostly from local schools.  The cuts were not a total surprise — the DC Council cut $17 million from DCPS in July and set aside another $3 million that cannot be tapped until later this year.  But DCPS leaders hadn’t given any indication that cuts to schools were imminent, and they haven’t explained why the cuts are so large.

There are still unanswered questions, but we’ve been able to decipher three key factors affecting each school’s budget reduction:

• Absorbing the $20 million in DC Council Cuts: This cut will be split evenly between central operations and individual schools.  Every school lost $228 per pupil, or about $90,000 for a school of 400 students.

• Taking Back “Gifts:” A number of schools were re-organized this spring, allowing principals to hire new staff.  This resulted in the hiring of some teachers who ended up without a classroom.  In these cases, the teachers were “gifted” to other schools that had already allocated their budgets.

The problem: DCPS hadn’t budgeted for these staff which created a spending problem.  What was the solution?  Every school that got a “gift” over the summer was told in September to cut their budget by the amount of the gift, either by letting that teacher go or by making other cuts.

• “Equalization:” Schools that end up with a lower enrollment than projected lost $7,200 for every student they were short.  At the same time, schools that have enrollment above projections receive $7,200 more per extra student.  Since enrollment appears to be close to projected levels, this will affect individual schools but not the overall DCPS budget.

These budget cuts will force schools to cut back on both staff and supplies, making it harder to provide a stable learning environment.

This round of budget cuts should send a message to the DC Council that when they cut DCPS’s budget, children are affected.  But DCPS also deserves some of the blame.  Why weren’t the teachers who were left without a classroom placed in other schools with vacancies rather than being offered as “gifts” that DCPS couldn’t afford?  The fact that some schools got gifts they hadn’t asked for and then had to cut more than other schools also doesn’t seem fair.  The process certainly fuels the suspicions that DCPS is aggressively trying to weed out its current stock of teachers.

As DCPS struggles to improve its performance and compete better with charter schools, cutting massive amounts from schools less than a month into the year isn’t helpful.  Let’s hope it is a problem that can be avoided in the future.

The Census Bureau announced this week that median household income in the District rose from $56,400 in 2007 to $57,900 in 2008.  Although this increase was not “statistically significant”, it is good news that the national recession hadn’t hit the city that hard — at least through 2008.  There is one group in DC that suffered in 2008, though.  Households led by someone without a high school degree saw their incomes drop by $4,000 —  from just $23,000 to $19,000 —  a sign that economic downturns often hit the most vulnerable the hardest.  And 2009 is likely to offer a less rosy story for lots of DC residents, as unemployment has shot up to more than 10 percent.

The one-year change in incomes was mostly insignificant however; the new data reveal important trends in income gains and losses since the start of the decade.

Since 2000, median household income District-wide rose an impressive $7,000 — from $51,000 to $58,000.  DC’s median income is higher than in the U.S. as a whole and in most states.    But the growth hasn’t been shared by all.  As is often the case in the District, very different stories emerge when we use the lenses of race, geography, and education.

• White household income (non-Hispanic) jumped 20 percent from m 2000-2008, after adjusting for inflation, up to $107,600.  Black residents, by contrast, saw their median income rise just two percent during the same time period, up to $39,200 in 2008, a change which was not statistically significant.  Hispanic household income fell from $47,000 in 2000 to $44,000 for 2008, also a change that was not statistically significant.

• Looking through the education lens, only those residents at the most advanced levels —  those with a graduate or professional degree — saw a statistically significant incomes gain from 2005-2008.

• Residents living in Census-defined areas that largely encompass Wards 2 and 3 enjoyed income gains of $15,000 -$20,000 since 2005.  Meanwhile, median income fell in the area that covers Ward 4, and incomes in most of Wards 5 through 8 showed no statistically significant change from 2005-2008.

This DCFPI analysis of Census Bureau data shows that many groups in the District are not sharing the income gains made over the last decade. (The full report can be found here)

No politician is fond of increasing taxes. So you know this recession must be severe when more than half of the states have adopted tax increases to help balance their budgets.

This summer, the District crossed that bridge as well, voting for about $50 million in new taxes to help address a $340 million shortfall. (Program cuts played a much larger role.)

That allowed many services to be spared from the budget ax. But DC’s specific tax choices — including an increase in sales, cigarette, and gas taxes — will fall hardest on low-income residents, while more progressive options were set aside. Working poor families will pay higher income taxes due to elimination of inflation adjustments to DC’s standard deduction, for example. Yet the DC Council kept a tax break that goes mostly to high-income residents, for their investments in bonds issued by other cities and states. The District is one of the few places in the country to offer this tax break, by the way.

As the District braces for its next budget shortfall — whenever it comes — it’s important to think about not only whether to raise taxes — but what kinds of revenue increases make most sense. The economic downturn offers an opportunity to close tax loopholes or reform ineffective parts of DC’s tax code. We have written before, for example, about expanding the sales tax to more services — such as pet grooming — as well as to tickets for live-theater events.

It also makes sense to adopt progressive tax changes — so that tax increases fall on higher-income residents rather than on lower-income families that already struggle to make ends meet. Studies show that DC’s overall tax system is regressive.

Eliminating the income tax exemption for interest on out-of-state bonds is a good place to start. Every state offers an exemption for interest on in-state bonds, which provides an incentive to support that state’s infrastructure projects. But only DC and Indiana give a tax break for bonds issued by other cities and states. It’s a policy that doesn’t make sense. Why should DC provide a tax incentive to invest in other states’ infrastructure?

Moreover, changing DC tax policy to be in line with the vast majority of states — including Maryland and Virginia — would be a progressive step. Two-thirds of the interest on tax-exempt bonds goes to DC households with incomes of $200,000 or more.

Raising taxes may not be very popular. But we should at least start with the ones that make sense.

The District took an important step last month to expand unemployment benefits to more residents and get $18 million in federal stimulus dollars in return. At a special session July 31, the DC Council voted unanimously for an emergency bill expanding training to unemployed workers, as well as giving extra benefits to those with dependents.

It’s a big step, but there’s more to do. Permanent legislation needs to be passed to receive the money, and DC officials should consider expanding insurance to an even broader group of workers.

The District certainly hasn’t been immune to the economic downturn. DC’s unemployment rate was 10.9 percent in June, exceeding the national average of 9.5 percent. In other words, one out of every nine District residents who wants to be working right now is not. Yet under the current rules, many of these people are not eligible to collect unemployment benefits.

As part of the federal stimulus package, states and the District were given a financial incentive to expand benefits to workers who fit into four categories:

1. Part-time workers who have been denied unemployment benefits because rules require them to be looking for full-time work.
2. Those who leave the workplace due to a compelling family reason, including domestic violence, caring for a sick family member, and spousal relocation.
3. Workers with dependent family members. (They would receive $15 or more per dependent up to a maximum of $50.)
4. Laid-off workers who need additional training.

States needed to expand in at least two out of the four categories to get the stimulus dollars. As of May, more than 25 states already had changed their unemployment benefit rules to collect the federal dough.

After some discussion this summer, District officials decided to expand benefits to workers in categories 3 and 4: the dependent family members allowance and training. Officials with the Department of Employment Services said that the city already has expanded benefits to part-time workers and those who leave the workplace due to domestic violence.

Why not expand benefits and comply with federal guidelines in all four categories? There’s no good reason not to. Advocates for workers, including the DC Employment Justice Center, hope the Council will revise the permanent legislation this fall to include all four categories. And while making training an emphasis, the city should make sure that participation leads to real, sustainable jobs.

DC needs to be as aggressive as possible in tapping federal stimulus dollars. The expansion of unemployment benefits will not only boost families, but our local economy as well.

D.C.’s affordable housing toolbox got a little bigger today.  The Fenty administration has taken the last step needed to implement DC’s “Inclusionary Zoning” law, which was adopted by the Zoning Commission and D.C. Council in 2006.  With publication of the final part of the regulations, the city can move forward with a national best practice that ensures that market-rate housing developments also have an affordable housing component.

Inclusionary Zoning (IZ) is a widely used affordable housing tool throughout the country. D.C. joins hundreds of other jurisdictions -  including Montgomery, Fairfax and Arlington Counties –  that have adopted IZ  to help respond to their communities’ affordable housing needs.

D.C.’s IZ program requires residential developments of 10 units or more to set aside 8-10 percent of the new housing as affordable to moderate and low income families – those  making between 50 percent and 80 percent of area median income.  For a family of four, that means income between $51,000 and $82,000.   In exchange, the developer is allowed to build 20 percent more housing than under normal zoning rules.  This tradeoff allows the District to get new affordable housing without having to devote any tax resources.  IZ will apply to most areas in the District with a few exceptions for the lowest density residential zones, and some Historic districts that were deemed inappropriate to receive the density bonus.

Inclusionary Zoning couldn’t come at a more critical time. As a result of the economic downturn, reduced tax revenues, and resulting budget cuts, affordable housing programs in the District have seen a dramatic drop in funding. In fact, total resources for affordable housing have dropped by one-third since the start of FY 2009.  Yet, the economic downturn also means more D.C. residents need affordable housing.

A wide variety of financing and development tools are crucial for any community to be able to meet the range of affordable housing needs of its residents.  It is particularly crucial in an area like DC where the cost of living is very high.  IZ will be a central development tool to help the District offer a meaningful supply of affordable housing opportunities in the years to come, particularly as the housing market – and the economy – begin to recover.

The Campaign for Mandatory Inclusionary Zoning launched its effort to bring the national best practice to the city in 2004.  The Campaign for Mandatory Inclusionary Zoning is a diverse coalition of affordable housing advocates, local labor unions, social service providers, civic associations, and faith-based organizations. These stakeholders across the District worked together for years to design the policy.  They should feel elated that their dream has finally become a reality.

When you buy a brush to groom your dog, you pay DC sales tax.  But if you take your dog to get groomed, you pay…

No sales tax.

When you buy a pack of diapers, you pay DC sales tax.  But if you call a diaper service to bring you clean diapers, you pay…

That’s right: no sales tax.

It’s a pattern that shows up over and over again.  When you do the work yourself, you pay sales tax.  But when you pay someone else to do it, you don’t.  What’s the deal?

The District just recently voted to raise the sales tax by ¼ of a percent to help close its budget shortfall.  But a more sound approach would have been to keep the rate steady and instead expand the sales tax to cover more services.

Why would DC want to expand the sales tax to cover more services?  A new report by Michael Mazerov from the Center on Budget and Policy Priorities explains why many states are expanding their sales tax to cover services like auto repair and dry cleaning.

For one, we no longer spend as much of our total income on goods – like shoes and refrigerators.  The share of household purchases going for goods declined from 39 to 32 percent over the past 30 years, according to the report, while consumption of services rose from 31 to 45 percent of household purchases over the same period.

Second, expanding the sales tax to more services would make the sales tax more equitable.  Taxing only certain businesses’ goods can put them at a disadvantage over other businesses that solely provide services.  Also, it isn’t fair to require someone to pay sales tax when they buy a good but not tax others when they pay for essentially the same thing as a service.

Third, expanding the sales tax to more services can limit the need for rate increases.  The sales tax is regressive – meaning low-income residents pay a higher share of their income in the tax than higher-income households.   Applying the sales tax to services – which are more likely to be used by higher-income households – is less regressive than increasing the sales tax rate while leaving services exempt.

So what would this mean for DC?  DC already taxes some services – such as landscaping, dry cleaning and electricity, but not others – such as pet grooming, investment counseling and diaper services.  Expanding the sales tax to cover more services could help maintain the adequacy of the sales tax and improve its equity.  It could also help DC raise some much needed revenue, without increasing the sales tax rate, at a time when DC – and virtually every other state – are scrambling to close revenue shortfalls.

As part of his recent budget gap-closing strategy, Mayor Fenty proposed cutting $6 million from DC’s welfare-to-work program, known as Temporary Assistance to Needy Families or TANF.   One-third of the money, approximately $2 million, would come from reducing benefits to families who do not meet at least half the District’s work requirement in six months.  The proposal also would have given the Mayor the authority for the first time to completely cut off families who did not meet DC’s work requirements.  

As we pointed out during the budget debate, DC should ensure that TANF families are getting the services and training they need to move from welfare to work.  But cutting families’ benefits isn’t the way to do that.  In fact, data from other states has shown that sanctioning families doesn’t lead to increased engagement in work activities.  It just pushes households deeper into poverty.  Last Friday, the DC Council rejected the Mayor’s proposal to increase sanctions for TANF recipients.  The Council deserves credit for protecting families from increased benefit cuts during an economic downturn and for recognizing that major changes to TANF should not be undertaken as part of a two-week budget gap-closing process.    

However, at the same time the Council decided against the Mayor’s sanction proposal, they accepted one that will make it more difficult for families to access TANF benefits.  The new policy would deny TANF benefits to any family that does not complete the program’s orientation and assessment.  Previously, a family would have a portion of its benefits cut if it did not participate in these activities.   

TANF families in DC face many challenges, including domestic violence, low levels of education, and caring for a disabled child or relative.  Under the new policy, these families – and the children in these families – would no longer be eligible for TANF if the parent cannot participate in an orientation.  TANF is the last resort for many families who are trying to get back on their feet.  Making it harder for these families to access the program will only increase costs down the road. 

We hope that the Council will reconsider this policy when it returns for the second vote on the Budget Support Act in September.

As the great worldly philosopher Yogi Berra once said: “It ain’t over till it’s over.”

Last Friday, the DC Council agreed on a mix of cuts and revenue increases that would close budget shortfalls for fiscal years 2009 and 2010. By all indications, Mayor Adrian Fenty will sign them into law. Given the national recession, this likely won’t be the last time the Mayor and Council take a red pen to these financial books. But for now, it’s over.

So what happened?

First of all, the budgets are now balanced. The actions taken by our elected officials were necessary to keeping our city fiscally healthy, and the Mayor and Council deserve credit for taking on this task. The decisions were hard and agonizing. On the positive side, the Council saved programs crucial to the city’s safety net from the chopping block and avoided even deeper funding cuts by raising revenue. Yet some of the tax increases are regressive, meaning they will have a greater financial impact on moderate and low income DC residents.

In the end, the council made about $100 million in cuts on top of those proposed by the mayor. The biggest slashed approximately $30 million from the public education budget. A majority of the programs targeted for funding cuts were in human services, which help the District’s most needy and vulnerable residents. In final negotiations, however, the council agreed to partially restore money to crucial programs that provide money to low-income residents and grandparent caregivers as well as to legal aid.

One reason additional cuts were made is because the council decided against dipping into the city’s rainy day fund, which the mayor had initially proposed. D.C., unlike almost every other state in the country, must pay back its fund within two years due to congressional mandate. Council members worried this would make the budget even worse in fiscal year 2011. Almost everyone agrees it’s “raining” economically, but this and other restrictions make the rainy day fund impractical to use during a prolonged economic downtown like we’re in now. Hopefully our elected leaders will soon persuade Congress to lift these onerous rules for the future.

Some of the shortfall was also closed through fee and tax increases. Many economists, including the 2001 Nobel Prize winner, believe that raising revenue is sound policy during a recession. Though many council members were initially resistant, they decided to raise about $50 million in revenue largely by increasing sales, cigarette, and gas taxes as well as delaying the inflation adjustments to the standard deduction and personal exemption. Council members rejected more progressive proposals, such as raising the personal income tax on high-earners.

The deliberations were also painful because the council decided to keep their decision-making secret, meeting behind closed doors. The budget is a reflection of our priorities as a city, and we believe the public needs to be part of the discussion. We also hope future budget balancing will lean more toward progressive fiscal policy and not fall so heavily on those who need the government safety net the most right now.

This Monday, a coalition launched an online petition to “Save DC’s Safety Net.”

By Tuesday, nearly 1,500 DC residents had signed on.

These are residents who believe that the District must support our most vulnerable neighbors in this economic crisis.

The petition is one of several actions being taken this week to influence the Council as it addresses a $340 million budget shortfall. A group of local and national groups is raising serious concerns over a plan to cut poor families with children off TANF cash assistance. And a rally is being planned for Thursday at noon at the Wilson Building.

Why? A budget proposal from the Mayor would make $100 million in budget cuts – with half of the cuts falling on services for low-income residents. The cuts include affordable housing, legal services, disability services, and assistance to needy families. The DC Council – which has been meeting behind closed doors – may cut even more from the safety net than the Mayor, as well as cutting schools and public safety.

Here’s what’s going on:

1) www.SaveOurSafetyNet.com. This online petition notes that proposed budget cuts are targeting poor residents – balancing the budget on the backs of the poor. It asks the Council to raise new revenues as a way to limit the need for budget cuts.

2) Opposing TANF cuts. 50 local and national groups have signed a letter to oppose cuts to DC’s TANF program – the single largest cut in the Mayor’s budget. TANF provides income support to children in poverty – covering one of three DC children. The Mayor’s plan would cut benefits entirely for some families if they do not meet work requirements. In other jurisdictions, the so-called “full family sanctions” have not worked to get more families to go to work but instead have created more hardship for very disadvantaged families. Many renowned national groups, such as the Center on Law and Social Policy, have signed on because they know the harm that these sanctions have done in other communities.

3) Rally at the Wilson Building, 12:00 on Thursday July 30. The Coalition for Community Investment, a 160-member group that organized the online petition is holding a rally for all concerned DC residents. The message of the rally is to protect the safety net from disproportionate cuts and for the city to raise revenues, as 25 states have done, to address the budget shortfall.

Your voice can be heard, too. Join the rally. Sign the petition. Call your Councilmember

A Nobel Prize-winning economist and a senior advisor to President Barack Obama have said that increasing some taxes is the right approach to weathering tough times and moving toward economic recovery.

Some DC Councilmembers, including Committee on Finance and Revenue Chairman Jack Evans, have said raising taxes is wrong and possibly the “worst” thing to do. They say we need to reduce spending through budget cuts.

Who is right?

Evans and his cohorts say that raising taxes, such as increasing the income tax on high earners, will make us less competitive with surrounding jurisdictions. They are concerned that residents and businesses will flee the District in droves.

Yet there is no evidence to support such a claim. Right across Western Avenue, Maryland residents pay a higher personal income tax in Montgomery County than DC residents. So do taxpayers in Prince George’s County. Well, what about suburban Virginia? A 2006 DC Fiscal Policy Institute study found that Virginia residents actually pay more than residents of DC when you add up all taxes, including the car tax.

The anti-revenue raising group on the council is at odds with many prominent economists. Joseph Stiglitz, a Columbia University professor and 2001 Nobel Prize winner, and Peter Orszag, head of the Office of Management and Budget and former senior fellow at the Brookings Institution, argue that severe cuts to state and local government programs and services might be more harmful to the local economy and a future recovery than raising taxes.

This is based on sound economic theory. Cuts to government spending on goods and services takes money directly out of the local economy and might push households on the brink into perilous circumstances. This slows down the economy even more, stalling the recovery.

Instead, Stiglitz and Orszag say, maintaining services by finding additional revenue through tax increases on high-income earners is a better option. The tax hike will not take money out of the local economy, because consumption and spending of these households will probably remain the same. Instead, these households might stockpile less savings, which were built up when times were good.

In the end, District leaders need to make sure that our city is well-positioned to take advantage of the economic recovery when it happens. In order to do that, we need to maintain investments in our critical infrastructure-and that includes our residents, by making sure they have adequate nutrition, education, and housing.

The budget crisis has been caused by a revenue problem that will get better as the economy recovers. Up until now, the mayor and council have focused mostly on cuts and not revenue enhancements. It is time to consider revenue increases, such as raising income taxes on high-earners, as a way to put us on the road to recovery.

The single largest program cut in Mayor Fenty’s recent budget plan is a $6.2 million reduction in the Temporary Assistance for Needy Families (TANF) program – which provides cash assistance and job readiness services to low-income families with children.  The TANF cut is part of a budget plan with $102 million in cuts, over half of which would fall on services for low-income residents. 

TANF is a critical program, providing support to one-third of the District’s children, including many families who lost jobs in the economic downturn.  The Mayor’s budget proposal would cut monthly cash benefits for these families if they do not meet requirements to participate in work activities – and for the first time in DC’s history, could eliminate benefits entirely for some families.  The proposal also would increase benefits for those who meet the requirements.

The goal of these provisions is to encourage more TANF parents to prepare for employment, but the approach is seriously flawed.  Rather than incentivize families to move toward work, the new penalties are likely to push vulnerable families deeper into poverty.

The proposal does little to address DC’s inadequate TANF services.  Some 90 percent of TANF recipients face at least one barrier to work, and most face multiple problems – such as domestic violence, a mental or physical health issue, or low levels of education.  Yet services for families facing barriers to work are not available in many cases.  For example, an estimated 20 percent of TANF recipients have experienced domestic violence, but fewer than one percent received an exemption from work requirements that such victims are eligible for.

Rather than focusing its energy and resources on improving services that can help TANF families address their personal barriers and gain job skills, the Mayor’s proposal would cut benefits for families who do not – or are not able – to comply with work requirements.  The experiences in other states show that “sanctioning” families does not result in greater compliance with work requirements or better employment outcomes.  Instead, steep sanctions tend to fall on families that have the most personal problems and the greatest barriers to work – and result in greater hardships for very poor families with children.

It is unfortunate that Mayor Fenty chose to balance the budget with a failed policy that would hurt poor children.  The DC Council should reject this proposal and focus instead on working with TANF recipients, policy experts, and advocates to re-design the TANF program to provide services that truly help recipients gain the skills needed to leave welfare for work.

A major element in Mayor Fenty’s proposal for closing DC’s recently announced budget shortfall includes budget cuts that fall heavily on programs affecting DC’s low-income residents – the very residents that are struggling the most during this economic downturn.

Cuts to programs affecting low-income residents total $52 million – more than half of the $99 million in proposed cuts.  Yet these programs only make up about 30 percent of DC’s budget.  In addition, the low-income cuts are more than three times as large as the cuts to any other area of the budget (see figure 1).

What’s on the chopping block? Rental assistance, neighborhood economic development, adoption subsidies, and financial assistance to grandparents taking care of grandchildren, just to name a few.  Some of the deepest cuts were made to DC’s Temporary Assistance to Needy Families (TANF) program – a program that provides financial assistance to low-income families with children –  and to adult literacy and workforce development, areas of the budget that have long been overlooked and underfunded in the District.  With the large increase in DC’s unemployed residents – nearly 15,000 in just one year – and the increased demand for public assistance, cuts to these programs will be particularly painful for DC’s neediest families.

It’s a tough job to balance a budget in the midst of an economic downturn.  DC’s revenue collections are down, but because of the economic downturn, the need for assistance is rising.  So how can officials create a balanced budget that doesn’t rely disproportionately on cuts to programs for low-income residents?

Part of the solution is using DC’s rainy day fund – a $330 million fund that can be used for budget shortfalls – and fixing the onerous payback rules which require us to replenish what we take out within two years.  The Mayor has proposed using $125 million of the rainy day fund, but hasn’t addressed the payback rules.

Another part of the solution is raising revenues.  DC’s budget shortfalls are almost entirely a result of falling revenues from the economic downturn – not from increased spending.  The Mayor’s proposal only includes one $7 million revenue increase.  This solves just five percent of the FY 2010 budget gap.  A fairer approach would be to balance revenue increases with expenditure cuts.

Relying on these principles can help DC officials create a balanced budget that protects the safety net for DC’s most vulnerable residents.

New legislation introduced in the DC Council this week would put important limits on efforts of developers to get large tax breaks for their projects.  This long-overdue bill would require developers to show why a tax subsidy from the city is needed – and what they’ll offer as community benefits in return. 

It couldn’t come at a better time.

It’s a common practice for developers to ask the city for a tax break, but it’s becoming even more common as the stresses of the recession are slowing many projects down. So far this year, at least 16 pieces of legislation have been introduced to provide public subsidies for commercial developments. The tax-break seekers include a boutique hotel planned for the West End, brand-new housing above the bustling Columbia Heights Metro, and the tourist-trap mall in Union Station.

Under some of the District’s economic development programs – like Tax Increment Financing, or TIF –  the city goes through a review process, including  a “gap analysis” by the CFO, to determine whether the  project would not be able to move forward “but for” the public subsidy.  But no such process exists for tax abatements.  Instead, developers can ask for property or sales tax breaks without having to prove why they really need it.   

The Exemptions and Abatements Approval Requirements Act of 2009, introduced by Councilmember Michael Brown, would change that.  It proposes several new rules before a project could receive a tax abatement.  The DC Chief Financial Officer would calculate the true cost of the abatement in terms of lost revenue. The developer would have to spell out community benefits they will offer.  And the developer would have to provide information to allow the city to assess the developer’s financial condition and to determine how much public subsidy – if any – is necessary to complete the project.

This level of oversight over the city’s tax base is desperately needed, especially during a time when falling revenues are forcing services to be slashed. Rather than routinely passing tax break legislation where numbers are barely more than characters on pages, lawmakers will be forced to consider the millions of dollars in revenue that may be unnecessarily lost. This bill takes fresh steps towards fiscal responsibility and transparency.

Like cities and states across the country, DC is having a hard time finding enough money in its coffers to maintain the basic services that residents rely upon.  Most recently, every agency was asked to propose 10 percent cuts to their budgets to address another drop in revenues.

While no one likes budget cutting, some policymakers say there is a silver lining to the fiscal crisis – that it’s an opportunity to examine the landscape of city services and do some long-needed pruning.  The Mayor and Council are finding ways to make agencies more efficient, such as eliminating unnecessary expenses and streamlining staffing.

Yet by and large DC leaders have not used the budget crisis as a chance to make the revenue system more modern and efficient.  Parts of DC’s tax system haven’t been looked at for years.  No one has even lifted the hood.

If they did, they would find a lot that needs repairing.  DC’s tax system could be improved in many ways that also would raise revenues at a time when they are desperately needed.

One place to start is to eliminate the special sales tax exemption for theater tickets.  If you go to an event at the Verizon Center or a Nationals game, the ticket sales tax is 10 percent.  Movie tickets are taxed at the basic rate of 5.75 percent.  But people who buy tickets to theater performances – plays, musicals, opera, dance, etc. – don’t pay any sales tax at all.

As a matter of equal tax treatment, the DC sales tax should apply to all ticket sales.  Some will say that this would hurt theaters.  But I would argue just the opposite, that right now theaters are getting an unfair advantage for no clear reason.  If the Verizon Center can thrive with a 10 percent sales tax on tickets, can’t the Kennedy Center, too?

It’s not as if the District doesn’t support the arts.  In the past decade, the city has given a $20 million grant to the Shakespeare Theater Company and a $30 million grant to Arena Stage.  This year’s budget has a $250,000 earmark for the Kennedy Center.  And every theater company in the city is exempt from the property tax. Movie theaters get no such break.

Extending the sales tax to theater tickets would have another advantage – much of the tax would be paid by non-residents who come into the city for a show.   

Stay tuned for more interesting ways to turn DC’s tax system a well-oiled machine.

Today, 58 organizations signed on to a letter to Mayor Fenty, asking him and the Council to spare safety net programs from budget cuts.  DC faces a $190 million revenue shortfall for the current fiscal year and a $150 million shortfall for FY 2010. 

After a year of budget-cutting in response to falling revenues – the latest shortfall represents the third round of cuts – the options for finding budget savings without hurting critical public functions are getting fewer and fewer.  Mayor Fenty has asked all DC agencies for proposals to cut their budgets by 10 percent.  Given that they already have laid off staff, eliminated vacant positions, and closed some service centers, these proposals likely will include real cuts to services.

Yet demand for public services is growing, as it always does in a recession.  DC’s unemployment rate – at 10.7 percent – is at its highest level in 25 years.  Over 13,000 District residents have lost their jobs over the past year.  As a result, demand for services in DC has increased.  Nearly 12,000 additional households have applied for food stamp assistance over the past year, and more than 1,400 additional households have applied for cash assistance and job training through the Temporary Assistance for Needy Families (TANF) program. 

Rather than increase hardship on families suffering the most during this economic downturn, the letter recommends that District leaders consider using the rainy day fund – as 27 states have – or raising  revenue – as half of all states have.  Using just half of DC’s rainy day fund could solve half of the budget shortfall.  The letter also recommends tapping special purpose revenue sources, like the Baseball Fund, in order to close the shortfall. 

This week, DCFPI released a paper outlining five principles that city leaders should consider as they address the current revenue shortfall.  In the coming days and weeks, check back for specific proposals describing how DC can raise revenue to help close its budget gap.

The Council may have passed the budget last month, but a new revenue forecast has sent the city’s leaders back to the drawing board.  As we mentioned last week, DC again faces a budget shortfall: $190 million for FY 2009 and $150 million for FY 2010.

As the Mayor and Council begin the difficult task of balancing the budget again, we’ve identified five principles to help them close the gap: 

• Use the Rainy Day Fund: Over half of states with rainy day funds have chosen to use their reserves to close a budget gap in FY 2009 or FY 2010. Using rainy day funds minimizes the need for spending cuts or tax increases. DC should use its rainy day fund to fill the FY 2009 budget shortfall and should work with Congress to fix the fund’s overly strict repayment rules.
• Tap Other Resources: The District has a number of special-purpose funds that are financed by fees and other revenues collected by the government. The FY 2009 budget includes 178 approved special purpose funds that are expected to collect $484 million in FY 2009. Some of these accounts have surpluses that can be used to close the budget shortfall. The District should scour aggressively for extra funds, including the city’s Ballpark Revenue fund.
• Spread Budget Cuts Broadly: DC agencies already have been asked to cut their budgets considerably to address previous revenue shortfalls. Future cuts should be spread across agencies to minimize the impact in any one area. Possible programmatic cuts include postponing the Healthy DC program, postponing lower-priority transportation projects, and delaying an expansion of the police force.
• Raise Revenue: The District’s budget shortfall stems almost entirely from falling revenue collections. During the current recession, 23 states have enacted revenue increases, with 12 more considering increases. To raise revenue, DC should consider measures like eliminating the CAPCO tax credit, expanding the sales tax base, and raising the minimum corporate franchise tax. High-income households should contribute through a new top income tax rate or by forgoing the tax exemption for interest received from out-of-state bonds.
• Preserve Safety Net Programs: Given the current economic downturn and DC’s high unemployment rate, the District should avoid cutting services that help with basic needs like housing, healthcare, and food assistance. Demand for the District’s safety net programs has risen over the past year; the Temporary Assistance for Needy Families (TANF) caseload has risen by 9 percent, while Food Stamp/SNAP participation has increased by 14 percent.

This Thursday morning, July 2, homeless individuals and advocates will gather to speak to the crisis in the lack of shelter for homeless individuals and families in DC.  The Homeless Emergency Response Workgroup will hold a rally at Freedom Plaza at 10:00 a.m.  They also will release a report on unmet shelter need, a “Declaration of Inter-Dependence,” and a letter to the Mayor and DC Council asking them to address the crisis.

Event organizers are looking for groups and individuals to sign a letter and to show up at the rally. (See rally contact information below.)

A rise in homelessness in the District of Columbia is the latest evidence of the devastating impact of the economic downturn. The number of homeless families with children is up 25% this year, and 200 families are on a waiting list just to get into emergency shelter, according to the sign-on letter.  Yet a main shelter for homeless families (at D.C. General) is slated to close because there is no funding to run it past the winter months.

A study of DC shelters in April by the Homeless Emergency Response Workgroup – a coalition of service providers, consumers, religious groups, advocacy organizations, and other community groups – found that many people were turned away due to lack of capacity, with a high of 79 turned away on one night.  They also showed that shelters in the individual emergency system were in overflow on 18 of 31 nights in May 2009, compared with zero nights in May 2008.

Both shelter and day service providers have said this is one of the worst years in terms of increased need for services.  Unlike in past years, the demand for shelter has not decreased with the warmer weather.

What do the organizers want?  The letter to the Mayor and Council asks for in increase in shelter beds and an improvement in the quality of DC shelters.  Equally important, it asks the city to live up to the legal mandate to track “unmet need” for shelter.

The sign-on letter also supports increasing housing resources in order to solve homelessness, but recognizes that emergency shelter needs will continue and that the District needs to do a better job of assessing and meeting that need.

For more information on this Thursday’s events, contact:

Eric Tars
Human Rights Program Director, National Law Center on Homelessness & Poverty
Office: 202-638-2535
etars@nlchp.org

The report and additional information are available here.

The District’s unemployment rate topped 10 percent in May, the highest it has been in 25 years.  Sadly, only about a third of jobless workers in DC end up receiving unemployment benefits.

There’s good news, though: The federal government is offering DC $18 million to help these folks get help. So should we try to get the money for them now or wait until later?

Almost all of us, especially given these difficult economic times, would want the help immediately.

Except, apparently, the District of Columbia. The District has yet to make the needed reforms to its unemployment insurance program to get the extra federal funds.

The money is tied to the Unemployment Insurance Modernization Act, part of the economic recovery bill signed into law by President Obama last February.  It gives DC and the states a financial incentive to expand unemployment benefits to three key groups of people who are currently excluded: those who leave their job due to domestic violence or other family reasons, those who lose a part-time job and are looking for part-time work, and those who are permanently laid-off and in need of extended training.  The recovery act also encourages states to expand benefits for unemployed workers with dependents.

To sum up, the feds want to give money to hard-working Americans who lost a job and need a little extra help to get through this recession.

Sound good?

Twenty-five states think so. They have expanded their unemployment assistance to include at least two of the four categories of workers above, which qualified them to receive two-thirds of their incentive money. The District hasn’t yet done so. The deadline to qualify is August 2011.

Why is the District waiting?

DC did get one-third of the approximately $27 million available because it already had in place a provision  allowing workers to count their most recent earnings in their unemployment application, known in technical jargon as the “alternative base period.”

But there’s no reason for DC to be sluggish about getting the other $18 million. (The money can only be used for the unemployment system and can’t be used to cover DC’s budget shortfall.)  Mayor Adrian Fenty and the D.C. Council, particularly Ward 8 Council member Marion Barry, who oversees the Department of Employment Services, need to push DOES to make decisions and bring forth the necessary legislation to put these reforms into place.

It’s a win-win: More District workers receive more money, which they will spend and help stimulate the economy.

Who wouldn’t want that?

It seems like just as fast as a $750 million public financing deal for a convention center hotel was put on the table, it was taken off.  One of the driving forces behind the fall of that proposal?  DC’s recently enacted debt cap.  It’s an early sign that this tool will help keep our leaders fiscally honest, especially when it comes to economic development subsidies.

Just last fall, the DC Council adopted legislation saying that the District cannot allocate more than 12 percent of its total annual budget toward debt payments. The additional borrowing that was proposed for the Convention Center hotel would have pushed our debt above the 12 percent cap.

Why put a limit on debt?  Any debt the District issues creates a long-term payment obligation.   When DC issues bonds, it pledges its tax revenue to pay it back – often for 20 years or more.  And those bonds must be repaid, no matter what happens to the economy.  So even though our resources are now shrinking, we still have to pay back all of the debt we have issued.  Too much debt can squeeze resources needed for other important programs and services.

Debt limits are also something that Wall Street pays close attention to.  When a city or state’s debt gets too high, it can lead to a lower bond rating.  That in turn, means higher interest rates when it’s time to issue bonds for things like schools or libraries.  Managing debt well, by contrast, can lead to better bond ratings.

DC already has more debt than most cities and states, and there is pressure for more.  The city is borrowing a lot to fix up schools and other public facilities.  And we have authorized over $1.5 billion in debt to subsidize economic development projects over the past decade, like the retail center at Gallery Place.  Until the debt cap, there’s been no real limit on economic development subsidies.

That’s why a cap is so key.  Knowing we cannot issue an unlimited supply of debt, elected officials must make choices and set priorities over the infrastructure and development projects they want to support with public tax dollars.

With the new debt cap, a decision to publicly finance the entire convention center hotel project could have forced officials to scrap many long-planned developments around the city such as the Southwest Waterfront redevelopment.  When faced with that decision, officials decided that the convention center hotel could not trump those already- planned projects and had to find another way to make the project go forward

Hooray for DC’s debt cap!

Just a few years ago, the Chief Financial Officer’s “quarterly revenue forecast” was something DC officials looked forward to because boom times meant surplus money to spend.  Now that we’re in a recession, the forecasts are increasingly gloomy because falling tax revenue causes budget shortfalls. And when that happens, Mayor Fenty and the Council must find cuts or revenue increases to close the deficit.

The just-released June revenue forecast shows a new $190 million shortfall for this fiscal year and $150 million for 2010.  Over the past year, projected 2010 revenues have dropped nearly $1 billion, making this fiscal crisis one of the worst in DC’s home-rule history. With unemployment and food stamp rolls at record levels, it’s a major economic crisis for families, too.

As DC’s CFO notes, there is only one real choice for addressing the 2009 shortfall: tapping DC’s $330 million rainy day fund.  With fiscal year 2009 nearly three-fourths over, there are no realistic budget-cutting options.  Even if the police and fire departments, libraries and parks were shut down entirely for the next 3 months, we wouldn’t save enough.  And it is too late to quickly implement tax or fee increases.

Drawing from the rainy fund is not as easy as it should be, however.  Congress created onerous rules a decade ago requiring the Districts to repay such withdrawals in a year.  They since have relaxed repayment to two years, but that still is more restrictive than in nearly all states, which typically wait until their budgets return to surplus to replenish their rainy day funds.  Considering that DC’s rainy day fund comes from local tax dollars – not a penny of federal funds – the Congressional restrictions are maddeningly unfair.

So as the city taps the rainy day fund, DC leaders also need to make the very reasonable request that Congress eliminate the restrictive repayment rules.

That will get us only to September 30, the end of fiscal year 2009.  What do we do after that?  Over the past year, Mayor Fenty and the Council adopted numerous belt-tightening measures, but they were able to largely leave core services intact.  They raised some revenues, but in pretty safe way, like parking enforcement.  As the Mayor and Council face a new shortfall – that could get even bigger – they are likely to have make some unpopular choices to cut real services and raise revenues.  Doing so in a way that protects our most vital services, particularly for residents suffering from the economic downturn, will be their challenge.

A number of for-profit developers have approached the DC government, hat in hand, seeking public subsidies to support projects stalled due to the economic downturn.  The requests for help include condo projects, a four-star boutique hotel, and most recently, a convention center hotel. They seem to be getting a positive reception in the Wilson Building.

But we have not seen much attention paid to another group of stalled projects – millions of dollars of affordable housing projects.  Helping these projects move forward would not only create jobs and stimulate the DC economy but also would address a huge need in the city.

The biggest challenge facing the housing development community is a recent drop in funds available from DC’s Housing Production Trust Fund.  Right now, the city has resources to support only one-fourth of the affordable housing projects that are ready to move ahead.

The Housing Production Trust Fund (HPTF) is the District’s primary source for affordable housing construction and rehabilitation, and is funded by collecting a percentage of DC’s deed recordation and transfer taxes.  The  slowdown in the real estate  market has caused  revenues into the HPTF to take a nose dive – falling by 57 percent in the last two years – from $42 million in FY 2008 to just $18 million expected for FY 2010.

But the drop doesn’t mean that there is less need for – or willingness to build – affordable housing in the District.

In fact, that willingness is evident by just how much is stuck in the development pipeline.  The Department of Housing and Community Development, who manage the HPTF, recently announced that they had $200 million worth of affordable housing projects (about 80-85 projects) in the pipeline.  However, the HPTF only has about $52 million in resources – leaving nearly $150 million in stuck projects. Considering that these projects use public funding to leverage private financing, the missed opportunity is even larger.

Last fall, the DC Council recognized that the lack of revenue for the HPTF was a problem and adopted legislation with a goal of setting a $70 million funding floor for the HPTF in FY 2010 and an $80 million funding floor in future years.  Yet, the recently enacted FY 2010 budget did not provide a new funding mechanism or meet the funding goal.

So, why are we now offering to bail out stalled commercial projects when there are millions of dollars worth of stalled affordable housing projects that we can’t move?  It’s a question every Council member should have to answer.

When some rates go up, like a TV show’s ratings, it can be a good thing.  However, there is one kind of rate that is going up now that is not a good thing:  unemployment rates. The current economy is making it hard for people to make ends meet.  Jobs cuts and company closures are leaving more people with no way to support their families.  Unemployment also is bad news for the companies that have managed to survive because there are fewer consumers to keep their businesses afloat. This is not only a major problem for DC, but for many other of the states as well. The worst part of all the trouble is that numbers of jobless citizens just keeps getting bigger.

In February 2008, unemployed DC residents equaled 5.6%. In April of 2009, barely a year later, that number rose to 9.9% of people without a job.  There were 18,400 unemployed DC residents in February 2008, but there are now 13,900 more – for a total of 32,300.  DC’s unemployment rate is at the highest level in 25 years.

Unemployment is growing in other places too.  Some cities are doing a lot better than DC, and some are doing a lot worse. In Omaha, Nebraska, unemployment in February of 2008 was just 3.5 percent and only rose to 4.7 percent in February of 2009.  On the other hand, Detroit, Michigan had unemployment of 13.6 percent, which rose to 22.8 percent in those same dates.

At this moment, DC has the 27^th unemployment rating of 50 major cities in the US.  The District of Columbia ranks in the middle.  However, just because the numbers say we’re not in the most trouble, it doesn’t mean that we’re not in any trouble.  If this problem is going to be resolved, we need to take action fast, and NOT by talking about it.

The hotel talk these days is mostly about the recent proposal from the District to pay $750 million to build a mammoth Convention Center Hotel.  We’ll write on that topic pretty soon.

Today we want to cover a lesser-discussed hotel subsidy – it’s an effort by a developer to get $7 million in tax breaks from the city for a planned boutique hotel at 22^nd and M Streets, NW.   A bill before the DC Council to do just that was the subject of a hearing in May.

$7 million may be small compared with $750 million, but it raises big questions about why DC should provide any subsidy at all to a hotel in one of its strongest real estate markets, especially at a time of difficult budget conditions.

The justification for this bill is that a changing economy and weak credit market have made it harder to finance the hotel’s development.  But that hardly seems to be a good reason to give it a $1 million tax break for seven years, as the bill would do.

The District cannot bail out all stalled commercial projects. Many development projects are facing trouble.  The District cannot afford to subsidize all of them, and it is not fair to help some projects but not others.

There are plenty of affordable housing developments that are stuck due to financing problems. The economic downturn has forced a big cut in funding for DC’s Housing Production Trust Fund.  The city has $175 million in approved affordable housing applications, but only $27 million to pay for them.  Rather than spend $7 million to subsidize a boutique hotel, the city should use its resources to get more of these affordable housing projects going.

There is no evidence that the hotel needs this subsidy to succeed It’s not clear why it needs a tax break for seven years, when the credit market probably will return to normal before then.  If the hotel has a solid business plan, it eventually will get built even without a subsidy.

Other forms of assistance have not been sought. The federal stimulus law has provisions to help businesses access low-interest rate loans.  The District should pursue that for the hotel first.  A second option (though less desirable) would be to provide a direct loan from the District at a market rate.  DC passed legislation in 2008 to offer a similar loan to Arena Stage.

The Council often considers ad hoc tax breaks without considering the broader context – that a $7 million tax break for a luxury hotel means $7 million less for other, more important priorities.  We think these trade-offs need more attention before the city gives away too much of its precious revenue.

The District’s summer youth employment program is expected to cost about $45 million this year, though the mayor and the D.C. Council allocated only $21 million for it in this year’s budget. Mayor Adrian Fenty recently proposed paying for the program by emptying the Nationals Stadium Community Benefit Fund.

The fund wasn’t intended as a source of money for unexpected shortfalls-or expected ones, as is the case with the summer jobs program. Council Chairman Vincent Gray said last week that he doesn’t think the Community Benefit Fund should be used that way – and we agree.  The Council should reject using the fund to bail out the summer jobs program – and instead devote the money to important unmet community needs like affordable housing.

The Community Benefit Fund was created out of the legislation authorizing the building and financing of a major league baseball stadium in Southeast Washington. Given the tremendous expense of taxpayer dollars into the project-more than $611 million-the fund was established from revenues generated around the ballpark to be put toward community priorities.

The Fenty administration wanted a huge summer jobs program again this year, and they allowed it to expand beyond its approved budget. Last year, the program ran $30 million over budget. The community benefit fund simply became the convenient way to cover the ballooning costs.  But that just doesn’t seem right.

In election after election, voters list improving schools, increasing public safety, and preserving and building more affordable housing as their top concerns. We believe the Community Benefit Fund should reflect these widely stated priorities and suggest putting this important source of money toward programs that fund affordable housing such as the Housing Production Trust Fund and the Housing Purchase Assistance Program. The Housing Production Trust Fund provides crucial financing for affordable housing projects in the city, and the Housing Purchase Assistance Program helps low-and-moderate income District residents purchase a home.

The Council tried last week to pare back the summer jobs program to six weeks, bringing its costs closer in line with its budget.  It received a majority of votes but not the nine votes needed to approve emergency legislation.

That leaves the summer jobs program at its current bloated size, but it doesn’t mean that the Community Benefit Fund has to be used to cover the overrun.  We urge the Mayor and the Council to use the Community Benefit Fund for something that will benefit District neighborhoods for years to come: affordable and safe homes.

Two D.C. council members have introduced legislation to exempt the retail center in Union Station from an estimated $2.7 million a year in local taxes. Instead, according to the bill co-sponsored by Jack Evans (D-Ward 2) and Tommy Wells (D-Ward 6), the shopping mall-which is located on federal property-would pay a lump sum of $253,000 a year. That’s an estimated $2.45 million a year tax break every year

Why should the McDonald’s or Ann Taylor in Union Station be taxed differently from the McDonald’s or Ann Taylor in the Mazza Gallerie or Dupont Circle?

Very simply, they shouldn’t be.

Taxing Union Station at the same rate as other retail spaces and eateries in the city is not only good fiscal policy for the District, but a matter of fairness. Government buildings are exempt from property taxes, but the District implemented a law in 2004 to put for-profit, commercial businesses that operate in these buildings on a level playing field with those in taxable spaces – by creating a property tax equivalent they must pay.

The possessory interest tax applies to approximately 200 businesses in the city housed in spaces such as the Ronald Reagan Building and International Trade Center, the Old Post Office Pavilion, and the Frank Reeves Center. This is an important source of revenue for the District because so much of the city’s real estate is tax-exempt and services in government buildings-such as food courts-are more and more being privatized.  It also is a matter of tax fairness – the commercial enterprises in federal and other tax-exempt buildings should pay the same taxes as businesses in traditional commercial buildings.

Union Station is owned by the U.S. Department of Transportation and run by the nonprofit Union Station Redevelopment Corp. Yet the ground lease of Union Station was awarded to a for-profit real estate company, Ashkenazy Acquisition Corp., which purchased it for $160 million in January 2007. According to an Ashkenazy press release, Union Station is one of the most successful malls in the country, averaging sales per square foot of $800 a year, twice the national average.

Union Station representatives complained that retailers were targeted by city tax officials and being unfairly singled out. But by asking for this tax break, Union Station’s businesses would get a special tax status that other businesses don’t have. The possessory interest tax should be applied to Union Station, and the city should work with the Union Station Redevelopment Corporation to identify the proper entity to pay the tax.

Some DC policymakers have commented that DC is weathering the economic downturn better than most.  By that, they mean that our budget problems are not as bad as in other cities and states.

That may be true.  But indicators of the well-being of DC residents tell a very different story.  Unemployment is at a 25-year high and food stamp recipients now number more than any year on record.  DC families are not weathering the downturn well at all.

Unemployment: 9.9% of DC’s workforce was unemployed in April, a total of 30,000 people. On average, 1,000 residents have lost their jobs every month over the past year.  DC’s unemployment rate is now higher than in any year since 1983.  Today’s unemployment rate exceeds any time in the 1990s, when DC’s economy went into a major tailspin.  And these figures don’t even include people who are too discouraged to look for work.

The unemployment rate tells us DC residents are losing jobs, but not who is being affected most – is it lawyers or laborers?  In particular, the unemployment rate alone doesn’t show how DC’s most vulnerable families are being affected by the downturn.  For that, we can look at another measure.

Food Stamps:  The number of residents getting food stamps is a good indicator of economic hardship, since the program is limited to low-income households (those below 130 percent of poverty.)

Like unemployment, DC’s food stamp rolls are rising rapidly.  Over 101,000 DC residents received food stamps in January 2009.  That’s more than one in six residents, and it is higher than the annual average for any year on record (the records go back to 1989).  In some ways, this is a good thing, because it means people needing help are getting it.  In DC, a relatively high share of eligible households gets food stamps.  But it also is a sign that more people are in need and a sign that poverty is on the rise.

For a city where poverty didn’t fall during the boom years of the early 2000s, this is decidedly bad news.

If you would like to learn more about the trends in DC’s unemployment rate and food stamp program, click here.

This year’s budget debate raised two critical school finance questions – with big dollar amounts and with emotions running high.  The issues involve just how much funding DCPS should get for basic operations and how much the city should pay for charter school facilities.

While the budget was adopted on May 12, these issues haven’t really been resolved yet.

DCPS Funding: The Council set aside $28 million of DCPS funds because it believed the enrollment projection was unrealistically high.  The Mayor assumed DC Public School enrollment would grow modestly and that public charter schools would grow a lot, resulting in combined enrollment growth of 3,000.  This left the Council scratching its head, because combined enrollment has been falling. DCPS would get the set-aside funds in the fall if the enrollment projection holds true.

Chancellor Rhee responded that this equivalent to a budget cut. The count occurs in October, which means DCPS would have to start the year working on the lower budget amount.

We tend to sympathize with DCPS.  DCPS needs to know its budget now so that it can plan for the start of the school year.  Its enrollment estimate is based on an independent study, though for a few technical reasons it may be a little too high.  Moreover, if we want a school system where students can choose to attend a public school or a charter, the price for that flexibility may be to over-estimate enrollment a bit each year.  Since we don’t really know where students will end up, both DCPS and public charter schools deserve the benefit of the doubt on enrollment.

This year’s brouhaha suggests that it may be time to come up with a new funding formula that is tied to actual staffing and other operating needs.

Charter School Facilities: Currently, each public charter school gets an annual facility allocation per pupil. But different charter schools have different needs – some are paying off big mortgages, while others operate rent free. If a charter gets more facility money than it needs, it gets to keeps the extra.

The Mayor’s budget made a seemingly reasonable proposal to give charters only enough to cover actual facility expenses, which would have saved $24 million.  But the charters cried foul, saying they need the full payments to build up reserves for future needs.

The Council restored most of the cut, but left in place the one-size-fits all funding formula. Council Chairman Gray pledged to spend this year figuring out the right way to support charter school facilities. For the sake of good policy and DC’s finances, this is important. One way to reduce facility expenses is to do more to help charters get access to excess DC public school space.

The District has $23.4 million to spend on programs and projects to benefit the city’s residents, but so far this year our elected officials have opted not to use it.

What is this pot of gold and where did it come from in these tough economic times?

The monies are the accumulated balance in the Community Benefit Fund, which was part of the law authorizing the financing and construction of Nationals Park. The mayor and D.C. Council created the fund in 2004 so District residents would reap some economic benefits from the huge public expense of building of a major-league baseball stadium.

The Nats began playing in the Southeast ballpark in Spring 2008, but the Community Benefit Fund remains benched so far.

During this year’s budget negotiations, some council members quietly suggested the idea of using the fund to provide more money for affordable housing programs. The money would provide a big boost for the Housing Production Trust Fund, which has seen a severe drop in dedicated money and put the construction of many affordable units on hold (Learn more about that here.). Also suggested was putting the money toward the Local Rent Supplement Program (LRSP), which helps renters, and the Housing Purchase Assistance Program (HPAP), which helps low-and-moderate District residents buy a home.

The DC Fiscal Policy Institute supports the use of the Community Benefit Fund to boost these important programs which provide critical assistance to residents throughout the city.

There is an important issue of making sure that use of the Community Benefit Fund reflects real community priorities. When the mayor and Council established the fund, they included a community input process that turns out to be pretty cumbersome. We think it makes sense to revamp and streamline that process, but that may take a while. In the meantime, the Council could develop a proposal to use the $23 million existing funds, with a hearing to get public input, and then use the revised community input process after that. And maybe the relief given to the city’s low-income renters and aspiring homeowners by using the stadium’s community benefits fund will inspire the Nationals relief pitching staff and them help them win games in the late-innings!

DC’s budget may have just been passed, but the debate over the use of limited taxpayer dollars isn’t over.  Today, the Finance and Revenue Committee held a hearing on six different bills that could cost the city $3.3 million in FY 2010 and $13.7 million from FY 2010-FY 2013.  The bills would provide property tax abatements for multiple commercial development projects in the District.  Those property owners would get a break for some – or even all – of their property taxes for up to 20 years.

Each bill is unique, but together, they leave some big questions unanswered.

Why these projects?  All were planned without tax abatements, and two of the projects are completed or nearly complete.  They are in some of the strongest markets in the city – just above the Columbia Heights Metro, for example.  Could it be the economy?  That was the justification for a recent tax abatement for a project called View 14.  Yet, it’s likely that every project is having difficulty right now. A changing market is part of the risk a developer takes on.  We can’t subsidize every struggling commercial project

Why do these projects get priority over the many affordable housing projects that also are stuck as a result of the economic downturn and a cut in the Housing Production Trust Fund? We think it’s more important to get those projects moving than a luxury hotel in Foggy Bottom.

What’s the cost?  Too often, the official fiscal impact for tax abatements way understates the ultimate cost.  Until projects are completed, which can take several years, the official cost covers only the tax break for the land.  DC’s 2010 budget includes tax abatements that ultimately will result in $13 million in annual revenue losses, but only $1 million had to be set aside in 2010 because most of the projects are still in the early stages.

How can we make the process fairer and more transparent?  Having an idea upfront of what the full cost to the District will be, and a financial analysis from the CFO that justifies that the project cannot go forward without the assistance, are two critical steps.  This information can help ensure we can make well informed decisions over the use of limited tax payer dollars.

DCFPI testified at the hearing about these tax abatements and solutions to improve the process.  Copies of the testimony on property tax abatements for:

Square 50, Lot 87, Kelsey Gardens,  Highland Park I and II, and Park Place, can be found here

The Studio Theatre Housing can be found here

The Union Station Redevelopment Corporation can be found here

Going into the FY 2010 budget season, the District faced a revenue shortfall of $800 million or 14 percent of the local budget. Two months later, DC has a balanced budget that largely protects services and even includes some modest increases for affordable housing and other low-income programs.

It’s a pretty amazing outcome, and both the Mayor and the Council deserve credit for balancing the District’s budget in difficult economic times.

The Mayor proposed a budget that used a combination of federal stimulus funding, reductions in hundreds of government positions, and revenue increases (though some of them, unfortunately, were regressive proposals that would have hit low income families hardest)

As we mentioned in our last post, the Council removed many of the rough edges of the Mayor’s proposal and added some nice touches. On the revenue side, the Council eliminated a proposed streetlight maintenance fee and maintained cost-of-living increases for the standard deduction and personal exemption. (The COLA for the homestead deduction was restored beginning in FY 2011.) On the program side, the Council found a way to give a cost-of-living increase to cash assistance benefits for needy families with children, to eliminate the waitlist for adult literacy services and expand adult job training programs, and to create 180 units of affordable housing through the Local Rent Supplement Program.

However, the news isn’t all good. DC’s affordable housing programs have taken a significant hit, even with the welcome boost to LRSP, losing nearly one third of their local resources since the start of FY 2009. The decline includes cuts to the first-time homebuyer program and rapidly falling resources for the Housing Production Trust Fund – DC’s primary source for affordable housing construction and rehabilitation.

The Council also left several key education issues unresolved, including how charter school facilities funding will be determined after FY 2010. The Council also set $27.5 million of DC Public School funds in an escrow account because it believed the DCPS enrollment projection is unrealistically high. DCPS would have access to the funds in the fall, if enrollment audits show they need it. But Chancellor Rhee says that would come too late – and that she would have to make cuts now to deal with the restriction on those funds.

Look for updates to our Budget Toolkit summaries next week to find out how the Council’s final budget vote will affect key programs.

The D.C. Council approved a $5.4 billion local funds budget Tuesday. One pot of money took up a considerable amount of time and energy this budget season for the mayor and some council members, even though it amounted to just one half of one percent of the city’s overall spending plan.

We’re referring to the approximately $22 million put toward earmarks-the noncompetitive allocation of taxpayer dollars to nongovernmental organizations and projects. Groups on the list this year include the Kennedy Center ($250,000), the National Council of Negro Women ($1,000,000), and the Greater Washington Fashion Chamber of Commerce ($100,000).

In some ways, the process was better this year. The mayor and council stuck mostly to a $250,000 per-group limit imposed after last year’s budget season, and earmarks were less than last year’s total of nearly $40 million.

Yet the process remains problematic in terms of good budgeting and overall fairness. Earmarking bypasses public input and scrutiny. There are no public hearings and no competitive award process, such as a request for proposals, to select recipients. In the end, groups who have ties to council members or might be important to a re-election bid get money, and those who do similar work but lack connections end up empty handed.

Other disparities became evident this budget cycle. Groups located in Ward 1 made up approximately one-third of the recipients. Why? The council member who represents that part of town, Jim Graham, is chair of the Committee on Public Works and Transportation. That committee generates large sources of revenue, mostly from parking and litter law enforcement. While many of the groups that got these earmarks do valuable work, other groups doing equally valuable work-let’s say youth mentoring or job training- but in other wards didn’t have an equal shot at the money.

One proposal to level the playing field is to appropriate a certain amount of money to a community fund that would be divided equally among councilmembers. Under this system, the size of the earmark pot would be known and capped each year. There would be an even distribution of dollars across the city. Council members could spend the budget season thinking about important public policy priorities rather than scrounging for earmark funds. And groups seeking funds would have to make a strong case that they deserve the funds, bringing an element of competition back into the process.

The finish line for the DC budget is just around the bend, which means this is a critical time to tell the Council what you want to see changed in the FY 2010 budget.  There are lots of ways to be heard, but one important opportunity is a rally at noon at the Wilson Building on Wednesday, May 6. (See details below.)   The Council will make its last changes to the budget this week, before the final budget vote next Tuesday, May 12. 

As SOME (via Bread for the City’s blog) reports, Council committees have added funding for some key programs and rolled back some of the regressive revenue increases we helped to advocate against. 

Councilmember Graham set aside $2 million for the Local Rent Supplement Program (LRSP) and $1.5 million for TANF, using revenue from enhanced parking enforcement.  LRSP provides housing vouchers for low-income families and funding to make new housing projects affordable to the lowest-income residents, while TANF provides job training, supportive services, and income assistance to over 16,000 DC households.  Councilmember Barry devoted $2 million to provide adult literacy services to 500 District residents on a waiting list

The Council also voted to eliminate the streetlight maintenance fee and to restore the cost-of-living adjustment (COLA) for the standard deduction.  It voted to restore COLAs for the personal exemption and property tax homestead deduction as well, but not until FY 2011.    

While this is a great start, there is still more to be done.  LRSP needs an additional $3 million to keep the program issuing new vouchers and supporting new housing projects in FY 2010.  The new funding for TANF will restore the FY 2009 cost-of-living increase, but it doesn’t provide enough to cover an inflation increase for FY 2010.  And the Housing Production Trust Fund – the primary source of funding for affordable housing construction in the District – has seen its budget fall from $60 million to $18 million in only two years, due to declining deed and recordation taxes (the main source of revenue for the Trust Fund). 

The Fair Budget Coalition will be holding a rally tomorrow at noon at the Wilson Building to thank Councilmembers for their support and to advocate for increased funding for affordable housing, TANF, and other services for low-income residents.  Come advocate for these critical services. 

We’ll be updating our Budget Toolkit summaries this week with information from the Council’s mark-ups.  Check back to find out what changes the Council has made to the FY 2010 budget.

A D.C. Councilmember has proposed increasing the income tax rate on the District’s wealthiest residents. The revenue-raising idea has been met with some skepticism, including the belief that this will push the well-off to leave the city.

This proposal should be taken seriously. A number of states, including California and Maryland, have recently raised taxes on high earners, and about 10 states are now considering such a measure. In fact, the new rate in DC would remain below the top rate in the Maryland suburbs. It  would not only generate needed revenue, but also shift the District in the direction of a more progressive tax system.

This approach stands in contrast with several revenue provisions in the FY 2010 proposed budget, which would make DC’s tax system more regressive. In particular, proposals to eliminate the cost-of-living increase for the standard deduction and personal exemption for the income tax and the homestead deduction for the property tax-  as well as charging a $51 a year “streetlight maintenance” fee-would hit low-income and working families in the District the hardest.

The Equitable Income Tax Act of 2009, introduced by Councilmember Jim Graham, is a progressive alternative. The bill would create a bracket of 8.9 percent for those with taxable income above $500,000. Currently, D.C.’s top rate is 8.5 percent. The increase would raise $11 million in revenue next year.

Even with the proposed new rate, DC’s top income tax would remain lower than in neighboring Montgomery and Prince George’s counties. Affluent residents in communities such as Bethesda and Potomac now pay a combined state and local income tax rate of 9.45 percent for taxable income above $1 million.

What about Northern Virginia? Though the state’s top income tax rate is 5.75 percent, Virginia suburbs have far higher property taxes, including the annual car tax. A September 2006 study by DCFPI found that when both income and property taxes are added up, D.C. residents at many income levels pay the lowest overall taxes in the region. 

But is it reasonable to raise taxes on anyone during this downturn?

A simple answer: Yes. Many economists say that raising income taxes on higher-income households is a sensible approach to addressing budget shortfalls because it has a very limited effect on the economy.  And researchers found that when New Jersey raised its top income tax substantially in 2004, the state lost less than 1 percent of its high-income households.

For more information, see DCFPI’s policy brief on this subject.

Summer’s almost here and with it will come another DC summer youth jobs program. Youth employment programs can play a constructive role in young people’s lives: connecting them to the world of work, teaching interpersonal and occupational skills, and serving as a springboard for the future.

But that is not the summer jobs program we have here. The District’s Summer Youth Employment Program (SYEP) can charitably be called “uneven.” Although some youth have positive experiences every summer, that’s due to the individual initiative of host sites, not by design or oversight.

Last summer’s program had well-publicized problems that led to a $30 million overrun and the firing of the agency’s director. A few key decisions – not putting a cap on enrollment and extending the length of the program from six weeks to 10 weeks – overwhelmed the Department of Employment Services (DOES). Even before the program’s expansion in 2008 to 21,000+ youth, DOES did not administer a consistently high-quality program. Last summer was not the first time young people got paid to do nothing.

The city is to be applauded for setting a bold goal to help youth. But it needs to align its vision with budgetary realities and its administrative capacity. The FY 2009 budget allocated $23 million for this summer’s program. Yet wages alone for the anticipated 21,000 participants will cost $33 million.

The FY 2010 budget allocates $43 million to SYEP, seemingly a realistic estimate. Especially in a tough budget environment, that is a lot of money, particularly for a program with uneven and sometimes poor outcomes. Meanwhile, only $9 million is allocated towards year-round youth employment programs. If the city is serious about helping youth, it should beef up its year-round programs – youth don’t only need guidance, support and skill-building in the summer months.

Given its track record, it is irresponsible to put $43 million toward SYEP. In budgeting for the 2010 effort, the agency should decide how many youth it can serve in a high-quality program -certainly far fewer than 21,000, and probably fewer than 15,000 participants. It can then focus on making the improvements needed to ensure a successful experience for participants – engaging employers to develop quality placements, getting youth work-ready, and improving program administration.

Then the city should direct the remainder of the funds towards year-round programs with a focus on disconnected youth: release a request for proposals for programs that serve youth and young adults with a combination of occupational skills training, basic skills education, work readiness services, and maybe stipends for participants.

A bill in the DC Council that would set a 5-cent fee on disposable plastic and paper bags is getting a lot of attention these days. It would apply to bags used at grocery stores, drug stores, liquor stores, restaurants and food vendors and would ban disposable bags that cannot be recycled.

The goal is to reduce the copious amounts of paper and plastic bag waste in and around the Anacostia river watershed. But legitimate concerns are being raised about the burden it might place on low and moderate income shoppers in the District.

The DC Fiscal Policy Institute hasn’t taken a position on this bill. But we think the impact that it would have on low-income people is important and should be addressed.

Based on estimates of current plastic and paper bag use, DC households could expect to pay between $2.50 and $5 per month in fees if their bag-use behavior doesn’t change. But of course the goal of the fee is to change behavior – and similar measures have proven effective (Ireland’s plastic bag tax reduced use by 90% in just three months!) Assuming a 50% reduction in bag use, the cost per household would be between $0.63 and $1.25 per month.

To make sure low-income residents can keep their costs down, they’ll need access to reusable bags. The DC bill would use some of the fee revenues to provide re-usable bags to seniors and low-income communities. This outreach must be carried out effectively. If it is, households could actually even benefit – since some stores offer rebates for customers who provide their own bags, and the bill creates incentives for more stores to do so.

Another concern that has been raised is the potential impact of the fees on food banks and food pantries that use bags to distribute food. But the fee only applies to bags distributed by a store at the point of sale, so donated or distributed bags would not be affected.

It’s worth noting that low-income residents may support bag fees despite the strain they might place on their wallets. In a Seattle survey, 88% of respondents with incomes below $25,000 were willing to pay extra for plastic bags.

With the goal to clean up the Anacostia and surroundings, a bag fee could adversely affect low-income residents. Much of the effects could be mitigated, however, through strong efforts to inform residents, hand out re-usable bags, and work out other kinks as the bill moves forward.

 This blog entry is part of a series that will highlight specific areas of the Mayor’s proposed FY 2010 budget.  For more budget analysis and information, visit our Budget Toolkit.

Affordable housing faces a tough future in the District.  While the economic downturn means even more District residents now need affordable housing, funding for it is falling at an alarming rate. The proposed local budget for affordable housing in FY 2010 is $79 million – a cut of more than one-third from the $124 million in the initial FY 2009 budget.

The lack of resources means that hundreds of affordable units that non-profit developers are ready to build won’t get started, that the wait list of nearly 26,000 people at the DC Housing Authority won’t get any shorter, and that fewer low-income families will become first-time homebuyers.

Support for DC’s Housing Production Trust Fund continues to plummet as a result of falling deed tax collections, the source of the Trust Fund’s funding.  The Trust Fund – the primary resource for affordable housing construction, renovation, and tenant purchase – will receive just $18 million in FY2010, compared with $59 million in 2007.  Many “shovel ready” projects will sit idle next year.

Other programs face problems too. HPAP, which provides home buying assistance to low-and moderate income households, will get just $19 million in 2010 – compared with $34 million originally budgeted for 2009.  The maximum HPAP loan has been reduced from $70,000 to $40,000, which may be too small to help some low-income families become homeowners.   The Local Rent Supplement Program, created in 2007 and expanded in 2008, has been frozen since then.  Without additional rent subsidies, it will be impossible to expand permanent supportive housing for the homeless or help families on the housing waiting list.

In a city where the costs of living are very high and out of reach for many residents, the reduction in affordable housing funding is troubling.   Last fall, the DC Council expressed support for more housing investment, but this was not reflected in the FY 2010 budget.  Additional funding for housing could put more families in their own homes, help kick-start the DC economy, and stop us from sliding even further behind in addressing the affordable housing needs of District residents.

For more information, see our summary of the budget for affordable housing.