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.
