In July, Mayor Fenty and the DC Council adopted an amendment to the District’s FY 2010 budget to address a revenue shortfall that was identified in June 2009. The June revenue forecast from the Chief Financial Officer, which came just a few weeks after the Council approved the FY 2010 budget for FY 2010, showed a new $190 million revenue shortfall for 2009 and a $150 million shortfall for 2010.
The budget-balancing plan, which was adopted by the DC Council on July 31, includes the following elements.
- Spending Reductions: The new plan includes $220 million in spending reductions for FY 2010, including elimination of all budget earmarks (saving $22 million) and more than $150 million in cuts to District programs and services. The cuts affect all major areas of the budgets, but the largest reductions are in human services and related low-income programs and in K-12 education.
- Revenue Increases: The plan calls for $42 million in new revenues, including increases in sales, cigarette, and gasoline taxes. The amended budget also eliminated annual inflation adjustments for the standard deduction and personal exemption in the income tax and the homestead deduction in the property tax. While some of these tax changes have specific rationales ‘ for example, increasing the cigarette tax is likely to reduce cigarette use ‘ all of these tax increases are regressive, which means they will increase taxes more for lower-income residents than for higher-income residents. The plan also reflects a change in DC’s corporate income tax law that will go into effect in 2011 ‘ called “combined reporting” ‘ which limits the ability of multi-state corporations to avoid paying taxes to the District.
- Tapping Excess Revenue in Special Funds: The budget was balanced in part by finding ways to increase the use of federal funds, including stimulus funds, and by tapping funds from a number of special accounts. For example, resources were transferred from the city’s Ballpark Revenue Fund to the general fund (because the ballpark fund has more than it needs to make bond payments for the Nationals stadium), as were all of the funds in the Baseball Community Benefit Fund, which was created to meet a variety of community priorities. Other funds that were tapped include the Healthy DC Fund and the Tax Increment Financing Fund.
These issues are discussed in more detail in the full report.