First there was the CAFR, DC’s annual financial audit that takes a detailed look at how DC spent and collected local revenues last fiscal year. Now, we have the Current Services Funding Level ‘ CSFL ‘ which provides a first look at DC’s projected expenditures and revenues in the next fiscal year. The bottom line? The costs of services are rising modestly, but continued weakness in the economy means that revenues will be $150 million less than the amount needed to maintain programs and services next year. That means that although the city ended 2011 with a sizable surplus, Mayor Gray will need to make cuts, raise revenue, or both, in order to present a balanced budget to the DC Council on March 23rd.
The current services budget shows three important things: 1) how much it would cost to maintain existing programs and services, 2) the areas where costs are rising, and 3) whether expected revenues will be enough to cover those costs.
The CFO estimates that it will cost $5.9 billion to maintain services in Fiscal Year 2013, an increase of 5 percent over what it currently costs. This estimate removes any one-time funding for programs that are not expected to continue next year, and it adjusts for expected changes in expenses such as utilities, rent and personnel costs, such as salaries and health care. The current services funding level also takes into account projected changes in program caseloads and legally mandated changes, such as the inflation increase in the Uniform Per Student Funding Formula used to fund DC Public Schools and Public Charter Schools.
Why are the costs of services rising? The final page of the CSFL provides a good breakdown of key changes. It shows that he largest drivers are an expected increase in Medicaid enrollment and a new requirement to allocate 25 percent of new revenues into a pay-as-you-go account to fund capital projects. Each of these changes represent 19 percent of total growth. DCFPI raised objections to the pay-go proposal, noting that tying up funds this way could force DC to make cuts to basic programs and services.
Lastly, the CSFL shows that expected revenues in FY 2013 are $150 million lower than the costs of maintaining services, a budget gap that the Mayor and Council will need to close through program cuts, increased revenues, or a mix of both. (Note that without the pay-go requirement, the gap would be $100 million.)
The CFO will issue another revenue forecast later this month, which may change the story on the size of the expected budget gap in FY 2013. Stay tuned to the District’s Dime for updates on the revenue forecast and how it will impact the FY 2013 budget.
