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Mayor Muriel Bowser’s proposed $16.7 billion budget for fiscal year 2021 relies heavily on savings and surpluses, as well as hiring and pay freezes for D.C. government employees, to address expected revenue losses due to the coronavirus pandemic. Her plan will eliminate the need for tax increases or major programmatic cuts.
The budget, subject to D.C. Council approval, still manages to invest in education and housing, increasing per-student funding by 3 percent for a total of $1.92 billion and committing $100 million to the Housing Production Trust Fund. But financial losses related to the pandemic meant that the executive declined to make significant investments in these sectors, as well as others, that officials were hoping to do before the pandemic hit and advocates were demanding.
“This budget really reflects our community’s priorities” Bowser said during a Monday press conference. “This is not the budget that I expected to send to the Council early this year. It is a budget that I am proud of and that the city should be proud of.”
The budget is based on a grim financial outlook Chief Financial OfficerJeffrey DeWitt offered in late April that suggested it would take two years for D.C. to recover from the pandemic. DeWitt said the projected revenue loss for the current fiscal year, which ends on September 30, is $722 million; the projected revenue loss for fiscal year 2021, which begins October 1, is $774 million.
“The impact on our revenues has been significant,” said Bowser. “Just as this pandemic has forced our residents and businesses to make difficult spending decisions, the D.C. government has been forced to do the same thing.”
How did D.C. make up for expected revenue losses? For starters, D.C. used its entire fiscal year 2019 surplus. D.C. ended FY2019 with a $500 million budget surplus. $324 million of that surplus was intended to go to the Housing Production Trust Fund, which supports affordable housing, and pay-go capital, which supports government construction projects. Now these dollars are being redirected to cover losses.
For fiscal year 2020, D.C. closed the budget gap by cutting $190 million from agency budgets, mostly through hiring and spending freezes instituted in March; shifting $214 million from the federal government’s Coronavirus Relief Fund; and relying on at least $267 million from prior years’ surpluses. For fiscal year 2021, the proposed budget cuts $166 million from agency budgets, with a freeze on all pay increases; shifts $38 million from federal resources; uses $213 million in the fiscal stabilization reserves, the total amount for one of four local or federal reserves available to the city; and relies on at least $320 million in prior year surpluses.
“Because we had 24 years of balanced budgets and AAA bond ratings, because we fully fund our pensions and health care, and because we ended fiscal year 2019 with 60 days of extra cash, it has made us more resilient and able to move through this very difficult and challenging time,” said City Administrator Rashad Young in a press conference Sunday evening where he previewed the budget.
Cuts to agency budgets appear to impact government personnel more than the services they deliver and residents depend on. There are no recommended furloughs or pay cuts in this budget, but financial planning assumes no pay increases for anyone, including Bowser, teachers, and other unionized workers. The mayor’s budget could mean the government operates slower given that a number of vacancies have not been filled and won’t be for a while.
“It may have the impact of not having us move programs as fast as we would otherwise like,” said Young, “but preserve the program.” And while there are some cuts to the scope of programs, residents are assured there is no material impact in how services are delivered. The executive tries to capture all the savings it can by making hundreds of tweaks to agency budgets, finding efficiencies in programs where it could, and evaluating all government contracts so that critical services like trash pickup can continue.
The largest change in spending between FY2020 and FY2021 comes from funds for the highly anticipated paid family leave program, along with the unemployment insurance program. The FY2021 budget sets aside $309 million for the Council’s paid family leave law, but the CFO has yet to certify whether there’s enough money in the fund to support what’s expected to be withdrawn. That could delay the July rollout.
Notably, D.C. did not tax the rich, as some progressives called for, or provide tax breaks, as a coalition of businesses called DC2021 had asked for. The mayor’s budget did close at least three tax loopholes to raise revenue. It appears that tax abatement for businesses hurt by the pandemic is off the table for now, and instead the executive is looking to provide targeted support, as it did with the small business microgrants program. D.C. is also hoping for more support from the federal government, seeing as the city was cheated when it was treated like a territory instead of state in the first COVID-19 relief package.
Everyone is still trying to understand the hundreds of pages of financial documents submitted to the Council. But a few shared their initial reactions to the mayor’s proposed budget. ANC 4B02 Commissioner Erin Palmer tweeted “Raise my taxes,” while Marcus Goodwin, a candidate for D.C. Council At-Large, said he was “very happy to see that [the mayor] was able to balance the budget without raising taxes” in a campaign statement.
The DC Fiscal Policy Institute, a progressive think tank, commended the mayor’s decision to use some of the city’s reserves and FY2019 surplus. “While the local fund budget protected and slightly expanded some crucial programs, it also missed an opportunity to respond to some immediate needs by failing to create a fund to stabilize child care providers, provide assistance to our undocumented brothers and sisters, and adequately fund the Affordable Housing Preservation Fund, among other needs,” the organization’s leadership said in a statement.
D.C. also released financial planning for FY2022 through 2026, showing how the city balances its budget over time by leveraging reserve and federal funds. Here’s what the executive ultimately decided to invest in:
The mayor proposed a 3 percent increase to the per-student funding formula (UPSFF), which funds both DCPS and public charter schools. In February, Bowser had proposed a 4 percent UPSFF increase, one of the largest increases in recent years, and education experts heralded the news. But the pandemic has changed things.
Supplemental money for students considered “at-risk” is maintained, so advocates won’t see any increase to the at-risk weight of the UPSFF that they were hoping for in the mayor’s budget. Funding for the charter school facility allotment also remains unchanged.
Other budget highlights include $6 million for technology expansion, $1.5 million for the school-based mental health program; $75 million for 17 schools to create 540 new early childcare and 180 new pre-K seats; and $1.4 billion to expand or modernize 41 schools. The budget also includes a permanent home for Excel Academy, an all-girls school in Ward 8 that was looking to secure a building after its lease expired.
Money was set aside for new hospitals planned in Ward 1 and Ward 8. Specifically, the mayor budgeted $25 million for the development of a new Howard University Hospital, plus future tax abatements that amount to $225 million over a 20 year period. The hospital is expected to be completed by 2026. $365 million is allocated for the new hospital and ambulatory center planned for the St. Elizabeths campus, which will replace United Medical Center.
The budget also includes $4.8 million to implement recommendations from the mayor’s Commission on Healthcare Systems Transformation, and $35 million to support increased enrollment in Medicaid.
Bowser keeps her commitment and budgets $100 million for the Housing Production Trust Fund in FY2020 and FY2021 to create 1,000 new units of affordable housing. The mayor has exceeded her annual commitment of $100 million in years past, but officials said the pandemic has prevented increases this time around.
The mayor also budgets $76 million across FY2021 and FY2022 for a new initiative at DC Housing Authority that looks to renovate and rehabilitate the agency’s portfolio. Other housing highlights include $19.5 million for the Home Purchase Assistance Program, which supplies interest-free loans to qualified individuals looking to purchase property, and Employer-Assistance Housing Program, which offers District government employees loan and grant opportunities so they can purchase property, as well as $15.6 million in anticipated federal funds for increased rental assistance and non-profit project delivery support.
For individuals experiencing homelessness, an additional $5 million was budgeted for permanent supportive housing units, $7.8 million to open new emergency housing, and $35 million to expand and renovate permanent and temporary supportive housing facilities.
The budget for the Office of Neighborhood Safety and Engagement was reduced, but funding for the Pathways Program should go uninterrupted. The executive anticipates using federal resources for school-based intervention, which faces budget cuts. The Office of Victim Services and Justice Grants also saw its budget reduced.
The mayor wants to increase enrollment in the police department’s cadet program from 100 to 150. Bowser had originally proposed to increase the cadet program to 200 members. This adds $1.7 million to the Metropolitan Police Department budget. Money was also budgeted to purchase new emergency response vehicles and cardiac equipment used by first responders, and to add correctional officers and upgrade critical building systems at DC Jail.
To improve code violation enforcement in the aftermath of the fatal Kennedy Street NW fire, $200,000 was set aside for a new management system at the Department of Consumer and Regulatory Affairs.
The Council will hold hearings on the mayor’s proposed FY2021 budget and financial plan starting Tuesday. Don’t expect hundreds of residents to crowd the Wilson Building for government or public testimony due to the pandemic. Committee mark-ups and reporting on agency budgets is expected to start late June, and final consideration of the mayor’s budget could happen as early as late July.
This post was updated May 19 to include various reactions to the budget. This post was also corrected May 18 to reflect that there were reductions to the operating budgets for the Office of Neighborhood Safety and Engagement and Office of Victim Services and Justice Grants.