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Mayor Gray Welcomes Extra 42 Million Dollars in Fiscal Year 2012 Revenues

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(WASHINGTON, DC) – Mayor Vincent C. Gray today welcomed news from District Chief Financial Officer Dr. Natwar Gandhi that projected revenue for fiscal year 2012 has increased by $42.2 million over initial estimates. He will request the DC Council approve a supplemental 2012 budget that will eliminate a corresponding amount of spending pressures in several critical areas.

“Like recent figures indicating a significant drop in the District’s unemployment rate, this $42.2 million projected revenue increase demonstrates that our city’s economy continues to rebound,” Mayor Gray said. “The emphasis we have placed on economic development and job creation is paying dividends for all of our residents.”

The supplemental budget Mayor Gray will propose eliminates $42.2 million in spending pressures within three significant agencies:

Department of Health Care Finance -- $10.2 million
• $6.0 million for an increase in inpatient hospital care
• $4.2 million to cover a funding shortfall for the D.C. HealthCare Alliance

Department of General Services -- $10.6 million
• $6.5 million for unexpected increases in fixed costs for fuel and water/sewer service for District vehicles and buildings
• $4.1 million for adequate maintenance of District facilities – an amount that historically has been under-budgeted

DC Public Schools -- $21.4 million
• $4.5 million to cover congressional reductions in federal payments to DCPS
• $10.7 million for increases in food-service contracts
• $2.8 million for mandated merit-based salary increases for teachers
• $3.4 million for increased personnel costs for non-instructional staff

“My goal is to be able to go to Wall Street bond-ratings agencies in February and show them that the District of Columbia has a structurally balanced budget with no spending pressures,” Mayor Gray said. “This will be yet more evidence that they should maintain or upgrade the District’s credit ratings.”

The Gray Administration has made controlling spending pressures a top priority – including the creation of a special task force that identifies spending pressures and immediately seeks ways to remediate them. Through these efforts, the administration has kept spending pressures to a lower amount at this point in the fiscal year than any other year in the post-Control Board era.

Nonetheless, spending pressures arise in any budget, and the Mayor believes strongly that they must be addressed quickly to protect the District’s fiscal stability. Mayor Gray plans to transmit a supplemental budget proposal to the Council in January and request that it be moved at the Council’s February 7th legislative meeting.

Dr. Gandhi’s revenue estimates for future fiscal years also continued to decline based on the impact on the District’s economy of future federal budget cuts that will result from the failure of the congressional budget “super committee” to reach an agreement. If the mandatory cuts – known as “sequestration” – end up taking effect, Dr. Gandhi estimated, they will contribute significantly to decreases of District revenues of $46.4 million in FY 2013, $92.1 million in FY 2014, and $129.8 million in FY 2015.

These decreases will come on top of the reductions to revenue that Dr. Gandhi projected in September 2011 of $52.6 million in FY 2013, $57.7 million in FY 2014, and $38.9 million in FY 2015.

The District’s current services funding level budget for FY 2013 is also projected to grow by $53.7 million more than was projected when the FY 2012 budget was approved, driven by growth in Medicaid and fixed costs. This means the District faces a projected gap of $152.7 million in FY 2013 between baseline expenses and projected revenue.

Mayor Gray said the federal government’s failure to come to a budget agreement will, therefore, force especially stark choices on the District government in proposing the FY 2013 budget.

“A $152.7 million gap would force the District to make incredibly painful cuts on top of the already-difficult choices we had to make in FY 2012 to close a $322.1 million gap,” Mayor Gray said. “Regardless of what happens on the Hill, I will propose a structurally balanced FY 2013 budget for the District of Columbia, in which we spend no more than the revenue we are projected to bring in. However, I am very concerned that if the federal government does not work to satisfactorily resolve the federal budget impasse, then the economies of the District of Columbia and our neighboring jurisdictions in the Washington metropolitan area will needlessly experience a disproportionate adverse impact.”

Dr. Gandhi will revise revenue estimates one more time, in late February, before the District’s FY 2013 budget is proposed on March 23, 2012. If the federal government reaches an agreement prior to the February revenue certification, the revenue decrease from sequestration could be lessened or eliminated altogether.