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PRESS RELEASE
 
Council of the District of Columbia
 Office of Chairman Vincent C. GrayThe John A. Wilson Building1350 Pennsylvania Avenue, NWWashington, D.C. 20004 _____________________________________________________________________________ 
For Immediate Release: Contact: Doxie A. McCoy
 
July 31, 2009 202-724-8032Gray Leads Passage of Revised Budget Plans to Ensure Long-Term FinancialStability of the District of Columbia
 Washington, DC - Chairman Vincent C. Gray today praised his colleagues on the Councilof the District of Columbia after today’s unanimous approval of the revised Fiscal Year 2009and 2010 Budget Request and Support Acts at the legislative meeting called to address theneed to revisit the budgets. Chairman Gray said today’s action was painfully necessary toaddress a more than $600 million revenue shortfall predicted over three fiscal years,beginning with the current FY 2009, already 10 months underway. In crafting a financialplan, Chairman Gray and the Council combined spending cuts, revenue producing taxincreases, and use of cash reserves, rather than relying on one source. No agencies wereexempt from reductions, although the proposal protects the District’s human services, publicsafety, and education programs to the greatest extent possible. “We have focused our gap-closing solutions on shared sacrifice, on belt-tightening, andon spending the District’s dollars as wisely as possible,” Gray said in his opening statement.He dramatized this point by displaying on the dais a jar of coins and dollars donated bystudents at the Latin American Montessori Bilingual Public Charter School to help fill thebudget gap. “If these children realize that everyone will have to give a little to get throughthis economic downturn, we as elected officials need to follow their example,” the Chairmanadded. “The financial crisis of the 90s, when the nation’s capital was governed by acongressionally mandated control board, has remained in our memory. The Council isacting today to ensure that we never again return to those horrific days of governmentinsolvency. This is why we’ve had to make very tough decisions that we believe at the endof the day will create a sound future for our government.” The Chairman’s full statementfollows.The Council of the District of Columbia is at an unfortunate place that is not unlike wherevirtually every state and jurisdiction across the United States finds itself. Recently at theNational Conference of State Legislators we heard the amazing financial challenges statesare facing. For example, the
state
of Washington has a $9 billion shortfall andPennsylvania, where the conference was held, is dealing with a $5 billion gap. The dismalreality of the worst economic conditions since the Great Depression has forced mycolleagues and I to come back to the drawing board to consider a Second Fiscal Year 2009Balanced Budget Act, after initial approval in May, and a revised Fiscal Year 2010 BudgetSupport Act, after what we thought was final approval in June. This was all precipitated inlarge part by the June 22
nd
revenue estimate revealed by the Chief Financial Officer: a $190million gap for FY 09 and a $140 million gap for FY 10.The Mayor proposed closing the gaps in FY 09 and FY 10 with fund balance use, $140million in expenditure cuts, undesignated future out-year cuts, and borrowing from theContingency Cash Reserve. I was concerned that this strategy further depleted our fundbalances, which drop precipitously from $1.2 billion at the end of FY 09 to $700 million atthe end of FY 10, with almost no unrestricted fund balance available. In talking with mycolleagues on the Council, I decided that an approach of facing the problem head-on
now
 
 
was a more responsible tact to take, because a gap of $260 million in undesignatedreductions in FY 11 raised red flags for me. Many thought my inspiration for this approachwas due to the recent trip to Wall Street to speak with our bond rating agencies. Inactuality, it initially came from a source of inspiration much closer to home.I have with me here a jar from children from the Latin American Montessori Bilingual(LAMB) Public Charter School who have contributed to help the city through its fiscalchallenges. They presented it to me at a monthly youth hearing a couple of months ago.When the students heard of our budget gap they took it upon themselves to take up acollection at school. If these children realize that everyone will have to give a little to getthrough this economic downturn, we as elected officials need to follow their example. Thus,taking this premise, the meeting with bond officials, and other factors into account, we havefocused our gap-closing solutions on shared sacrifice, on belt-tightening, and on spendingthe District’s dollars as wisely as possible.Over the past two weeks since the Council received the Mayor’s revised FY 10 budget,Councilmembers and our staff have put forth countless hours and effort to figure out thebest way to fill the huge funding gap to produce a balanced budget. We heard from the CityAdministrator, the Chief Financial Officer, and other Executive officials to get a basis forwhat the Mayor was proposing to address the greater shortfall. We heard from more than100 citizens and representatives of groups and entities during a 10-hour public hearing theCommittee of the Whole held to gauge public sentiment. Our offices have been flooded withletters, e-mails and phone calls from residents, businesses, and a variety of communityorganizations. My colleagues and I have appreciated the feedback and certainly haveincorporated some of the budget ideas we received in the legislation before us today.The Council has considered all of this input in our careful and painstaking deliberations anddebate. We have put together a package that balances about $90 million in cuts with $50million in broad-based new revenue enhancements. No agencies were exempt fromreductions, although the proposal protects the District’s human services, public safety, andeducation programs to the greatest extent we could. But the thread that dominates theresult of what we are about to consider is our determination to ensure the long termfinancial stability of the District of Columbia. We are taking action that we believe will fillthe revenue gap in 2009, but just as importantly, our solutions look at Fiscal Years 2010,2011, 2012 and 2013. The lasting financial survival of the District of Columbia depends onthis approach. It is just not prudent to spend all the District’s unrestricted fund balance--that is money in the bank--nor prudent to rely on the cash reserves, known as the rainy dayfund, especially given the stringent pay back requirements. That is half back in FY 10 andhalf in FY 11.The financial crisis of the 90s, when the nation’s capital was governed by a congressionallymandated control board, has remained in our memory. The Council is acting today toensure that we never again return to those horrific days of government insolvency. This iswhy we’ve had to make very tough decisions that we believe at the end of the day willcreate a sound future for our government.We put all options for filling the budget gap on the table: cutting spending, reducing staff and their benefits, raising taxes, fees and other revenue enhancements, as well as using thefund balance. In the end, we have a jointly-developed proposal that is a responsible,balanced approach to solving the District’s financial gap going forward and ensures wenever go back to the days when the District did not control its own destiny.
 
 
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INSTEAD OF USING OUR CONTINGENCY CASH RESERVE THAT WOULD HAVE TO BEPAID BACK OVER THE NEXT TWO YEARS, AN ENORMOUS PERIOD OF UNCERTAINTYHERE AND EVERYWHERE, WE ARE RELYING ON THE USE OF FUND BALANCE ROLLEDBACK FROM INTENDED USE IN FY 10 TO CLOSE THE GAP FOR FY 09 AND THEN ACOMBINATION OF BUDGET REDUCTIONS AND REVENUE INCREASES TO BALANCETHE FY 10 BUDGET.
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TO HELP MITIGATE BUDGET REDUCTIONS, WE ARE RELYING IN FY 10 ON A NUMBEROF REVENUE INCREASES:-1/4 OF A PERCENT SALES TAX INCREASE-A 3.5 CENTS GASOLINE TAX INCREASE-INCREASE IN THE CIGARETTE AND LITTLE CIGAR TAX-DELAYING INDEXING OF THE STANDARD DEDUCTION, PERSONAL EXEMPTION ANDHOMESTEAD DEDUCTION.-AND SEVERAL OTHER WAYS OF RAISING REVENUE TO HELP AMELIORATE CUTS INSERVICES.-THE MAJOR TAX INCREASES WILL AUTOMATICALLY SUNSET IN THREE YEARS WITH THEHOPEFUL EXPECTATION THAT THE ECONOMY WILL HAVE RETURNED TO A FAR BETTERCONDITION THAN THE PRESENT STATE.-JUST OVER $10 MILLION IN NEW MEDICAID REVENUE FROM THE CHILD AND FAMILYSERVICES AGENCY-USE OF TOBACCO SETTLEMENT AND OTHER HEALTH RELATED FUNDS TO HELP STAVE OFFDEEPER CUTS IN THE NEAR TERM.-USE OF STIMULUS FUNDS NOW AND IN FY 10 TO THE MAXIMUM EXTENT POSSIBLE.
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ON THE REDUCTION SIDE:-REDUCTION AND ELIMINATION OF A NUMBER OF ENHANCEMENTS THAT ORIGINALLY HADBEEN PLANNED FOR THE FY 10 BUDGET BEFORE THIS LATEST DROP IN ESTIMATEDREVENUE FOR FY 09 AND FY 10 OCCURRED-REDUCTION OF THE SUMMER YOUTH EMPLOYMENT PROGRAM TO THE LEVEL ORIGINALLYAPPROVED BY THE COUNCIL FOR FY 10 THAT WILL PROVIDE FOR A SIX-WEEK INITIATIVETHAT WAS CUSTOMARY FOR THIS PROGRAM FOR MANY YEARS.-FREEZING OF HIRING OF POLICE OFFICERS WITH LOCAL FUNDS, RECOGNIZING THAT THEDISTRICT WILL RECEIVE FEDERAL FUNDS TO HIRE NEW OFFICERS THAT WILL HELP THESIZE OF THE FORCE OVER THE NEXT 2-3 YEARS.
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