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PRESS RELEASE Council of the District of Columbia

Office of Chairman Vincent C. Gray The John A. Wilson Building 1350 Pennsylvania Avenue, NW Washington, D.C. 20004 _____________________________________________________________________________
For Immediate Release: July 31, 2009 Contact: Doxie A. McCoy 202-724-8032

Gray Leads Passage of Revised Budget Plans to Ensure Long-Term Financial Stability of the District of Columbia Washington, DC - Chairman Vincent C. Gray today praised his colleagues on the Council of the District of Columbia after today’s unanimous approval of the revised Fiscal Year 2009 and 2010 Budget Request and Support Acts at the legislative meeting called to address the need to revisit the budgets. Chairman Gray said today’s action was painfully necessary to address 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 financial plan, Chairman Gray and the Council combined spending cuts, revenue producing tax increases, and use of cash reserves, rather than relying on one source. No agencies were exempt from reductions, although the proposal protects the District’s human services, public safety, and education programs to the greatest extent possible. “We have focused our gap-closing solutions on shared sacrifice, on belt-tightening, and on 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 by students at the Latin American Montessori Bilingual Public Charter School to help fill the budget gap. “If these children realize that everyone will have to give a little to get through this economic downturn, we as elected officials need to follow their example,” the Chairman added. “The financial crisis of the 90s, when the nation’s capital was governed by a congressionally mandated control board, has remained in our memory. The Council is acting today to ensure that we never again return to those horrific days of government insolvency. This is why we’ve had to make very tough decisions that we believe at the end of the day will create a sound future for our government.” The Chairman’s full statement follows. The Council of the District of Columbia is at an unfortunate place that is not unlike where virtually every state and jurisdiction across the United States finds itself. Recently at the National Conference of State Legislators we heard the amazing financial challenges states are facing. For example, the state of Washington has a $9 billion shortfall and Pennsylvania, where the conference was held, is dealing with a $5 billion gap. The dismal reality of the worst economic conditions since the Great Depression has forced my colleagues and I to come back to the drawing board to consider a Second Fiscal Year 2009 Balanced Budget Act, after initial approval in May, and a revised Fiscal Year 2010 Budget Support Act, after what we thought was final approval in June. This was all precipitated in large part by the June 22nd revenue estimate revealed by the Chief Financial Officer: a $190 million 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, $140 million in expenditure cuts, undesignated future out-year cuts, and borrowing from the Contingency Cash Reserve. I was concerned that this strategy further depleted our fund balances, which drop precipitously from $1.2 billion at the end of FY 09 to $700 million at the end of FY 10, with almost no unrestricted fund balance available. In talking with my colleagues 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 undesignated reductions in FY 11 raised red flags for me. Many thought my inspiration for this approach was due to the recent trip to Wall Street to speak with our bond rating agencies. In actuality, 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 fiscal challenges. 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 a collection at school. If these children realize that everyone will have to give a little to get through 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 have focused our gap-closing solutions on shared sacrifice, on belt-tightening, and on spending the 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 the best way to fill the huge funding gap to produce a balanced budget. We heard from the City Administrator, the Chief Financial Officer, and other Executive officials to get a basis for what the Mayor was proposing to address the greater shortfall. We heard from more than 100 citizens and representatives of groups and entities during a 10-hour public hearing the Committee of the Whole held to gauge public sentiment. Our offices have been flooded with letters, e-mails and phone calls from residents, businesses, and a variety of community organizations. My colleagues and I have appreciated the feedback and certainly have incorporated 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 and debate. We have put together a package that balances about $90 million in cuts with $50 million in broad-based new revenue enhancements. No agencies were exempt from reductions, although the proposal protects the District’s human services, public safety, and education programs to the greatest extent we could. But the thread that dominates the result of what we are about to consider is our determination to ensure the long term financial stability of the District of Columbia. We are taking action that we believe will fill the 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 on this 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 day fund, especially given the stringent pay back requirements. That is half back in FY 10 and half in FY 11. The financial crisis of the 90s, when the nation’s capital was governed by a congressionally mandated control board, has remained in our memory. The Council is acting today to ensure that we never again return to those horrific days of government insolvency. This is why we’ve had to make very tough decisions that we believe at the end of the day will create 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 the fund 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 we never 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 BE PAID BACK OVER THE NEXT TWO YEARS, AN ENORMOUS PERIOD OF UNCERTAINTY HERE AND EVERYWHERE, WE ARE RELYING ON THE USE OF FUND BALANCE ROLLED BACK FROM INTENDED USE IN FY 10 TO CLOSE THE GAP FOR FY 09 AND THEN A COMBINATION OF BUDGET REDUCTIONS AND REVENUE INCREASES TO BALANCE THE FY 10 BUDGET.

TO HELP MITIGATE BUDGET REDUCTIONS, WE ARE RELYING IN FY 10 ON A NUMBER OF 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 AND HOMESTEAD DEDUCTION. -AND SEVERAL OTHER WAYS OF RAISING REVENUE TO HELP AMELIORATE CUTS IN SERVICES. -THE MAJOR TAX INCREASES WILL AUTOMATICALLY SUNSET IN THREE YEARS WITH THE HOPEFUL EXPECTATION THAT THE ECONOMY WILL HAVE RETURNED TO A FAR BETTER CONDITION THAN THE PRESENT STATE. -JUST OVER $10 MILLION IN NEW MEDICAID REVENUE FROM THE CHILD AND FAMILY SERVICES AGENCY -USE OF TOBACCO SETTLEMENT AND OTHER HEALTH RELATED FUNDS TO HELP STAVE OFF DEEPER CUTS IN THE NEAR TERM. -USE OF STIMULUS FUNDS NOW AND IN FY 10 TO THE MAXIMUM EXTENT POSSIBLE.

• ON THE REDUCTION SIDE:

-REDUCTION AND ELIMINATION OF A NUMBER OF ENHANCEMENTS THAT ORIGINALLY HAD BEEN PLANNED FOR THE FY 10 BUDGET BEFORE THIS LATEST DROP IN ESTIMATED REVENUE FOR FY 09 AND FY 10 OCCURRED -REDUCTION OF THE SUMMER YOUTH EMPLOYMENT PROGRAM TO THE LEVEL ORIGINALLY APPROVED BY THE COUNCIL FOR FY 10 THAT WILL PROVIDE FOR A SIX-WEEK INITIATIVE THAT WAS CUSTOMARY FOR THIS PROGRAM FOR MANY YEARS. -FREEZING OF HIRING OF POLICE OFFICERS WITH LOCAL FUNDS, RECOGNIZING THAT THE DISTRICT WILL RECEIVE FEDERAL FUNDS TO HIRE NEW OFFICERS THAT WILL HELP THE SIZE OF THE FORCE OVER THE NEXT 2-3 YEARS.

-A NUMBER OF REDUCTIONS REQUESTED BY THE MAYOR IN THE DEPARTMENT OF CORRECTIONS -A NUMBER OF OTHER RELATIVELY SMALL REDUCTIONS IN THE PUBLIC SAFETY CLUSTER -HOLDING THE UNIFORM PER STUDENT PUBLIC FUNDING FORMULA AT THE CURRENT LEVEL -REDUCING SUMMER SCHOOL SLOTS FOR 2010 BY 50 PERCENT WHICH COULD BE REVISITED IF THE FINANCIAL PICTURE IMPROVES

• OTHER ACTIONS:

-PROVIDING AUTONOMY ON PERSONNEL AND PROCUREMENT DECISIONS FOR THE STATE BOARD OF EDUCATION. -RESTORATION OF FUNDS SO THAT SANCTIONS WILL NOT BE IMPOSED ON TANF (TEMPORARY ASSISTANCE FOR NEEDY FAMILIES) RECIPIENTS WHO EXPERIENCE PARTICULAR HARDSHIPS IN BECOMING EMPLOYED. -ELIMINATION OF ONE-TIME DESIGNATED GRANTS [EARMARKS] FOR FY 10. -ENSURES METRO CONTRIBUTION OF $50 MILLION ANNUALLY IN ADDITION TO WHAT THE DISTRICT ALREADY PROVIDES TO WMATA -RETAINS THE OFFICE OF ASIAN AND PACIFIC ISLANDER AFFAIRS AND THE OFFICE OF VETERANS AFFAIRS AS SEPARATE AND DISTINCT ORGANIZATIONS. -ADDITIONAL FUNDING FOR ADULT TRAINING, WHICH IS PARTICULARLY NEEDED GIVEN THE LEVEL OF UNEMPLOYMENT IN THE DISTRICT AND THE MISMATCH BETWEEN THE SKILLS OF MANY OF OUR RESIDENTS AND THE REQUIREMENTS OF AVAILABLE JOBS. FUNDING ALSO IS RESTORED FOR THE GRANDPARENTS SUBSIDY ###