Public Hearing on FY 2010 Budget Spending Pressures


Public Briefing of the Committee of the Whole The Honorable Vincent C. Gray, Chairman

February 19, 2010 10:00 a.m.

Good morning, Chairman Gray, and members of the Council. I am Neil O. Albert, City Administrator, and I am here to provide testimony today on fiscal year 2010 budget spending pressures.

As you know, the Mayor proposed, and the Council approved, a balanced budget for FY 2010 on September 23, 2009. This budget closed a previous revenue gap through targeted savings and the use of federal stimulus funds. On December 16, 2009, the Chief Financial Officer issued revised revenue estimates, certifying an additional $17 million shortfall in Local Fund revenues for FY 2010, which began October 1.

Along with this estimated decline in revenue, the Chief Financial Officer has projected about $192 to $212 million in FY 2010 budget pressures, including the revenue shortfall. The range of this forecast indicates that

there is some uncertainty regarding potential cost drivers and their fiscal impact. Costs may turn out to be lower than anticipated after one quarter of expenditure data, creating room to relieve pressure within the approved budget. It will be essential to closely manage potential spending pressures with the goal of reducing them as far as possible.

This forecast may change within the week, when the OCFO issues new revenue estimates for FY 2010 to FY 2013.

On February 10, 2010, the Mayor submitted a plan to the Council to resolve the FY 2010 budget shortfall. The plan proposes to reduce agency spending pressures by providing Local budget authority for dedicated revenues up to $100 million, realizing up to $50 million of savings from debt restructuring, and implementing a spending control for FY 2010 on February 1 that could result in $99 million of savings. The FY 2010 plan will be adjusted based on the OCFO’s new revenue projections.

I would like to review several of the spending pressures projected by the OCFO for FY 2010.

Education In the education cluster, the OCFO projects spending pressures of about $31 to $38 million in Non-Public Tuition. The FY 2010 Non-Public Tuition budget was based on the data available at the time of budget development. The FY 2010 budget assumed 4.9 percent inflation and enrollment of 2,219

students in non-public placements. The revised assumptions for non-public placements are 8.8 percent cost increases and enrollment of 2,750 students. The OCFO and OSSE have implemented improved data and billing systems and now have access to information that the District never had before, including the services billed for, the number of invoices received each month, the number of students receiving services. The accuracy and completeness of these data systems are a key step forward in tracking and reducing the number of non-public placements funded by the District. OSSE and the agencies who serve children in the non-public school system are working to reduce the number of students in non-public placements this year.

The spending pressure for Special Education Transportation is estimated between $12 million to $15 million. The FY 2010 budgeted amount is $77 million. On February 3, 2010, the Transportation Administrator filed a motion to the court for additional funds to increase the FY 2010 budget to $88.6M. The agency will achieve savings and a reduction in the spending pressure when the number of students placed in non-public placements that require transportation goes down. Cross-agency plans are in place to realize


that reduction in the number of students which will impact the number bus routes needed in DOT.

Public Safety In the public safety cluster, the OCFO is forecasting spending pressures of $15.2 million in the Department of Corrections (DOC), and $5.3 million in Fire and Emergency Management Services (FEMS). In FY 2010, overtime spending in FEMS is projected to be $6.3 million over the budget. Reimbursement from the Emergency Planning and Security Fund and Special Purpose Revenue will reduce the spending pressure to approximately $5.3 million. The Mayor’s FY 2010 budget proposed to fund critical positions in the department and budget for overtime savings that would result from filling those positions. The Council later reduced the FEMS budget by $2.9 million for FY 2010, stating that the reduction represented salary lapse. At the start of FY 2010, the OCFO projected a spending pressure and instituted a hiring freeze for FEMS. As a result, the hiring freeze increased the operational vacancy rate, and related overtime spending followed.


The Department of Corrections projects a spending pressure as a result of the U.S. Marshals moving parolees out of DOC more quickly. The U.S. Marshals Service reimburses DOC for the costs it incurs to house and transport inmates at the D.C. Jail who are the responsibility of the U.S. Bureau of Prisons. The anticipated revenue collection from the U.S. Marshals Service in the FY 2010 budget was anticipated to cover $27.7 million of costs at the Correctional Treatment Facility, and current revenue projections are $22 million, creating a $5.7 million spending pressure. In addition, DOC’s Unity health care contract has gone to a month to month rate that is higher than what was budgeted for it in FY 2010. The FY 2010 line item budget for the healthcare contract was budgeted at $20.3 million. The current rate of the contract is $2.5 million per month or $29.8 million per year.

Human Support Services The human support services cluster projects between $77.6 and $81.6 million of spending pressures, reflecting in large part the increasing use of human services by residents in an economic downturn. Almost

$30 million of these spending pressures represent greater than expected recession-driven enrollment growth in Medicaid and Alliance, and delays in

some savings initiatives in these programs.

States across the country are

experiencing similar pressures in healthcare programs. Current Alliance enrollment is 55,818 and Medicaid enrollment is 156,760. The Department of Health Care Finance has taken significant steps to achieve cost savings in the Alliance program and Medicaid program, as described in the approved FY 2010 budget. The Alliance program is projected to achieve about

$24 million in Local fund savings, and the Medicaid program is projected to achieve about $11 million in Local fund savings this fiscal year.

The OCFO is also projecting a $23 million spending pressure in CFSA. In FY 2009, CFSA suspended Medicaid billing for Targeted Case Management (TCM) and Rehabilitative Services Option claims based on Medicaid cost report audits. The FY2010 budget was built on the assumption that Medicaid claiming would resume by January 1. Claiming was delayed based on analysis that additional cost savings for the planned Medicaid claiming methodology would have a negative impact on claiming Title IV-E. That is, any gains from Medicaid claiming would offset any gains from Title IV-E. CFSA intends to resume Medicaid claiming in July for specific, Medicaid-eligible services through a Nurse Care Management Model that complies with local and Federal laws and regulations.

Other The Department of Real Estate Services is projecting a $17 million budget shortfall in fixed costs, including rent, utilities and security. Of this

$17 million gap, about $4 million was reduced by the Council from the Department of Recreation in the FY 2010 budget. This cut to DPR

represented about 95% of the water, electricity, and natural gas budget for recreation centers. Other significant reductions include $3.7 million in

reductions to rent from multiple agencies, which are related to active leases that require funding, and a $1.6 million reduction to electricity and security for the Office of Unified Communications. The DC Public Schools also are projecting a $2.5 million spending pressure in natural gas due to higher utility costs.

Thank you for the opportunity to testify today. At this time, I am prepared to answer any questions you may have.