Later this week, the Mayor will send to the District Council his proposal to close the budget gap. He needs to find $340 million to balance the budget over the next two years. It is likely that persons living in poverty will be hard hit with cuts to programs that provide social, medical, housing and other essential services.
There are things that the Mayor can do that will mitigate the impact. A group of advocates led by the D.C. Fiscal Policy Institute and the Fair Budget Coalition are calling on the Mayor to take steps to ensure that the burden is equitably distributed. In a letter to the Mayor (Legal Aid has joined as a signatory), advocates asked that the District (quoting from the letter):
- Use Half of the Rainy Day Fund: Some 27 states have tapped their reserves recently, but the District has not. Using half of DC’s $330 million in rainy day reserves would cover roughly half of the $340 million shortfall for FY 2009 and FY 2010, while leaving some of the reserve for future years. The Mayor and Council also should start working now with Congress to eliminate numerous federal rules that make DC’s reserve far more restrictive than the rainy day funds in nearly every state, including a requirement to repay withdrawals in a very short time frame — two years.
- Tap Other Revenue Sources: The District’s budget includes a number of special-purpose funds that are financed by dedicated fees and taxes. Many of these funds currently have surpluses that should be used to help cover the budget shortfall. All dedicated funds should be considered, including the Ballpark Revenue fund and the Washington Convention Center Authority.
- Raise New Revenues: Fully half of all U.S. states have enacted revenue increases this year and 12 more are considering increases. The District should consider tax changes based on a number of factors, including those that would improve tax fairness or that would spread the costs partly to non-residents — such as imposing a sales tax on tickets to live performances. Tax changes should be structured to protect residents who are least able to absorb the additional burden and should instead fall as much as possible on those most able to pay.
- Preserve Safety Net Programs: DC’s unemployment rate is at the highest level in 25 years, and demand for public assistance benefits has risen significantly over the past year. Given the rise in need, the District should avoid cutting services that help with basic necessities like housing, healthcare, and food assistance. Cutbacks in safety net programs can prove to be “penny wise and pound foolish” by increasing hardship, reducing residents’ buying power, and creating the need for more costly emergency services.
* * *
There is one other thing the District can do -- fix the internal issues that are preventing it from successfully applying for federal reimbursements. Much of the budget shortfall would be taken care of if the District were able to properly submit the paperwork necessary to get federal money that it is owed. Recent examples include:
- The District has had its application for stimulus money rejected by the federal government placing at risk up to $120 million. While it can correct this error, the rejection is emblematic.
- We have heard that the District is giving up hundreds of thousands of dollars in Department of Labor funds each year for failing to meet unemployment processing deadlines.
Who knows how much other money the District is giving up.