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DC Faces $128 Million in Budget Pressures

Thursday, February 20, 2003

DC Faces $128 Million in Budget Pressures

Approximately $52.5 million is attributable to a revised, lower revenue estimate; the remainder is due to increased demands on mandated programs and other service needs.

(Washington, DC) Five months into its fiscal year, the District of Columbia has identified additional pressures in its local source budget totaling $128 million. Approximately $52.5 million is attributable to a revised, lower revenue estimate for the current fiscal year. The remainder is due to increased demands on mandated programs, such as Medicaid and unemployment compensation, and other service needs, including court-ordered spending and snow removal.

“These budget pressures constitute approximately three and a half percent of the city’s local source budget of $3.635 billion,” said Chief Financial Officer Natwar M. Gandhi. “In a budget of this magnitude, it is not unusual to encounter such pressures as priorities change and forecasts of revenue or spending change. In these uncertain economic times, other jurisdictions are encountering problems of a similar or greater magnitude.”

To help resolve these budget pressures, the District may use $28 million set aside at the beginning of the fiscal year to address any problems that could arise. For the remaining $100 million, Mayor Anthony A. Williams and the Council are reviewing with the Office of the Chief Financial Officer a range of options that can be used to rebalance the FY 2003 budget. Approximately $64 million of the $100 million is structural in nature, meaning that the fall in estimated revenue or increase in costs is not expected to be a one-time event. As a result, in addressing the shortfall, most of the spending cuts to be made will need to be permanent in nature, thereby lowering spending patterns in subsequent years.

Last September, Mayor Williams and the Council of the District of Columbia agreed to $323 million in spending cuts and revenue increases in order to ensure that the District began its 2003 fiscal year with a balanced budget. “If not for the mayor and the Council’s hard work last fall, these new budget pressures would be a great deal more difficult to manage,” said Gandhi.