(Washington, DC) Chief Financial Officer Natwar M. Gandhi announced today that the District of Columbia's revised revenue estimate for FY 2003 is $322.7 million lower than the estimate released in May. The revised estimate reflects a $285.2 million drop in tax and non-tax revenues and a $37.5 million downward revision in anticipated Medicaid revenues.
"The nationwide downward trend in revenue collections continues to hit the District," said Dr. Gandhi, "but I am confident that the city's political leadership and our financial management will meet this challenge and ensure a balanced budget for next year."
The adverse impact of the national economic slowdown has been apparent for many months in the District's revenue collections as well as those in neighboring jurisdictions, including Maryland and Virginia. In June, Gandhi's office identified a $75 million revenue shortfall for FY 2002, a gap that was closed through hiring and spending freezes as well as converting unspent balances held by city agencies into unrestricted local funds.
A year after the September 11 attacks, a sustained recovery in the District's economy is not evident, and District tax collections continue to decline. In the October 2001-July 2002 period, general sales tax collections were down 5.0 percent, individual income tax collections were down 11.9 percent, and business income tax collections were down 22.7 percent.
According to Dr. Julia Friedman, chief economist for the District, "The losses in individual income taxes are from steep drops in payments that accompany returns, less revenue collected on capital gains taxes, and a substantial increase in refunds."
To manage this drop in revenues for FY 2003, the District's elected leaders are currently reviewing a list of options that includes spending reductions and revenue increases, a combination of which will be used to balance the budget.