Council of the District of Columbia Administrative Meeting

Tuesday January 13, 2015

Financial Update Office of the Budget Director Jennifer Budoff, Director

December 2014 Revenue Estimate

On December 30, 2014, the Chief Financial Officer released updated revenue estimates for FY14 through FY18.

Revenues are projected to increase more slowly than previously estimated.

$25.5M shortfall in FY14 will be reflected in the 2014 CAFR and will be deducted from any year end local funds surplus. No further action required.

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Local Source, General Fund Revenue EstimateFY 2014 FY 2015 FY 2016 FY 2017 FY 2018

September 2014 Estimate 6,334.1 6,660.9 6,869.3 7,091.0 7,311.3December Revision to Estimate (25.5) (83.3) (39.5) (43.7) 21.4December 2014 Estimate 6,308.6 6,577.6 6,829.8 7,047.3 7,332.7Percent Change from the Previous year 1.7% 4.3% 3.8% 3.2% 4.0%

FY 2015 - Overview FY15 Budget Pressure: $83.3M

FY15 revenue is projected to decrease $83.3M from the revenues that were expected when we passed the budget.

Additional spending pressures not yet finalized:

FEMS v. PERB: FEMS overtime ($45-$49M)

District v. Reid: standards for homeless shelters ($10-15M)

Former Mayor Grays December 31, 2015 letter to Council on Freezing New Program Enhancements for Subordinate Executive Branch Agencies

Executive order to freeze $18.85M was never issued

Provided recommendations to new Mayor and Council on financial management

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FY 2015 Spending Freeze

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Agency Amount (,000) FY 2015 Enhancement

DCHA 3,000 Increase the number of Project and Sponsor-Based LRSP vouchers for extremely low income individuals and families

DCHA 3,000 Increase the number of Tenant-Based LRSP vouchers for extremely low-income families

DCHA 1,000 Increase the number of Tenant-Based LRSP specifically targeted for low-income Seniors

DHS 1,300 Specific supports and services dedicated to ending youth homelessness per the End Youth Homelessness Amendment Act. DHS 600 To hire 10 family case managers for DC General

DHS 1,300 Increase funding to create a locally funded enhancement to the SNAP program for eligible households receiving less than $30 per month in SNAP benefits. OSSE 3,051 3.0 FTE, associated fringe benefits and NPS for the Healthy Tots Program

Charters 12,582 Adjustment based on lower than projected enrollment DME 4,000 To provide facilities planning grants to DC Public Charter Schools

DMPED 5,000 Operating grant for animal care and control facilities and operations OMPTD 1,500 Increase the DC Film Incentive Fund

DPR 250 Competitive grant to provide improvements at Kenilworth Parkside Community Park CAH 1,000 Grant funding DPR 1,500 Enhance and increase the number of summer programs offered by DPR

Total 39,083

Earlier this fiscal year, Former Mayor Gray requested that the CFO place a freeze on certain line-items in the FY15 budget.

FY 2015 Spending Freeze

The spending freeze is still in effect: Currently under review by Mayor Bowser

Items that were legislated in the FY15 BSA would need to be repealed for the freeze to remain permanent

In previous fiscal years, mid-year budget gaps have been solved by: Suspending new hiring and sweeping vacant positions

Eliminating discretional NPS spending

Identifying efficiencies and lowering costs in existing programs

Increasing revenues through new taxes and fees

Natural growth in revenues as reflected in the quarterly revenue estimates from the OCFO

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FY 2016 - Overview FY16 Budget Pressure: $245.6M

December revenue estimate for FY16 reduced revenue growth by $39.5M.

November CSFL for FY16 (see next slide) already indicated a

budget pressure of $163.1M. OCFO recently confirmed a $43M increase to the CSFL

related to police/fire/teacher retirement contributions and other expenditures.

Mayor must resolve FY16 budget pressure when formulating FY16 proposed budget.

Note: FY16 proposed budget will be based on the February revenue estimate; thus, amount of the pressure may grow or shrink.

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FY 2016 Current Services Funding Level (CSFL)

The FY16 CSFL is $7.04B, a 4.0% increase over the FY15 local funds

recurring budget ($6.77B). The CSFL represents the cost (local funds only) of continuing

current services in FY16, without consideration of further policy decisions.

CSFL methodology: Start from FY15 local funds budget.

Remove one-time spending.

Apply inflation to fixed costs, Medicaid, student funding, PS, etc.

Recalculate debt service and fringe, add operating impact of capital, and make other adjustments to reflect trends in spending.

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FY 2016 - Efficiency Savings Report The FY 2015 Budget was passed with as-yet-unidentified

efficiency savings used to balance the Financial Plan. The Council added a provision in the FY15 BSA requiring the

CFO to report on the progress made toward realizing these savings.

December 22, 2014 report from OCFO:

There is no indication that agencies are restricting their spending. OCP has not identified any savings to date, nor are there personnel

savings that can be carried forward to FY16.

The OCFO is evaluating the assumptions used to determine the debt cap and we expect a significant increase in borrowing capacity in FY2016.

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Tax Reforms Now in Effect Income Taxes

The rate on the new individual income tax middle bracket of $40,000 - $60,000 has been reduced to 7.0%, improving the economic picture for middle-class families and singles.

The local EITC has been expanded to cover single workers, providing additional support for low-income workers.

The standard deduction has been increased to $5,200 for singles, $8,350 for married residents, a reform that has the most impact on low-income residents.

Certain tax expenditures have been eliminated, broadening the tax base and increasing the fairness of the tax code.

The personal exemption now phases out by 2% for each $2,500 above $150,000, with a complete phase out at $275,000, establishing a more progressive tax structure.

Business Taxes The Unincorporated and Incorporated Business Franchise Taxes have been reduced to 9.4%,

improving the Districts commercial competitiveness. The franchise tax apportionment method has been changed to a single weighted sales formula. Passive investment vehicles have been exempted from the Unincorporated Business Franchise Tax.

Sales and Use Taxes (went into effect Oct 1, 2014)

Personal income tax returns will now capture use taxes. The general sales tax is being expanded to cover certain services, broadening the tax base and

leveling the playing field among business types. Taxation of tobacco products has been unified and improved.

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Performance Budget Oversight: Key Dates CAFR Released: Monday, February 2 CAFR Hearing: Thursday, February 5 Performance Oversight Hearings: Monday, February 9 Friday, March 13 Mayor Transmits FY16 Budget: Thursday, April 2 Spring Recess: Friday, April 3 Friday, April 10 Mayor Briefs Council on FY16 Budget: Monday, April 13 FY16 Budget Oversight Hearings: Wednesday, April 16 Thursday, May 7 COW BRA/BSA Hearing: Friday, May 8 Committee Markups: May 1214 Council Review of Committee Budget Actions: Wednesday, May 20 Vote on FY16 BRA and First Vote on FY16 BSA: Wednesday, May 27 Second Vote on FY16 BSA: Tuesday, June 16

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Office of the Budget Director - Contacts Jennifer Budoff Budget Director | 724-5689 | jbudoff@dccouncil.us

Committee Staff Contact

Phone Number

E-mail

Committee of the Whole Angela Joyner 724-5688 ajoyner@dccouncil.us

Business, Consumer and Regulatory Affairs

Averil Carraway 724-8544 acarraway@dccouncil.us

Finance and Revenue Joe Wolfe 727-6132 jwolfe@dccouncil.us

Education Angela Joyner 724-5688 ajoyner@dccouncil.us

Judiciary Tom Moir 724-8169 tmoir@dccouncil.us

Transportation and the Environment

Randi Powell 724-8056 rpowell@dccouncil.us

Health and Human Services Jonathan Antista 724-7782 jantista@dccouncil.us

Housing and Community Development

Joe Wolfe 727-6132 jwolfe@dccouncil.us

Councilmember Charles Allen Angela Joyner 724-5688 ajoyner@dccouncil.us

Councilmember Brianne Nadeau Jonathan Antista 724-7782 jantista@dccouncil.us

Councilmember Elissa Silverman Tom Moir 724-8169 tmoir@dccouncil.us

BSA/BRA Issues Tom Moir 724-8169 tmoir@dccouncil.us

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Council of the District of ColumbiaAdministrative MeetingTuesday January 13, 2015December 2014 Revenue Estimate FY 2015 - OverviewFY 2015 Spending FreezeFY 2015 Spending FreezeFY 2016 - OverviewFY 2016 Current Services Funding Level (CSFL) FY 2016 - Efficiency Savings ReportTax Reforms Now in EffectPerformance Budget Oversight: Key DatesOffice of the Budget Director - ContactsJennifer Budoff Budget Director | 724-5689 | jbudoff@dccouncil.us