WASHINGTON - An "economic tsunami" has hit the District of Columbia as it faces another $136 million revenue gap for the fiscal 2009 budget, bringing to nearly $400 million the total drop in revenues since June, chief financial officer Natwar Gandhi said yesterday.
Warning the financial picture will worsen for the district in the next few fiscal years, Gandhi projected revenues will be down $800 million in fiscal 2010, $967 million in 2011, and $1.1 billion in fiscal 2012 from estimates less than a year ago.
"For a long time, we had assumed the district had been immune" to the broader economic downturn nationwide, the CFO said at a press conference after detailing the new estimates to the District Council.
The district has already made cuts and used surplus dollars to close previous gaps for the current fiscal year, but the estimates for fiscal 2010 and beyond are much worse than those released in December. Gandhi had said then revenues for fiscal 2010 would be $304 million less than expected, $330 million less in fiscal 2011, and $327.5 million less in fiscal 2012.
The council in mid-November approved a $46 million spending freeze on top of $131 million of cuts to close the gap announced in September. To close the December gap, officials used the $46 million that the council had set aside and an $87 million surplus from fiscal 2008.
While the city will receive about $395 million from the economic stimulus package for Medicaid and the state fiscal stabilization fund, the money will barely put a dent the district's shortfalls after this year.
Gandhi said about $145 million of stimulus funds will close the gap in 2009, $178.4 million will go toward closing the $802 million gap in fiscal 2010, and about $71 million will go to the $967 million fiscal 2011 gap.
Robert Zahradnick, director of research for the CFO's office, said that even though the district did not cut Medicaid or education in the current budget, officials can direct the stimulus dollars to those programs and then use the local funds that had been intended for them to instead close the budget gaps.
Another $124 million of infrastructure funds that the District is to receive from the stimulus package will be put into its highway trust fund, but the projects have not yet been detailed, Zahradnick said.
The lower revenue projections for fiscal 2010 and beyond are due to a dramatic falloff of real estate tax collections and income tax collections, Gandhi said.
In recent years, property tax revenues experienced double-digit growth - 25.6% in fiscal 2007 and 15.5% in fiscal 2008, he said. In December, Gandhi projected 5% annual growth from fiscal 2010 to 2013. However, the current revenue estimate expects property tax revenues to decline by 5% for fiscal 2010.
"The resulting reduction in real property tax revenues accounts for nearly all the change in the overall fiscal 2010 estimate from December 2008 to now," the CFO said in a letter to the council and the mayor.
Mayor Adrian Fenty is currently working on his fiscal 2010 budget proposals, which will have to be approved by the council.
