How D.C. Is Extending Push for Budget Autonomy

dewitt-jeffrey-photo.jpg

WASHINGTON – Revenue estimates for the District of Columbia's fiscal 2016-2020 budget and capital plan remain nearly unchanged from the district's February estimate, D.C.'s chief financial officer said this week.

In a letter sent Thursday to D.C Mayor Muriel Bowser and D.C. Council Chairman Phil Mendelson, district Chief Financial Officer Jeffrey DeWitt said the June revenue estimates remain essentially unchanged because of strong collections from some revenue sources, like sales and business income taxes, and lower-than-expected collections from other sources, like individual income and real property taxes.

"This quarterly estimate reflects increased uncertainty in traditional revenue sources and no extraordinary one-time revenues at this time," DeWitt wrote. "Taken together, these trends do not warrant a change in the estimate from February."

The revenue estimate increased to $6.9 billion in fiscal 2016 after a February estimate put revenue at $6.89 billion for the same time period. Projected revenues for each fiscal year 2017-2020 dropped very slightly in the most recent set of estimates

The slight variations are a result of policy changes enacted as part of the district's Budget Support Act of 2016 that was adopted in June, DeWitt said. Policy changes required in that act include a delay in corporate tax deduction and a one-time increase in fiscal 2016 in hospital assessments for inpatient and outpatient care, he added.

The latest five-year revenue estimate projects $6.9 billion for fiscal 2016, $7.1 billion for fiscal 2017 and $7.4 billion for fiscal 2018. Thursday's estimate also projects $7.6 billion in revenue in fiscal 2019 and $7.8 billion in fiscal 2020.

The revenue estimate for fiscal 2016 is essentially unchanged from fiscal 2015, but the fiscal 2017 estimate reflects a 3.4% increase from fiscal 2016. Projected revenues for fiscal 2018 and 2019 represent a 3.2% increase from 2017, and projected revenue for fiscal 2020 would be a 3% increase from fiscal 2019.

DeWitt said revenue estimates remained essentially unchanged because strong sales, business income, deed recordation and transfer taxes, forecasted to decline 1.9% between January and May, only declined 0.3% percent in that time.

Still, DeWitt said weaker-than- anticipated individual income and real property taxes offset the strong sales and business income receipts. The district's February revenue estimate projected an annual growth of 4.4% in withholding tax collections for fiscal 2016, but year-to-date collections through May averaged on 2.9%. DeWitt added that he expected withholding tax collections to accelerate over the coming months due to current wage and salary trends.

The D.C. CFO said the district's economic outlook through fiscal 2020 continues to be one of moderate growth, due in part to employment in D.C. and resident employment increasing slightly faster than February estimates, but at a pace slower than that of fiscal 2015.

Another factor in future projections is Britain's recent exit from the European Union, which DeWitt said poses a risk to the global economy. He added that it is "too early to assess" any potential impact on D.C.'s economy.

"We are monitoring the situation closely and any effects on the district's finances will be reflected in future revenue estimates," DeWitt said.

The revenue estimates come just over a week after the district submitted its enacted $13.4 billion fiscal 2017 budget and 2017-2020 capital plan to Congress and President Obama.

The district's $13.4 billion fiscal 2017 budget is 3.1% higher than the previous fiscal year's budget, which DeWitt attributed to strong population growth. The district's proposed fiscal 2017-2022 capital improvements plan also includes $6.3 billion in infrastructure spending, roughly $4.3 billion of which will be financed through the issuance of municipal bonds.

The fiscal 2017 budget, despite opposing legislation and Republican threats of criminal and administrative penalties against district employees, marks the first in which the district rather than Congress will have control over spending its own money.

Budget autonomy is seen as a stepping stone to district statehood, which Bowser has made a strong push for in 2016. Her efforts have seen support from President Obama and likely Democratic presidential nominee Hillary Clinton, but have been opposed by Republicans because of the new Democratic seats it would likely add to Congress.

At its annual meeting in Washington this week, the U.S. Conference of Mayors adopted a resolution introduced by Bowser supporting D.C. statehood. On Tuesday, the New Columbia Statehood Commission, the independent agency within D.C. government charged with promoting statehood and voting rights, approved a draft state constitution for the district.

Legislation introduced by Rep. Mark Meadows, R-N.C., chairman of the House Oversight and Government Reform Committee's government operations panel, would repeal D.C.'s Local Budget Autonomy Act of 2012 to require district funds are subject to congressional approval.  The bill, which is pending before the Senate, has received support from House Speaker Paul Ryan, R-Wis., who said local budget autonomy undermines the Constitution.

For reprint and licensing requests for this article, click here.
Tax Infrastructure Washington
MORE FROM BOND BUYER