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Government of the District of Columbia
Executive Office of the Mayor
Testimony of
Vincent C. Gray Mayor of the District of Columbia
Public Briefing on the Mayor’s Fiscal Year 2015 Budget
Council of the District of Columbia Committee of the Whole
The Honorable Phil Mendelson, Chairman
April 7, 2014
Council Chambers/Room 500 John A. Wilson Building
1350 Pennsylvania Avenue, NW Washington, DC20004
10:00 A.M.
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I. Introduction
Good morning Chairman Mendelson, members of the Council, and members of the
public, I am Vincent C. Gray, Mayor of the District of Columbia. I am pleased to be
here today to present my proposed Fiscal Year 2015 budget.
I would like to start by thanking and congratulating my fellow panelist Jeff DeWitt
for the vital work that he and his staff have put in on the Fiscal Year 2015 budget.
This is no easy task and we couldn’t have put together a quality budget without the
cooperation and work of the OCFO. With the addition of a public education volume
as well as color photos and charts throughout the budget and capital plan, this may
be the best budget book we have ever produced.
I would also like to thank members of the Council for working with me and my
budget staff, and for helpful ideas in advance of the budget, not just this year, but
during each of the four years that I have been Mayor. I believe this collaborative
approach has served the city well and allowed us to budgetarily address the
priorities of District residents.
II. Brief Retrospective on District’s Fiscal Turnaround
My first priority when I became Mayor in January 2011 was to restore fiscal stability
to the District of Columbia’s budget and finances. The task I was confronted with
was both urgent and daunting.
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The District of Columbia faced a $322.1 million gap between its baseline budget and
certified revenue. Our fund balance had plummeted from a level of $1.5 billion in
FY 2007 and was budgeted to fall to $705.1 million at the end of FY 2011. About
one-third of this decline was due to the recession, while the rest was caused by the
failure of the Executive branch to control spending within agencies, resulting in
spending pressures of over $200 million annually.
Councilmember Evans, like me, I’m sure you vividly recall our trip to Wall Street in
February 2011. After a difficult closeout of Fiscal Year 2010, we went to New York
and literally had to implore the three rating agencies not to downgrade the District’s
bond ratings. We promised that we would rightsize the District’s budget. We
committed to three principles, emanating from legislation I was pleased to sponsor
as Council Chairman:
(1) We would deposit any undesignated surpluses into two new locally mandated
reserve accounts, a Cash Flow Reserve and a Fiscal Stabilization Reserve.
When fully filled and added to Congressionally Mandated Rainy Day Funds
(the Emergency and Contingency Cash Reserves) the accounts would total two
months cash-on-hand, which is the Government Finance Officers Association’s
(GFOA) recommended best practice for state and local governments.
(2) The District of Columbia would pass structurally balanced budget and financial
plans that did not draw upon the locally mandated reserves and spent only
what was certified in revenue.
(3) We would abide by a 12% cap on all General Fund tax supported debt.
Based on these commitments we avoided a bond downgrade, and instead the
District of Columbia’s bond ratings were placed on a negative outlook.
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The next step was equally challenging. I spent the first three months of my
administration combing through every line of the budget with a newly created
Mayor’s Office of Budget and Finance that reported directly to me. I knew we had
to close a $322.1 million gap and for Fiscal Year 2012 transmit the first structurally
balanced budget to the Council in the last three years. I used a balanced approach
of two-thirds expenditure reductions and one-third tax increases. Wherever
possible, I tried to avoid cuts to important programs and instead challenged my
agency directors with aggressive performance improvement savings targets. We
were met with skepticism from some on the Council that we could achieve such
savings and Dr. Gandhi flagged these reductions as “items to watch” in his budget
certification letter.
We got to work even before Fiscal Year 2012 began. I imposed a hiring and travel
freeze and an approval process for all non-personal services during the last half of
Fiscal Year 2011 through the Office of the City Administrator. I created a spending
pressure task force, chaired by my budget director, whose mission was to
ameliorate spending pressures in FY 2011 and work with agency directors to begin
to implement the reforms necessary to hit fiscal year 2012 performance
improvement savings marks. Through these efforts and an increase in revenue we
orchestrated a $399.8 million turnaround of the fund balance in FY 2011. Instead of
falling to $705.1 million, the fund balance instead rose to $1.1 billion. That spring
the District’s bond ratings were taken off negative outlook.
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I emphasized the need to not grow complacent with our successes. Through sound
management of agency budgets we hit all of our projected performance
improvement savings in non-public tuition, special education transportation,
disability and unemployment compensation fraud prevention, D.C. Healthcare
Alliance residency verification, reductions to the number of children in foster care,
energy retrofits to District buildings, and increased Medicaid revenue collections.
We closed out FY 2012 with another budget surplus that increased the District’s
fund balance to $1.4 billion. These successes did not go unnoticed. In March of
2013, Standard and Poor’s upgraded the District’s general obligation bond ratings
from A+ to AA-. With this upgrade by S&P all three of our G.O. bond ratings had
moved out of A to the AA category.
Through prudent management by District agency directors and the efforts of my
Spending Pressure Task Force, we effectively eliminated all significant spending
pressures in Fiscal Year 2013 and closed out the Fiscal Year with a fund balance of
$1.75 billion, an all-time high in the District’s history. With the close of the FY 2013
CAFR we put an exclamation point on a remarkable three-year fiscal turnaround.
I wanted to take the time to go through this brief chronology of events not to spike
the football, to use a sports metaphor, but instead to make sure that revisionist
history doesn’t succeed in painting the District’s return to fiscal stability over these
last three years as some sort of happy accident.
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In perhaps the most ill-informed op-ed published in the Washington Post in recent
memory, and that’s truly saying something folks, Mike Madden suggested that it
was a myth that my administration can take credit for rebuilding the District’s
economy and restoring its fiscal health. While anyone with a keyboard and a
newspaper column is entitled to their personal opinion, the facts of what occurred
during the last three years truly speak for themselves.
I have successfully implemented a deliberate strategy to bring the District of
Columbia’s finances back from the brink of a bond rating downgrade in 2011 to the
strongest they have been in the District’s history by 2014. In summary, we now
have the highest fund balance of $1.75 billion in the District’s history; we have the
most cash-on-hand in the District’s history; and we have the highest bond ratings in
District’s history.
I am proud to turn over a true “steaming engine” of an economy, a budget, and a
fund balance. My advice to the District’s further leadership is to stick to the three
principles that I passed into law as Council Chairman and that Jack Evans, Dr.
Gandhi, and I used on Wall Street to help begin this turnaround. To the residents of
the District of Columbia, it has been my honor and privilege to be the steward of
your hard-earned money over the last 3 ¼ years. The taxes you have paid have been
leveraged wisely to accomplish amazing things such as: bring pre-kindergarten to all
three and four year olds, improving test scores across the city, modernizing our
schools, building new affordable housing, making sure we now have over 4,000
sworn police officers keeping our city safe, and to continue to provide the most
generous social services to our residents in need that exist anywhere in the country.
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III. Fiscal Year 2015
With that brief review of history, it is time to turn our attention to the subject of
today’s hearing, the Fiscal Year 2015 budget. The FY 2015 budget is $10.7 billion, of
which $6.8 billion is local funds. The FY 2015 budget and financial plan is structurally
sound and does not use locally mandated reserves. There are no tax or fee
increases to balance the budget. This budget preserves the District’s 12 percent
debt cap and continues to fund the legislatively mandated, dedicated Pay-As-You-Go
Capital fund, all the while still providing for $1.4 billion of capital investments in
Fiscal Year 2015 and $7.0 billion over the 6-year Capital Improvements Plan.
The theme of this year’s budget is “Keeping the Promises”. With the District
continuing on an upward trajectory, this budget makes numerous key investments
to ensure that we continue to keep our promises to all District residents to keep
moving this City forward. In order to take full advantage of these opportunities, I
invoked the following four overarching goals for Fiscal Year 2015:
(1) Continue improvements in public education;
(2) Make additional investments in affordable housing;
(3) Encourage economic and workforce development;
(4) Improve the quality of life for all District residents.
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IV. Goal #1: Continue to invest in improvements in public education
The first and most important goal I emphasized when formulating this budget was to
continue the focus on making improvements in public education. Anyone who
knows me knows that I have always been a staunch advocate of public education. In
particular my focus has been to educate the youth of the District from birth to
adulthood in the most inclusive and beneficial environment possible. Every decision
I have made, from school facility improvements to increased emphasis on child
development programs, has been to advance the education achievement level of
the District’s students.
As part of the fiscal year 2015 budget, no decision I made was more important than
the one to invest $112 million directly into public education. This includes $57
million for D.C. Public Schools (DCPS) and $55 million for D.C. Public Charter Schools
(PCS). Part of these increases will go towards covering the cost of increased
enrollment in both sectors. Enrollment for DCPS rose from a projected amount of
46,060 in fiscal year 2014 to a projected total of 47,592 in fiscal year 2015.
Enrollment for PCS rose from a projected 37,410 in fiscal year 2014 to a projected
total of 39,076 in fiscal year 2015. These enrollments represent the highest student
enrollment in both sectors in 25 years, an achievement which I am extremely
excited about. The investments made as a result of these enrollment increases will
allow schools to place an increased focus on technology, algebra, foreign language,
art, gym, and music. In addition, I added an inflation adjustment to the facilities
allotment for charter schools, an issue which has been a persistent problem for
charter schools looking to make needed improvements to school facilities.
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The other portion of the increases to public education relate to increased funding as
a result of the findings of the adequacy study commissioned by my administration
through the Deputy Mayor for Education. This study was comprehensive and the
results gave us several key areas on which to focus our efforts. As a result, DCPS is
receiving an additional investment of $44 million for related initiatives and PCS is
receiving an additional $19 million. The vast majority of these increases are as a
result of the addition of an at-risk weight. This new weight will allow our public
education system to place renewed focus on the students most in need. This
includes students in foster care, students who are homeless, students on TANF or
SNAP, and students who are behind grade level. Focusing on this critical population
will help ensure our students don’t fall behind and that they progress appropriately.
The growth in enrollment, advancements in education, and improving test scores
means we are on the right track with public education in this city and we need to
continue the current focus on our students to sustain the improvements and attract
even more students to our public education system. The increased funding noted is
one key way to do that, but this budget also contains several other key education
related initiatives such as:
• $4.2 million for infant and toddler programs;
• $5 million additional for school nurses;
• Nine Career and Technical Education Academies to serve 200-300 students
each, thus beginning to restore vocational education to our schools so that
more students will be prepared with a marketable skill when they graduate;
• $175,000 for Free SAT testing for all junior and senior students;
• Implementing a new DC Youth Reengagement center;
• $1.1 million for the My School DC Common Lottery system;
• $1 million to continued funding for truancy prevention;
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• $400,000 to continue the Sing, Talk, and Read program at DC Public Libraries;
• $1.3 million increase for the University of the District of Columbia; and
• $2.5 million for workforce development programs at CCDC.
On the capital side, we are investing $1.6 billion in the Capital Improvements Plan
(CIP) for citywide school modernizations. We are investing $404 million in FY 2015
for citywide school modernizations including:
• $173.8 million for high schools;
• $20.4 million for middle schools;
• $115.7 million for elementary schools; and
• $94.4 million for general improvements.
We are also focusing on enhanced school modernizations at schools facing critical
needs. These include:
• $62 million for Spingarn Career &Technical Education;
• $39 million for Orr Elementary School;
• $32 million for Powell Elementary School;
• $38 million for Garrison Elementary School; and
• $28.6 million for Stanton Elementary School.
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V. Goal #2: $100 Million Investment in Affordable Housing
My second key goal of this budget is continuing our commitment to preserving and
developing affordable housing in the District of Columbia. As I said in my State of
the District address recently, we must redouble our efforts to move families out of
shelters and into apartments faster and with the necessary supports to get them
standing on their own two feet. And we’re having success with the approach we are
using.
Through Rapid Re-Housing and other supports, over the last three years we have
helped transition more than 1,200 families from shelter or short-term housing to
permanent housing. At the same time, spending on homeless services has increased
by 41 percent and local funding for permanent supportive housing has increased by
127 percent.
Now, for the second fiscal year in a row, we are proposing the District allocate $100
million for affordable housing initiatives. These initiatives include:
• $78.5 million to the Housing Production Trust Fund, including $30.2 million in
fiscal year 2014 in additional one-time funding and $48.3 million through
recurring dedicated deed taxes;
• $8.5 million to fund B20-318 "Senior Citizen Real Property Tax Relief Act of
2013”, which I signed into law late last month, and which exempts low- and
middle-income seniors from real-property taxes if they are at least 70 years
old and have owned a residence in the District for 20 consecutive years or
longer;
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• $4.7 million needed to end chronic Veteran homelessness by the end of 2015,
an effort on which the city is participating in cooperation with more than a
dozen local non-profits and faith-based communities;
• $4.0 million in additional funding for the Local Rent Supplement Program,
including $1 million for low-income seniors to move from nursing homes to
home settings;
• $2.0 million to assure the ongoing-success of the 500 Families in 100 Days
campaign. As the name suggests, between now and June we will identify and
lease at least 500 apartments for homeless families using either Rapid Re-
Housing or Permanent Supportive Housing vouchers; an additional and
recurring $1 million in ERAP funding and $1 million Rapid Rehousing money
will allow the program to operate beyond this fiscal year. This effort will be
supported by the “One Family One Congregation initiative through which
houses of worship, as part of their social justice mission, will connect with a
family and provide ongoing life skills support including financial management
until they are stable enough to go it alone.
• $1.3 million in additional funding for the LIHEAP “Heat and Eat” program,
which provides Food Stamp recipients who have not received a LIHEAP
payment a $1.00 utility payment that in turn qualifies them for the full
standard utility allowance for Food Stamps;
• $1.0 million increase for the Home Purchase Assistance Program;
• $300,000 to establish a new Homeownership Campaign in Wards 7 & 8; and
• $250,000 in additional funding for the Emergency Housing program at the
Office of the Tenant Advocate to help those displaced by fires and other
destructive events.
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VI. Goal #3: Encourage economic and workforce development
An integral part of making the District more affordable not only includes ensuring
that we have more affordable housing but also that we have more good jobs. And
that our residents have the ability to compete for them. That starts with having a
solid workforce-development system – a first for our city. The third pillar of this
proposed budget is the continuing need to encourage economic and workforce
development.
First, we’ve included in this proposal an additional $4.2 million in recurring funds for
an adult job training increase for services for unemployed or underemployed
persons so that they can achieve economic security.
In addition to these adult training dollars and the Career and Technical initiatives we
are proposing in public education, the proposed fiscal year 2015 budget includes an
additional $2.5 million in funding for workforce development at the Community
College of the District of Columbia. With these funds, the Community College will
serve an additional 2,000 residents – on top of the nearly 3,000 a year it currently
serves – for jobs in one of its five high-growth career pathways: health care,
construction, hospitality, transportation, and IT/office administration.
I recently announced the development of the One City Business Portal, an on-line
resource for businesses that will unify in one website the licensing-and-permitting
functions of eight District government agencies, creating a user-friendly, one-stop-
shop experience for business owners. The costs of development will be covered in
the fiscal year 2014 and 2015 budgets.
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As part of a beautification and streetscape improvement effort, I have identified
$3.3 million in Fiscal Years 2014 and 2015 for new amenities and infrastructure
enhancements to key commercial corridors in Ward 8 neighborhoods. This Ward 8
Business Development Initiative will also include $500,000 for business façade
improvements and an additional $50,000 funding for Clean Teams in the FY 2015
budget.
Finally, the proposed capital improvement plan provides continued funding for a
wide array of economic development projects that will provide jobs and economic
growth for District residents. Projects include:
• Walter Reed redevelopment;
• Shops at Dakota Crossing;
• Skyland Town Center;
• St. Elizabeths East Campus; and
• SW Waterfront.
VII. Goal #4: Improve the Quality of Life for All
The fourth and final pillar of my fiscal year 2015 budget, improving the quality of life
for all, acts as an umbrella category to allow me to discuss all of the other great
things that are included in this FY 2015 budget.
A. An Age-Friendly City
This budget contains additional funding to support my initiative to make the District
of Columbia an Age Friendly City. I have increased funding for our Senior Wellness
Centers by $2 million, which will provide for upgraded services offered at these
facilities.
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I am requesting $54.4 million in the 6-year Capital Improvements Plan and budget
for upgrades to sidewalks and curbs, which if left broken and uneven present a
tripping and falling challenge for our seniors and for all pedestrians. We currently
have a backlog of $28 million in needed improvements so this budget will address
the backlog and more. Additionally, I ensured that the Commodity Supplemental
Food Program will continue to operate at existing service levels, with a $456
thousand commitment to the DC Office on Aging.
This budget also provides increased funding for transportation services for our
seniors. This $3 million investment provides new transportation services for our
city’s senior population, by expanding the DCOA’s transportation model to include
both medical and non-medical uses.
B. The East End Medical Center
The budget takes the bold step to solidify a viable health care system for District
residents on the East End of the city. I am committing $300 million of capital budget
to create the East End Medical Center on the East Campus of Saint Elizabeths. This
will be a state-of-the-art facility that will replace the antiquated United Medical
Center facility currently located in Ward 8. This funding will allow the District to
begin implementing its plans for long-term reform much more quickly than investing
in the current UMC campus, thus affording the District a major rebranding
opportunity and the potential for significantly increased market share that goes
along with it.
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Soaring facility maintenance and improvement costs found at the existing UMC site
would be slashed in half by building the new East End Medical Center. The St.
Elizabeths location offers much better access to public transportation from across
Wards 7 and 8 as well as other parts of the area. All of these ideas greatly
strengthen the likelihood of attracting a high-quality operating partner for the
hospital and continue to catalyze economic development on the St. Elizabeths
campus and to the East End. Moreover, the site of the current UMC will then
become available for development, thus generating resources for the District in
general and to facilitate paying off construction costs of the new hospital.
C. Health Investments
Additionally, this budget continues to improve the health outcomes of the residents
of the District. Several exciting new initiatives are funded, such as:
$2.5 million enhancement for the Department of Health Care Finance to
broaden Medicaid health coverage to cover organ transplants;
$867,000 for Early Periodic Screening Diagnosis Treatment incentives for our
Managed Care Organizations funded through DHCF;
$596,000 at the Department of Health to continue programs targeted to
reduce the infant mortality rate within the District;
$2.5 million within DOH to backfill vanishing federal funds to ensure that
home visitation for new at-risk parents continues at the current service level;
$5.5 million to increase the provider rates at independent community
residential facilities that provide housing for individuals with mental health
issues; and
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$250,000 at the Department of Behavioral Health to increase funding for
tobacco cessation programs.
Initiatives such as these help to provide systemic healthy outcomes for all District
residents, particularly those that are the most vulnerable.
D. TANF C.P.I. Adjustments
Working closely with Councilmember Barry, I have proposed a method to provide an
increase to the TANF benefit to those who are especially economically challenged.
This budget will increase the TANF benefit by the same percentage as the Consumer
Price Index in FY 2015 and again in FY 2016. This will be the first time since 1996
that this benefit has been raised. Based on the financial plan and Budget Support
Act I have submitted, beginning in FY 2017, the benefit will increase almost 46
percent to the approximate amount the TANF benefit should have been increased
annually for C.P.I. since 1996. This will give the District a TANF benefit that would be
comparable to that which Maryland gives its families. Additionally, the Budget
Support Act requires that the TANF benefit continue to be indexed to CPI in FY 2018
and beyond. The proposed increase to the TANF benefit will provide better
opportunities to families to move from dependency to self-sufficiency.
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E. The City Fund
My budget will continue to invest in the non-profit community by the philanthropic
efforts available through the $15 million in City Fund. The City Fund will continue to
allow non-profits in education, job training, health, services for seniors, arts, public
safety, and the environment to compete openly and transparently for competitive
grants of up to $100,000 a year. This fund will still be managed by the Community
Foundation for the National Capital Region, a nationally renowned organization. All
grant decisions will be made by them and only on the merits of the proposal.
The Community Foundation will insulate this grant process from political pressure
and help guarantee we avoid the pitfalls associated with earmarking funds.
Moreover, this will continue to provide an avenue for funding innovative ideas
proffered by non-profits that advance the quality of life or support for projects
which do not readily fit existing public grant categories.
F. Investments in the District’s Workforce
My budget continues the investments this administration has made to the District
government workforce by fully funding all pending labor collective bargaining
agreements and compensation awards, and by expanding the parental leave policy
for District employees.
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I am proposing a paid family leave program, entitled the Family Bonding Program,
which will provide District employees up to six weeks of paid parental leave for
primary caregivers and up to two weeks of paid parental leave for secondary
caregivers during a twenty-four month period. Under this program, an eligible
employee will receive up to 100% of his or her salary for qualifying events such as
birth and adoption.
G. Public Safety
In order to further enhance residents’ quality of life, it is critically important that
residents in all neighborhoods of the District of Columbia feel safe and secure, and I
have thus continued to focus resources on public safety. These investments include:
• A fully funded a police force of over 4,000 sworn officers;
• $91.3 million for Fire and EMS capital investment in facilities and fleet;
• $670,000 in FY 2014 for pumper and ladder repairs for FEMS
• $1.2 million for Department of Forensic Sciences to fully fund expanded
services at the new Consolidated Forensics Lab;
• $193,000 for mobile library services for incarcerated citizens;
• Increasing the Access to Justice legal assistance fund by $250,000 for a total of
$4 million; and
• $293,000 to achieve accreditation for Office of the Chief Medical Examiner.
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H. Effective Government Operations
My budget makes a major investment of $6.9 million, that is comprised of 54 FTEs
allocated the Office of Contracting and Procurement (OCP) and Office of the
Attorney General (OAG), to transform the District’s procurement system. While OCP
procurement staff will be assigned to District agencies, receiving day-to-day
direction from agency Directors or their designees, the Chief Procurement Officer
retains responsibility for the quality of the procurements processed by assigned
personnel. In addition, OCP’s central operations will be strengthened by providing
additional resources for policy direction, regulatory oversight, quality assurance,
compliance monitoring, training and capacity-building. Moreover, the OAG budget
provides for additional procurement-skilled attorneys to ensure quality assurance
from the procurement planning stage to contract execution.
The underpinning of the reform strategy is to streamline processing operations by
authorizing agencies, through CPO delegation, to manage the procurement of the
goods and services that are needed to perform agency functions. This strategy
recognizes that many of the District’s purchasing needs are “business” specific –
tailored to agency functions.
I. Parks, Recreation, and the Arts
My budget provides increased funding, in the amount of $1.5 million, for summer
programs at the Department of Parks and Recreation. DPR is the primary source of
summer programming for District families serving well over 5,000 children, youth
and families with its programs, events and activities during the summer months.
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The proposed increase in funding will allow additional seasonal hires to serve a
program support role, and to monitor and drive program quality by serving as front
line workers who will actually facilitate programs, events and activities. Additionally,
by placing more staff in our centers, we will be better able to ensure that we meet
adult-to-child ratios at all times.
The arts will receive $5 million of Local operating funds in FY 2015 for arts and
humanities grants and projects. By moving this money out of the capital budget, we
not only comply with new audit requirements, we also give the Commission on Arts
and Humanities greater flexibility in how the funds are disbursed.
J. Transportation
My Fiscal Year 2015 budget fully funds the District’s portion of the WMATA
operating subsidy at $292 million, including an increase of $2 million for the School
Transit Subsidy and $5.1 million for expanded Circulator Bus routes. I have also
funded the $25 million for the District’s portion of the region’s capital commitment
to WMATA Momentum program that I made with the governors of Maryland and
Virginia.
I have included pay-as-you-go capital funding dedicated for an Integrated Premium
Transit system, including the Streetcar build-out at $810 million, a Circulator bus
garage at $41 million, and new Circulator buses purchased at $49 million.
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This dedicated funding will ensure that needed improvements to our public
transportation infrastructure are fully funded. It is also an economic development
tool, because we fully believe the streetcar system will more than pay for itself in
the long-term through the increased revenue it will generate for business expansion
along the streetcar network.
We also are piloting a program that redirects $1 million from Metro Access services
to the far less expensive option of D.C. taxicabs. The capital plan funds $114M for
sidewalks, bicycle and pedestrian improvements and an additional $10 million for
alley construction and rehabilitation.
K. Expanded Autonomy
My budget addresses the District’s continued fight for greater autonomy by
proposing Congressional enactment of the budget and legislative autonomy
provisions in the President’s FY 2015 budget. As you know, last year, for the first
time, the President’s budget included legislation to provide the District with budget
autonomy. This year, the President’s budget also included legislative autonomy for
the District in his budget submission. My budget also provides funding, $100,000 in
non-personnel services, to support the important activities of our elected D.C.
Statehood Delegation related to the achievement of statehood. Additionally, my
budget provides local funding for a Statehood Commission Director position to
support the activities of the 51st Statehood Commission to educate, advocate for,
promote, and advance the proposition of statehood for the District of Columbia.
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VIII. Tax Policy Changes
During the Great Recession, the Hospital community was asked to help with a
growing budget deficit by implementing a local Hospital Bed tax to increase
revenues for the District, with a sunset provision for this tax in FY 2015.
Additionally, a provider tax was implemented to assist the Hospitals by raising the
Medicaid outpatient rate to the Medicare upper limit, thereby maximizing the
leveraging of federal funds to compensate for the loss of local revenues. My budget
keeps the District’s promise to the Hospital community by allowing the sunsets of
the bed tax and provider tax while raising the Outpatient rate from 47 percent to 77
percent, increasing reimbursement rates for hospitals to mitigate the loss of federal
funds.
I want to thank Mayor Anthony Williams and the members of the Tax Revision
Commission for their hard work and deliberations and for preparing a thoughtful
analysis of the District’s tax code as we move into the 21st century. Their
recommendations are a useful road-map of goals for reform moving forward, and I
am pleased that we could begin some of that reform in the proposed Fiscal Year
2015 Budget and Financial Plan. Although we did not have the revenue necessary to
implement all of the Commission’s recommendations, I share their goals of
mitigating the tax burden of middle-class residents and attracting business activity
to the District. That is why this budget proposal includes measures to implement
some of the recommendations included in the Commission’s report.
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First, we propose a reduction in the marginal tax rate on individual income between
$40 and $60 thousand, from 8.5% to 7.5%. The measure increases the progressivity
of the tax system for working individuals and families, who currently are taxed at a
marginal rate equal to that of people making $350,000 annually.
Second, we unified the taxation of tobacco products so that other non-premium
products are taxed in the same manner as cigarettes. Not only is this good tax
policy, but it works as a disincentive to use tobacco products, and will help us fund
tax decreases as well as additional tobacco cessation programming.
Third, we propose the use of a single sales apportionment factor for multi-state
corporations. This measure will allow us to lower the business franchise tax rate
from 9.975% to 9.4% without lowering tax revenues – a win-win for existing and
prospective local businesses alike.
Finally, we include the Commission’s recommended “tax safe harbor” to attract
investment funds operating a stock “trading” business in the District of Columbia.
The proposal would generally exempt investment funds from the unincorporated
business franchise tax and could attract a vibrant new industry to the District’s
economy.
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IX. Revised Revenue Priority List
In every budget cycle there are more needs than there are resources. Even in times
when revenue is increasing, there will be things we want to fund in the budget, but
cannot. Despite the District’s positive financial position, this budget cycle is no
different so I have included in the budget a Revised Revenue Priority List that
contains initiatives that were not included in the FY 2015 budget, but that I support.
If FY 2015 revenue projections increase as part of the June revenue estimate,
initiatives will be funded in the order in which they are listed. The initiatives include
an array of services including increased infant and toddler slots, funds for adult
literacy, youth summer programs, and tax relief.
X. Conclusion
I believe this budget will continue the amazing financial turnaround we have
collaboratively worked towards since January 2011. It does not raise taxes or fees to
balance the budget and funds critical priorities in education, health and human
services, and workforce development, while continuing to preserve the District’s
safety net for the most vulnerable of our residents.
This is an exciting time to live, work, and visit the District of Columbia. Given our
recent track record of financial management, economic expansion, population
growth, and service to protect those most vulnerable, I would proudly measure our
progress against that of any state, county, or city in the nation.
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It is has been my honor and privilege to work with so many dedicated professionals
in the District of Columbia Government during my time as Ward 7 Councilmember,
Council Chairman, and Mayor. I have met so many amazing people across the City
during this time. I feel blessed to have been able to give back to the city I love…the
city I was born in, educated in, raised a family in. And with that, I open it up for
questions.