Outlook brightens for D.C. budget

Washington Post Staff Writers
Tuesday, March 1, 2011; 10:27 PM

D.C. Mayor Vincent C. Gray announced Tuesday that the District's revenue forecast for the coming fiscal year has improved by $105 million, a windfall brought on by an improving local economy that could forestall crippling budget cuts.

Speaking at a news conference, Gray (D) and Chief Financial Officer Natwar M. Gandhi said the improved outlook for fiscal 2012 stems from a rising stock market, a stable unemployment rate and, most of all, an influx of companies seeking office space in the nation's capital.

Gandhi now projects that Gray and the D.C. Council will have to close a shortfall of $322  million when they consider the 2012 budget in the spring. Although Gray said tough choices will have to be made to cut spending, the revised projection is far less than the $400 million to $600 million gap he had been expecting.

"It certainly makes the situation better, but we don't want to overstate the optimism here," Gray said. "The good news is we got more money, but we still have enormous problems."

The news had an immediate effect on the interim schools chancellor, Kaya Henderson, who had been hours away from informing principals that they would have to make deep spending cuts at their schools, possibly forcing layoffs. Now, Henderson plans to hold off on those conversations while she tries to determine whether the additional revenue will mean less-drastic reductions.

"It definitely changes my plans," Henderson said. "The mayor has been incredibly generous in extending the opportunity for [D.C. public schools] to take advantage" of some of the revenue growth.

Gray released the revised $5.3 billion budget projection for fiscal 2012 as his administration sought to regain its footing after being battered by allegations of cronyism, nepotism and wasteful spending.

Although he continued to face questions about why some children of top administration officials had landed city jobs, Gray largely used the news conference to try to demonstrate that he's working to fulfill his campaign promises.

Gray also announced enrollment figures showing gains for both regular public schools and public charter schools. In the latest audit, the District's 123 public schools had 45,630 students, a 2 percent gain over the previous audit, and the city's 52 charter schools had 29,356 students, an increase of 5.8 percent. The figures indicate that 39 percent of the city's public school students now attend charter schools.

The audit confirmed an October count that showed the first growth in public school enrollment since 1969. The change was attributed primarily to sizable increases in pre-kindergarten and kindergarten enrollment, and Gray credited those gains - which offset continued losses at higher grade levels - to efforts in recent years to boost funding for pre-kindergarten programs.

"What we have seen over the last three years certainly suggests these investments have been paying off," said Gray, who made universal preschool for 3- and 4-year-olds a top priority in his 2010 mayoral campaign.

Gray also sought Tuesday to show progress in his pledge to ease unemployment through programs that encourage city contractors to hire more District residents.

At the news conference, City Administrator Allen Y. Lew detailed a pilot program that offers contractors financial rewards to hire D.C. residents. The first phase of the Workforce Incentive Program will center on six planned school construction projects, estimated to cost a combined $55.6 million.

If D.C. residents account for 35 percent or more of a contractor's employees on one of the projects, the city will pay the contractor up to an additional 5 percent.

Gray and Lew said that the new program doesn't require council approval and that the additional cost most likely won't be passed on to taxpayers because the money will be taken from "contingency" reserves built into the budget.

"It's clearly an investment," Gray said, remarking that it could help reduce unemployment in the city.

In his quarterly revenue projection, Gandhi said the city's unemployment rate remains stable at slightly less than 10 percent. But Gandhi reported an overall 5.4 percent increase in District wages, nearly double the national average of 2.8 percent. The revenue reportattributes the increase to the federal government, stating that "federal salaries were $1.23 billion higher than a year earlier" in the final quarter of fiscal 2010.

Gandhi said the District's status as the nation's capital is also a boon to commercial real estate, fueling a 16 percent increase in property tax receipts during the quarter.

"The federal government has been a stable" and stimulating force, Gandhi said.

Although Gandhi stressed that the District is far better positioned than many other cities to balance its budget, Gray cautioned that it will be a challenge for him and the council to come up with a fiscal 2012 budget. He refused to rule out tax increases, layoffs or cuts to government services to close the shortfall.

"Everything is still on the table," Gray said.

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