According to the most recent projections, that plan will have to close a $115 million gap between the revenue anticipated to come in and the level of spending necessary to maintain current city services.
You might note some dissonance between the ongoing need for austerity — the current gap represents about 2 percent of a $6 billion local budget — only a month after city leaders crowed about banking a $250 million surplus for fiscal 2011. There’s a bunch of reasons for that, starting with the natural growth in spending due to rising costs, “spending pressures” in agencies that were unable to make their budgets last year, and the conservative revenue projections of Chief Financial Officer Natwar M. Gandhi (which Gray pushed back on a week ago).
Long story short, the District has not yet left the world of recessionary pain it has been in since fiscal 2009 — on paper, at least.
Gray has to find $115 million worth of spending cuts or new revenue somewhere, and he has hinted, and city officials confirm privately, that any hike in the “Big Three” tax rates — sales, income and property — is off the table. That’s not to say there won’t be revenue-raisers, but Gray won’t be seeking a reprise of last year’s grand debate over whether to raise income taxes on the city’s top earners.
So what else is on the table? You could do worse than look at the D.C. Fiscal Policy Institute’s recent statements on its budget preferences. The group advocates for protecting spending on city programs for the poor and vulnerable, and several of its recommendations — including a high-earner tax — ended up in last year’s mayoral plan to close a $322 million gap. This year, DCFPI has identified a number of relatively small-dollar items that could help address the gap.
They include eschewing a $50 million-a-year commitment to “pay-as-you-go” funding for capital projects and requiring married couples to combine their income on tax returns, making it more likely that they will be pushed into higher brackets. DCFPI’s most controversial proposal is to start applying sales tax to more services that currently are exempt. The city government has taken some steps toward this in recent years — applying it to private investigators last year, for instance — but suggestions in 2010 that things like gym memberships and yoga classes might be taxed turned into a political disaster of sorts.
As far as cuts go, it’s harder to guess what Gray might target. DCFPI is pushing him to keep his hands off social-service programs, which absorbed about 60 percent of last year’s spending cuts. But that might be wishful thinking, given that the other major drivers of city spending — education and public safety — are more politically treacherous. With violent crime showing a recent uptick and police staffing a continuing issue, don’t expect big cuts to police. And Gray has already pledged a 2 percent increase in per-pupil schools funding and is feeling heat from charter school supporters to make good on campaign promises to increase facilities funding.
So the District might be in for a reprise of last year’s budgetary drama: Gray, thanks to Gandhi’s conservative revenue estimates, will have to play bad cop — proposing significant cuts to social service programs that, in Gray’s words, have already been cut “to the bone marrow.” The D.C. Council will dig in, and come June and September, Gandhi will swoop in with another, higher set of revenue estimates, letting the council play good cop to restore many of the toughest cuts.