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City Administrator Testifies on Fiscal Year 2016 Proposed Budget

Friday, May 8, 2015
Written testimony of City Administrator Rashad Young

GOVERNMENT OF THE DISTRICT OF COLUMBIA

Fiscal Year 2016 Budget Request Act of 2015

Testimony of
Rashad Young
City Administrator

Before the
Committee of the Whole
Council of the District of Columbia

May 8, 2015
Room 500
John A. Wilson Building
1350 Pennsylvania Avenue, NW
Washington, D.C. 20004 

Introduction

Good morning Chairman Mendelson and Members of the Council of the District of Columbia. I am pleased to testify before you today on the Fiscal Year 2016 Budget Request Act of 2015 and the Fiscal Year 2016 Budget Support Act of 2015, entitled collectively “Pathways to the Middle Class”.  

When the Mayor took office she promised to align programs, staff, budget, and District resources around what is most important to District residents. She committed to creating pathways to the middle class—a governing perspective that focuses on implementing strategies that give our residents a real opportunity to achieve a better life for their families. To help effectuate these opportunities, the Mayor focused on the following key areas for FY 2016:

  1. Education
  2. Economic Opportunity
  3. Neighborhoods
  4. Public Safety and
  5. Infrastructure and the Environment

The budget investments and the legislative changes made in these areas mean educational investments in high quality schools and innovative early childhood opportunities, workforce development and job training programs that lead to actual employment opportunities, making improvements to our neighborhoods to give our children safe places to play, protecting residents lives and property, and supporting infrastructure and transportation so residents can move safely across the District. These governing principles guided the decision making in nearly every area of this budget.

Fiscal Year 2016 Budget Request Act of 2015

The “Fiscal Year 2016 Budget Request Act of 2015” establishes the operating and capital budget authority for the District of Columbia government for FY 2016.  The Budget Request Act advances the Mayor’s budget goals by making important investments in the key areas mentioned above. Over the last four weeks, government officials and the public have testified before the Council on the details of the operating and capital budgets for executive and independent agencies that are appropriated and authorized in the Budget Request Act.  The agency budgets in the Budget Request Act include investments that have already been discussed at length by the Mayor and her agency directors throughout the budget process so I will not discuss those again but will be happy to answer any questions you may have. 

I would like to highlight that the FY 2016 budget is structurally sound and includes a realistic set of financial plan adjustments and assumptions.  This budget preserves the District’s 12 percent debt cap all while still providing for $1.2 billion of capital investments in FY 2016 and $6.2 billion over the 6-year Capital Improvements Plan.

Fiscal Year 2016 Budget Support Act of 2015

The “Fiscal Year 2016 Budget Support Act of 2015” makes amendments to the laws of the District of Columbia that are necessary to implement the policies, initiatives, and cost savings incorporated into the budget and financial plan.  
Without reciting every subtitle in my testimony, I would like to take this opportunity to highlight several portions of the Act that support key priorities of the Mayor’s budget in the areas of government operations, economic development, public education, health and human services, and finance and revenue.  Of course I am available today to address any questions you might have on other provisions included in the bill.

Government Direction and Support

The key subtitle I want to highlight is the “Supply Management Amendment Act of 2015”. This subtitle makes small but significant shifts in how the District deals with the disposition and sale of surplus property through our Office of Contracting and Procurement (OCP). More specifically it establishes an electronic inventory control system to monitor all surplus property.  This system will contain key information, such as date of receipt, photos and descriptions, designed to help monitor and control our inventory.  Additionally, this subtitle would allow OCP to enter into disposition agreements with District agencies, including independent agencies as well as public charter schools to sell surplus goods. Proceeds of these sales will be housed in a newly created fund which OCP will use to cover the cost of online auctions as well as maintenance and storage. This subtitle will give the District a more defined process for monitoring, maintaining and selling these goods and represents a major step forward with regard to surplus goods.

The last thing from this title I would like to note is with regard to the OAG/MOLC relationship. I want the Council to know that we are committed to continuing to work with the OAG to address any remaining issues. We want to strike the right balance between being able to do the job set out for the Mayor and living up to the public’s expectations related to the new elected AG. We will work judiciously to have the most appropriate framework, and we will continue to work with the Council to keep you included and informed as we move forward.  

Economic Development and Regulation

There are four important subtitles in this title that I want to discuss.  The first is the “Department of Small and Local Business Development Micro Loan Fund Amendment Act of 2015”. The DLSBD Micro Loan Fund allows DSLBD to administer financial assistance programs for eligible DC small businesses. Eligible recipients are currently defined as CBEs only. CBEs represent 1,150 companies, a mere 2.3 percent of the DC small business population. These amendments would expand loan eligibility to all DC small and local businesses headquartered in DC who are eligible to become a CBE. This small change expands the pool of eligible recipients by as many as 3,000 businesses and helps a key sector of our economy develop and expand, thereby increasing our tax base.

The second subtitle I want to mention is the “Retail Priority Area Amendment Act of 2015”. This subtitle expands the access to funds previously only available to the H Street community to all eligible Great Streets areas.  This change coincides with the Mayor’s general strategy during this budget process to find existing resources and more effectively use them.  For years the H Street fund has held large unspent balances which were not being fully utilized. This amendment will allow access to these funds by all Great Streets thus making needed investments throughout the District.

The next subtitle I would like to discuss is the “Creative and Open Space Modernization Act of 2015”. This act supports two purposes: (1) providing real property tax abatements to attract and retain Qualified High Technology Companies in the District, and (2) transform vacant class B offices into functional creative and open spaces.  The total abatement is capped at $3 million/year for 5 years, effectively sun setting in 2021. Individual entities are eligible for up to $1 million/year for 5 years. In order to qualify for the abatement, entities must meet Certified Business Enterprise and First Source requirements and provide public benefits to the District.  These benefits will be negotiated with DMPED and may include hiring and training targets, free or reduced priced software, or discounted services and community space availability. The Mayor has committed to growing job opportunities in the District and to supporting D.C. based businesses. This subtitle aligns with her strategy of supporting the entire tech ecosystem by supporting startups as well as medium and growing tech companies. Additionally, this subtitle serves as an investment to update and modernize office spaces that would otherwise remain vacant. 

The last subtitle in this title I wish to discuss is the “Youth Employment and Work Readiness Training Amendment Act of 2015”. This subtitle would authorize the Mayor’s proposed enhancements to the 2015 Mayor Marion S. Barry Summer Youth Employment Program. The legislation also establishes program requirements for the District’s youth employment and work readiness program that are consistent with standards established under the federal Workforce Innovation and Opportunity Act of 2014. The legislation would provide pay increases, 6 weeks of transportation subsidies, and an increase in the age from 21 to 24 (max 1,000 participants).   

Public Safety and Justice

The only item in this title I want to highlight is the “Body-Worn Camera Privacy Amendment Act of 2015”. We followed yesterday’s hearing closely and appreciate the passion that the public brings to bear on this issue. We know that when interactions between the police and the public are recorded public safety is enhanced, accountability is increased, and police services are improved. We want to work with the Council to strike the right balance between equipping our officers with innovative body camera technology and ensuring that individual privacy is protected. We want to do whatever we can to build trust and accountability. We know that we must take big steps to ensure that we are preventing here the disorder we have witnessed in Ferguson, NYC, and Baltimore. We do that by having an even more responsive and accountable police force and body cameras are a vital part of smart, strategic community policing efforts. We intend to draft rules and regulations, subject to Council approval, before implementing the body worn camera program.

Public Education

The Public Education title contains important subtitles like the "Funding for Public Schools and Public Charter Schools Amendment Act of 2015", which would establish the funding levels for the 2015/2016 school year.  While there were no change to the base amount or to any of the weights, it is important to note that the Mayor did invest $31.4 million into our public education system related to enrollment increases. In a year where we faced a nearly $200 million gap, this investment shows the Mayor’s commitment to education. Much work remains to be done, but if we stay the course we will have the best urban education system in the country in the very near future.

The other subtitle I would like to mention is the “At-Risk Weight Preservation Fund Establishment Act of 2015”. This subtitle represents a new initiative by the Mayor, Chancellor, Deputy Mayor, and CM Grosso designed to ensure that at-risk funding is preserved and can be expended as intended.  This subtitle would create a new At-risk Fund which would allow up to 50% of an individual schools at-risk allocation to be deposited and carried over from one fiscal year to the next.  This will help schools plan for the appropriate use of those funds so that no school feels the pressure to expend funds in any manner possible by the fiscal year’s close. With the non-lapsing nature of these funds, we can better ensure that every at-risk dollar is spent in a manner which directly benefits those students defined as at-risk. We certainly hope that every school is doing its best to get these much needed funds expended as quickly as possible, but in instances where that isn’t possible this preserves the option for alternative means of expenditures in the upcoming fiscal year.

Health and Human Services

The Health and Human Services title contains a number of provisions related to protecting the District’s most vulnerable residents, but there is one in particular I want to highlight which was amended as part of the errata letter.   Subtitle A, the “Temporary Assistance for Needy Families Amendment Act of 2015” contains a key investment of the Mayor’s budget – the extension of TANF benefits for families who had been on for more than 60 months. The Mayor didn’t come to this decision lightly or without concern. She, like many of you, wondered what would be different 18 months from now. We know that these families are receiving, on average, just $152 a month in cash assistance. And while it may not seem like a make-it-or-break-it amount of money to many people, the reality is that this amount could be what is helping that family be able to contribute and live with grandma, or their friend or neighbor.  We would rather make that $152 a month investment for another 12 months, than pay $4,583 a month for them to stay at DC General Family shelter. But that doesn’t mean that we won’t work hard over the next 18 months to help these families establish greater self-sufficiency. Our DHS Director is going to use the next 18 months to:

  1. Conduct a comprehensive review of all TANF families who are within 12 months of hitting the time limit to identify remaining barriers;
  2. Increase the existing supply and availability of work supports, employment and training opportunities;
  3. Conduct a study to better understand and provide supports tailored to the characteristics and needs of 60-month customers; and
  4. Develop hardship extension criteria that can be programmed into the new eligibility system for implementation at the start of FY 2017.

Finance and Revenue

The Finance and Revenue title contains several subtitles that are necessary to balance the District’s budget, but I would like to take this opportunity to talk broadly about the Mayor’s proposed tax increases, which appear as a part of this title. Two important initiatives are funded with revenue increases from the sales and parking taxes:  the WMATA subsidy at $31.8 million and initiatives to create affordable housing and end homelessness at $21 million. Given the tough choices that we made to prepare this budget these investments will help move our residents to the middle class. In addition, this budget raises taxes in a way that still leave our middle income residents better off. That is because we did not roll back important income tax relief for residents. In fact, the budget continues implementation of the overall reduction of $48.5 million in tax changes in FY 2016 adopted as part of the FY 2015 budget.

The sales tax will increase from 5.75% to 6.0%, which will generate $22.2 million annually to help fund investments to create affordable housing and end homelessness. These investments include funding $18.6 million for the DHS Strategic Plan and $2.4 million in rental assistance that will be coupled with investments into the Housing Production Trust Fund to help create affordable housing for very low-income residents. The parking tax increases from 18 to 22%, generating $9.9 million that will be used towards to the WMATA subsidy increase of $30.8 million.

The tax package enacted last year is still part of our budget. The “tax triggers”, as they are known, will kick into effect if revenue forecasts in the 2016 February revenue estimates exceed the amount included in the FY 2016 budget.  Items on the tax trigger list will be funded in the order in which they are listed and only if the full amount for the individual tax increase is available.

While nobody relishes the choice to raise taxes, when faced with the alternatives of raising metro fares or reducing services to our most vulnerable residents, we believe this was the most prudent course of action and we ask the Council to stand beside us to help effectuate these changes.

Special Purpose and Dedicated Revenue Fund Amendments and Transfers

The last BSA section I want to discuss is in Title X, the “Designated Fund Transfer Act of 2015”. This subtitle would sweep the available fund balances of certain designated funds throughout District agencies.  This subtitle is the result of a full scale review of every single designated fund which the District currently has. This included a review of over 150 funds. 

One of the first hearings I attended as CA was on the FY 2014 CAFR. At this hearing we heard from almost every Councilmember that we needed to conduct a review of citywide spending in all areas and determine why agencies were leaving funds on the table at the end of the fiscal year. This subtitle is one result of that review. Working with the OCFO we looked back at the last four years of data for each designated fund to determine which funds were consistently carrying balances and having trouble getting funding out the door. This review resulted in a list of funds (about 100) which showed consistent underspending.  My office then sent that list out to each deputy mayor, agency director, ACFO, and AFO with an affected fund asking for a justification for the lack of spending. In many instances agencies were able to provide a justification and we agreed on a joint strategy to better utilize those funds. In some instances there was no justification or one not suitable for removal from the BSA list.  For those funds which remained, we included them in a one-time funding sweep which helped close the budget gap to the tune of $67.2 million.

It is important to note that we do not make these decisions in a vacuum and that we are not eliminating these funds.  This action only affects fund balances (i.e. those unspent funds from prior fiscal years) that these agencies were accumulating.  As such these funds were not getting out the door to residents and programs so to classify any of these choices as cuts would not be accurate. We certainly agree that the work that many of these funds impact is critical and we are coordinating with the affected agencies to make sure balances no longer accumulate, but with a nearly $200 million gap it would not have been prudent for us to leave these unspent funds on the table.  The alternative would have been to cut actual services and programs that would have had a direct impact on residents.  While not ideal, we believe this was the best course of action.

TIF Savings Expenditures

The last thing I would like to briefly highlight is the Mayor’s proposed expenditure of the recently identified TIF savings related to the Wharf project. As you know we were informed by the OCFO that the $9.9 million set aside in the FY 2015 Supplemental was not necessary. As such $7.3 million is available in FY 2015 and $2.6 million is available in FY 2016. We are proposing to allocate those funds to the following items:

  FY15 FY16
Funds Available $7.261 $2.646
Community College of the District of Columbia   $2.346
Waste Transfer $6.000  
Film Incentive Fund $0.980  
Clean Team Living Wage $0.281  
Wilson   $0.300

Conclusion

In conclusion, Mayor Bowser’s proposed budget for FY 2016 is good news for the District of Columbia and all of its residents. It puts us on the path to ending homelessness, investing in our schools and communities. It provides the resources to keep our neighborhoods and streets safe and allocates resource for vital infrastructure improvements. It builds a pathway to the middle class and ensures our government remains transparent and accountable. This budget is a step forward for the District of Columbia and we stand proudly behind it. Thank you for your time and your commitment to the District of Columbia. I am happy to answer your questions at this time.