The Coming D.C. Financial Crisis
Updated: Oct 2, 2022
FISCAL Year 2023 for the District of Columbia started today, October l, 2022. The D.C. Council just passed a $20 billion budget in June--the largest budget in the city's history and several billion dollars larger than even two years ago.
During the 2020-21 pandemic, DC was treated like the other 50 states and was awarded $2.5 billion in federal funds to offset projected losses from tax revenue. Like most states, the projections were way off, and the city had all this additional one-time money. Like all governments, the council spent it, mostly on re-occurring programs in education and human services.
In addition, the council also raised taxes on individuals earning over $250,000--even though the city was awash in money and didn't need any additional revenue. They spent all that money as well. Our tax rates are again the highest in the region and among the highest in the nation.
At the same time, the council cut in half Mayor Muriel Bowser’s request for additional funding for the DC Metropolitan Police Department. This and other actions have left our police force with the fewest officers in several decades.
After unanimously passing the 2023 budget with these and other questionable financial enhancements, the council "celebrated" the authorized spending of all that money. But as they say on the Game of Thrones — "Winter is Coming".
The $2.5 billion in the one-time federal money is gone. Our downtown has not bounced back and, if anything, is still largely deserted. The federal workforce is mostly at home and the private sector is working maybe three days a week. As a result, the downtown office buildings are empty. Without workers, small businesses are struggling. In addition, tourism is off by millions of people.
All this has resulted in a reduction in our sales tax collections. But more importantly because of the empty office buildings, we are looking at a $1 billion reduction in our commercial property tax collections, the city's largest source of income.
If all this comes to pass, in 2024 the council could be looking at a budget with spending of $21 billion and revenues of $17 billion. This is a gap that cannot be closed.
I focus on the council because the council has the last bite at the apple. The mayor proposes the budget, but the council has the final say. (The mayor proposes and the council disposes).
The council will be faced with raising taxes, already the highest in the region, and making cuts. The city spends over 80% of its budget in four areas. Debt services which can't be cut. Human Services (the underserved), Education (the children), and Public Safety (the police) make up the rest. The police are already short-handed, and crime is at a 10 year high. And who wants to vote to cut education or human services?
The city faced just this situation in 1995 and the result was a Federal Control Board.
Unless immediate action is taken, it is likely that the city will face a financial crisis that cannot be solved, and with a Republican Congress, its GAME OVER.
Jack Evans served on the D.C. Council from 1991-2021 and served as chairperson of the Committe on Finance and Revenue from 2001-2020.
photo credits: DowntownDC.com, The DCLine