Opinion: The Coming D.C. Financial Crisis
By • October 3, 2022 0 1411
Editor’s note: From time to time The Georgetowner selects to run guest columns on issues of concern to our readers. We have decided to run this opinion piece by Jack Evans owing to his extended experience with and knowledge of the District government’s budgeting and finances.
Fiscal Year 2023 for the District of Columbia starts on October 1, 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, D.C. 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 reoccurring 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 Bowser’s request for additional funding for our police force. 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 “Game of Thrones,” “Winter is coming.”
The $2.5 billion is the one-time federal money and is gone. Downtown D.C. has not bounced back and, if anything, is still largely deserted. The federal workforce is mostly home, and the private sector is working in-person maybe three days a weeks. As a result, the downtown office buildings are empty.
Without workers, small businesses are struggling. In addition, tourism is off millions of people.
All this has resulted in a reduction in our sales tax collections. But, more important, 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 more than 80 percent 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, it’s … GAME OVER.
Jack Evans served on the District Council from 1991 to 2021 and served as chairperson of its Finance and Revenue Committee from 2001 to 2020.
