District of Columbia Budget Briefing & Input Session Overview
Briefing on the District of Columbia's budget covering FY 2011 achievements, fiscal challenges, surplus history, bond ratings, and the composition of the general fund balance. Highlights include a $400 million surplus in FY 2011, successful revenue increases, and prudent financial management strategies.
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DISTRICT OF COLUMBIA BUDGET BRIEFING & INPUT SESSION Government of the District of Columbia Vincent C. Gray, Mayor
WHAT WE WILL COVER FY 2011 CLOSING THE YEAR STRONG FY 2012 THE CURRENT SITUATION FY 2013 NEW CHALLENGES 2
DC SURPLUS AND BOND RATING HISTORY $2,000 Budgetary Basis Deficit $1.1 Billion Budgetary Basis Surplus $1,500 Cumulative Fund Balance Revitalization Act $1,000 $500 $- 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Control Period $(500) -$518 million $(1,000) General Obligation Bond Ratings BB BBB BBB BBB+ BBB+ Ba1 Ba1 Baa3 Baa3 Baa1 Baa1 BB+ BB+ BBB S&P: A- A- Baa A- A- Baa BBB+ BBB- Ba BB B Ba BB B A- A A2 A- A+ A2 A A+ A2 A A+ A1 A+ A+ A1 A+ A+ Aa2 AA- A+ Aa2 AA- A+ Aa2 AA- Moody's: Baa Fitch: Ba2 BB BBB BBB+ A- Income Tax Secured Revenue Bonds: S&P: AAA Moody's: Aa1 Fitch: AA+ 4
FY 2011 SUCCESSES CAFR shows a $400 million increase over projected ending balance: o Unanticipated increases in some revenue - $186.7 million Estate Taxes - $34.0 million increase Capital Gains Taxes - $40.0 million increase Income Withholding Taxes - $57.1 million increase o Agency Spending Controls - $72.1 million in Local Funds o Special Purpose Revenue Funds - $141.8 million (Dedicated fees and taxes including the Anacostia River Clean-up Fund, the Sustainable Energy Trust Fund, Housing Production Trust Fund) 5
FY 2011 SUCCESSES $239.7 million surplus: o Surplus cannot be spent in future Fiscal Years By law, surplus funds must be placed in o$194.2 million - Dedicated Reserve Accounts Mandated by local law (Cash Flow Reserve and Fiscal Stabilization Reserve) o$45.5 million - Special Purpose Accounts Anacostia River Clean-up Fund, the Sustainable Energy Trust Fund, Housing Production Trust Fund Funds are only one-time money and can t be used for recurring tax cuts or new spending 6
COMPOSITION OF GENERAL FUND BALANCE FY 2007 FY 2011 1,600.0 $1,494 81.2 1,400.0 $1,245 1,200.0 86.7 $1,105 591.6 135.6 1,000.0 409.1 $920 $890 91.2 UNRESERVED AND UNDESIGNATED/UNASSIGNED POLICY DECISIONS RESERVED/DESIGNATED RESERVED BY EXTERNAL FACTORS LOCALLY MANDATED RESERVES EMERGENCY/CONTINGENCY RESERVES RESERVE FOR DEBT SERVICE $ 000 245.9 245.9 91.1 800.0 194.2 185.0 172.7 209.2 600.0 158.4 338.6 309.4 337.9 400.0 330.2 284.3 200.0 345.3 326.8 288.3 231.9 209.5 - FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Fiscal year 7
TOTAL WORKING CAPITAL Unassigned Fund Balance Plus Congressionally Mandated Emergency/Contingency Reserves and Locally Mandated Reserves as a Percent of Next Year s Budgetary Expenditures And Number of Days of Funds Available in Reserve ($ in millions) (# days spending in reserves) 13.00% 12.00% Government Finance Officers Association guidelines: Governments should have two months cash on hand 11.00% 9.6% 8-1/3% = one month s expenditure s 10.00% 35 days 9.0% 33 days 8.6% 8.1% 31 days 9.00% 29 days 8.00% 6.7% 25 days 8.3% 7.00% 30 days 7.5% 5.0% 18 days 28 days 6.00% 6.5% 5.8% 21 days 5.00% 24 days 4.00% $364 $338 $339 $429 $432 $391 $416 $284 $338 $534 3.00% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 8
BUILDING A BETTER BUDGET FOR FY 2012 Commitment to a structurally balanced budget o Spend only the revenue that comes in o Do not raid Fund Balance to balance the budget o Control overspending in agencies with strong management Closed $322.1 million funding gap o Cut government spending ($187.0 million) o Increases to high earners income tax, parking garage taxes and combined reporting ($135.1 million) Met Congressional mandate to submit a balanced 5-year financial plan o Budget must be balanced for current year and 4 years into the future 10
SPENDING PRESSURES FOR FY 2012 Budget Pressure and Policy Initiatives History Local Funds, Including Dedicated Taxes Fiscal Years 2001 - 2012 ($ in millions) As of January 23, 2012 Average, FY 2001 - FY 2011 FY 2012 (As of 01/23/2012) FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Description Spending Pressures & Policy Initiatives (1) Revenue Shortfalls Total, Pressures $ 383.0 $ 306.0 96.0 $ 402.0 $ 175.0 376.0 $ 551.0 $ 206.1 $ 167.6 $ 177.5 $ 184.5 $ 217.6 $ 222.0 - $ 217.6 $ 209.7 80.2 $289.9 $ 147.4 118.5 $265.9 $ 44.7 $ 203.4 67.2 $ 291.2 - - - - - 136.0 $358.0 - $ 383.0 $ 206.1 $ 167.6 $ 177.5 $ 184.5 $ 44.7 Approved Budget, Local Including Dedicated Taxes (2) 3,503.0 3,705.0 3,715.0 3,833.0 4,165.5 4,949.5 5,186.2 5,767.8 5,619.9 5,346.5 5,624.5 6,015.3 4,674.2 Spending Pressures & Policy Initiatives as % of total budget pressures 10.9% 8.3% 4.7% 5.4% 4.0% 3.6% 3.6% 3.8% 4.0% 3.9% 2.6% 0.7% 4.4% Revenue Shortfalls as % of total budget pressures 0.0% 2.6% 10.1% 0.0% 0.0% 0.0% 0.0% 0.0% 2.4% 1.5% 2.1% 0.0% 1.4% Pressures and Initiatives as % of Appropriations 10.9% 10.9% 14.8% 5.4% 4.0% 3.6% 3.6% 3.8% 6.4% 5.4% 4.7% 0.7% 6.2% Notes: (1). FY 2001 spending pressures include $100 million in overspending by the DC Public Schools. (2). Congressionally Approved Budgets, Local plus Dedicated Taxes appropriated funds, GAAP General Fund 100. Includes transfers out. 11
FY 2013 CHALLENGES OCFO CURRENTLY PROJECTS: Current Services Funding Level for FY 2013 is $207.9 million over FY 2012 budget $50.5 million Medicaid $34.6 million Debt Service $33.5 million Fixed Cost $12.0 million MPD (COPS grant and longevity pay) FY 2013 revenue estimate shows revenue growing by just $57.3 million over FY 2012, about 1% increase September and December 2011 estimate was lower than previous quarterly estimates due to: Growing concern for the impact of likely federal budget cuts due to Sequestration Economic uncertainty caused by uneven US recovery and European insecurity Projected FY 2013 funding gap is $150.6 million 13
MAYOR GRAYS BUDGET PHILOSOPHY The District must produce and maintain a structurally balanced budget District Will Maintain and Rebuild Its Fund Balance Will not use the District s fund balance to provide recurring programs and services Fiscally Responsible on Spending Right-Size the Government and Seek Efficiencies Make cuts where possible to right-size the government Make every attempt to manage growth of budget by finding efficiencies within agencies before resorting to new taxes and/or fees 14
Q & A 15
