Thursday, December 17, 2009

Revenue and the FY 2011 budget

For those who follow such mundane topics as revenue, the latest revenue estimates for FYs FY 2010 - 2014 were released yesterday by DC's CFO Natwar Gandhi.   As expected, the news was bad, with FY 2010 revenue down $17 million from the September estimate; worse, FY 2011 revenue is estimated to be $104 million less than the September estimate.

Both individual and corporate income taxes played a role in the revenue reduction.   Particularly important in DC, according to Gandhi's letter, is the real estate market.   The FY 2011 projection for real property tax revenue was reduced from September to account for the “deterioration in the D.C. real property market over the past year as well as the credit squeeze spawned by the financial crisis. . .”   Further, Gandhi expects real property to be a drag on overall revenue even as other revenues increase as we leave the recession behind us.

The revenue estimates are much more than an accounting exercise.   They are the foundation of the budget.   Sometimes maligned as bean counters (and worse), Office of the Chief Financial Officer analysts are charged with ensuring the budget is balanced.   Thus the budget instructions for the development of FY 2011 agency budget requests:

The revenue outlook for FY 2011 presents a challenge for the budget development process.   The District is expected to experience an economic recovery in FY 2011, but the effects of the recession will continue to impact the District’s revenue.   The revenue estimates for FY 2011 project minor growth, yet uncertainty is still great, and revised estimates this year may result in a net decline in revenue projections.   At the same time, one-time funding sources, including federal stimulus funds, which helped to balance the FY 2010 budget, will not be available to the same extent in FY 2011.   Agencies have already reduced Local funds budgets significantly from the start of FY 2009 to the proposed FY 2010 budget.   To meet the challenge of improving service delivery, while reducing cost, agencies will need to dig deeper to reduce contract costs, eliminate unnecessary positions, and evaluate programs.
The FY 2011 budget process will be focused on requests that support the agency’s core services and programs and identify cost savings to reach the target set by the City Administrator.   New spending must be limited to technical cost adjustments, such as an already negotiated contract escalator, and must be offset by a proposed cost saving.   Agencies will be invited to discuss new initiatives during the Budget Review Team meetings, but, due to the recent revenue declines and the potential for additional revenue drops this year, almost all new initiatives will have to be offset by other reductions.

Nothing about the budget instructions suggests that the budget proposed by Mayor Fenty in March 2010 will be draconian, that initiatives to support the most economically disadvantaged will not be funded.   Instead, the instructions explain how the current and future economic environments on the revenue side govern the process.

How the budget process and budget document play out is anyone's guess.   Agencies have submitted their requests to OCA.   Requests will be reviewed, conversations will be had between OCA and the agencies, policy priorities will be integrated, and on and on.   We should see the budget in mid-March 2010.

Amid all the unknowns, what I can tell you is that no one in the Office of the City Administrator is taking a cavalier approach to the FY 2011 budget.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.