Is Fenty caving on meter fee increases?
Update, 12:50 p.m.: Under questioning by D.C. Council member Jack Evans (D-Ward 2), a Fenty ally, the mayor said his administration may have to consider reeling in parking meter rate increases due to "outcry."
"Probably, to be honest with you, we're going to have to look at going back or reducing," Fenty said.
The city has greatly increased its meter revenue by charging for evenings and on Saturdays. The meter rates have also gone up with plans in the fiscal 2011 budget to change 75-cent-per-hour meters to $1.
The hikes have drawn the ire of business owners, residents and out-of-towners.
Evans, known as a friend of business, said he "can't eat out anymore without being accosted by a restaurant owner (about the meters)."
Update, 12:15 p.m.: Gray's first question to the mayor: Where is he getting what he estimates as $161 million over four years to cover salary raises struck in a labor agreement between Schools Chancellor Michelle Rhee and the Washington Teachers Union?
"It's an enormous amount of money. I can't find it (in the budget)," Gray said.
Fenty and City Administrator Neil O. Albert said they'd get him the answer later.
"Can you do it now?" Gray asked.
Fenty explained that it would have been helpful if he had received the question in advance, and somewhat defensively said he doesn't know every dollar in the budget.
Gray said, "That's not my point, mayor."
Conclusion? Fenty promises a memo with an explanation.
Let the mayor's race commence.
Update, 11:55 a.m.: Fenty just read his nine-page opening statement on the fiscal 2011 proposed budget to the council. It was long on spending -- education, public safety, jobs, economic development and health and human services. But it was short on his planned cuts and fee hikes. Nary a mention.
But he had a warning for the council: "The District of Columbia cannot afford to return to a time when the city spent more than it had. At the same time, the District cannot and should not ignore the opportunity to create a more efficient and effective government whenever possible, and our proposal this year reflects that goal."
Original post: D.C. Council Chairman Vincent C. Gray (D) began budget hearing season with an opening speech about how Mayor Adrian M. Fenty (D) has a history of proposing "unsustainable budgets," leaving the council to clean up the mess. "In each case, the council rose to the occasion," he said.
Fenty will answer council questions about his proposed budget Monday.
If Gray's opening is any indication, it will be a long day.
This year's mayor-council hearing on the budget is expected to be more tension-filled than in the past because Gray is challenging Fenty for his seat in the September primary. With revenue decreasing, advocates for low-income programs are already protesting cuts to social service programs, and residents across the city are growing frustrated with hikes in fees, such as parking meter rates and fines for moving violations.
Those could be major issues on the campaign trail this summer.
Fenty smiled and nodded when council member Marion Barry (D) brought up what everyone was thinking: "We ought to do as much as we can to keep politics out of this budget ... Mr. Mayor, Mr. Chairman ... let's just make this pledge unequivocally."
Barry then talked about how job creation must be a part of the budget.
Here is the full text of Gray's statement on Fenty's budget proposal:
As everyone knows, the District of Columbia has not been immune from the country's worst economic crisis since the Great Depression. During the last major fiscal downturn, the District failed to take the actions needed to right-size its finances and a Financial Control Board was the result. I am alarmed reading this budget because this is not a fiscal plan that rises to meet the economic realities that we face.
The recent recession has required extremely difficult choices to determine which programs and services would be preserved in the face of declining revenue. My frustration emanates from my view that the majority of the tough decisions to keep the District Of Columbia financially solvent have been left to this council. In too many instances, we have received budgets driven by political considerations rather than prudent financial decision-making.
This was especially true in both the November 2008 and July 2009 gap-closing budgets, when the mayor presented the council with unsustainable budgets. Examples include labeling programs as one-time funding that, in fact, are recurring in nature, and the use of undesignated cuts to non-personal services to balance the financial plan in the out years.
However, in each case the council rose to the occasion. In November 2008, we made cuts to program enhancements in the fiscal year 2009 budget to create a $46 million operating cash reserve, which proved critical just a month later when revenue fell by $127.1 million. Then in July 2010, we preserved $120.4 million in fund balance by proposing a balanced approach of 2/3 spending cuts and 1/3 revenue increases, totaling an additional net of $80.1 million in cuts to local fund expenditures and $40.3 million in new revenue initiatives.
My other concern has been the executive's style of "get it done no matter the cost." This approach has cost the city dearly, because the price we pay for speed is that other important services suffer. This is speed at the expense of sustainability. The 2008 Summer Youth Employment Program was the most glaring example when the program went $20 million over budget, but then the very next year, the executive moved to overspend the budget by another $23 million to be paid out of reserve funds. The council tried to stop this overspending on an emergency basis, got a majority vote but not the 2/3 required to halt this action.
We see the same approach in the capital budget, where the rush to get things done quickly resulted in higher contractor fees. Just by raising questions at a hearing with the Office of Public Education Facilities Modernization (OPEFM), for example, the council was able to reduce the contractor fees involved by almost $1 million in a matter of minutes.
I have concerns in a number of other areas such as non-public tuition, special education transportation, Medicaid provider agency billing, and alliance eligibility determination. This is the third consecutive year where the executive is turning to the unsustainable use of reserve funds rather than presenting a budget that requires us to live within our means. This overspending has caused our cumulative fund balance to plummet, falling from $1.494 billion at the end of fiscal year 2007 to $920 million at the end of fiscal year 2009. While some use of fund balance is indeed appropriate during a recession, the precipitous drop of 38.4% in just two years is hugely problematic leaving us in a potentially perilous situation.
Some of these same problems are repeated in the budgets before us today. I agreed with the mayor and the CFO to bring forward a debt restructuring plan.
The positives to this were that it refinanced some of our riskier variable rate debt when interest rates are low and thus freed up substantial debt service savings. However, the negatives were that we were pushing our current debt obligations into future years. When we met with the bond rating agencies they explained to us that while this restructuring alone would not lower our bond ratings, it would make issues such as maintaining our fund balance crucial. The executive even committed to the bond rating agencies that our fund balance would not drop significantly if we did the debt restructuring. Instead, and unfortunately, the debt service savings are not being used to right-size our budget and preserve our fund balance.
The mayor has proposed a budget that drops the District's fund balance to approximately $822 million at the end of fiscal year 2010, to $656 million at the end of fiscal year 2011, and to $606 million at the end of fiscal year 2012, of which $343 million will be our congressionally mandated rainy day funds and the remaining $263 million will be almost entirely devoted to reserves required to cover debt service.
I'm also concerned that our fund balance may be overstated by $54.6 million. Under this proposal, our fund balance will end fiscal year 2011 at the lowest level since FY 2001, which was the second-to-last year of the control board period, and the executive will have spent the cumulative fund balance down by 60% in a period of just 4 years. While surpluses at the end of the year historically replenished the fund balance, the executive's use of special purpose revenue funds for budget balancing means any replenishment of the fund balance through operating surpluses will be minimal or non-existent.
The use of reserve funds in this budget proposal leaves the District with no room for error. It greatly restricts our cash flow; it means we will have to rely on significantly more short-term borrowing; and potentially imperils our bond ratings which the city has worked so hard to improve.
We also see the repeat of unsustainable approaches in this budget that threaten the fiscal future of this city. Many positions are being shifted from the operating to the capital budget, meaning the city is doing long-term borrowing to pay for salaries of government workers.
Additionally, there is $83 million in programs that the executive has labeled as one-time funds that are clearly recurring programs. Therefore, fund balance is being used to pay for services without a solution as to how they will be sustained in future years.
There also are examples of actions proposed in the FY 11 budget, which, at best, are puzzling. The office of employee appeals and the public employee relations board are proposed to merge into the office of administrative hearings. The executive seeks to take three agencies with three separate functions and three sets of case backlogs, jam them into one agency and dramatically cut funding. The $4.9 million cut to the Department of Corrections healthcare contract also leaves me extremely skeptical. The capital budget has been crammed with new projects that push us right up to the debt cap again, after we have just done a debt restructuring, and makes it likely that we will exceed the debt cap in the very first year outside the capital plan. The increases to D.C. public schools and the Office of the Chief Technology Officer need to be explained more, because these increases are being paid for by spending down our reserve funds.
It also will be important to clarify whether the school teacher contract is fully supported by this budget proposal.
Left unchanged, this budget proposal puts the District of Columbia's finances in a dangerous position. The job of leadership is to provide services in a fiscally responsible way. I am hard pressed to conclude this budget achieves that.
-- Nikita Stewart
Washington Post Editors
April 12, 2010; 12:50 PM ET
Categories: 2010 District Election , Budget , D.C. Council , Marion Barry , Mayor Fenty , Nikita Stewart , Vincent C. Gray | Tags: Adrian Fenty, Marion Barry, Vincent Gray, d.c. budget hearing, gray criticizes Fenty at budget hearing
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