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D.C. in a Recession, City’s Financial Officer Says

The District has entered into a recession with a $721.8 million lack of revenue for the remaining fiscal year and a $773.6 million projected shortfall for the fiscal 2021 budget due to the onset of the coronavirus pandemic, said the city’s chief financial officer.

“This is a recession, no matter how you look at it,” Chief Financial Officer Jeffrey S. DeWitt said at an April 24 news conference attended by Mayor Muriel Bowser, D.C. Council Chairman Phil Mendelson (D), city Administrator Rashad Young and 11 members of the Council virtually.

Dewitt said $721.8 million must be cut out of the present operating budget that will end on Sept. 30. He also said that when the mayor presents her fiscal 2021 budget to the council on May 12, $773.6 million must be cut in order for it to be balanced, as required by District law.

DeWitt based his data on statistics compiled by his office since the most recent economic forecast in February. Since then, wage growth has declined from 4% to -5% and job growth has gone down from 1.1% to -5.1%, DeWitt said.

In February, the District’s gross domestic product projection stood at 2%, but dipped to -3.8%, he said, citing his latest figures.

DeWitt said it will take two years for the District to get back to pre-coronavirus economic growth levels and out of the recession. He said the recovery could be delayed by a second wave of infection, layoffs extending into professional sectors, or serious financial problems with the stock market, financial institutions and bankruptcies.

DeWitt laid out his recommendation for a recovery timetable based on his office’s projections.

“Some businesses should be allowed to reopen with social distancing and other restrictions in the summer,” he said. “The recovery should begin in the fall and a new ‘normal’ may take place by the spring/summer of 2021.”

DeWitt said despite the dire news, the District has many advantages that other cities and states don’t have such as a strong rainy day fund, a federal presence that serves as a consistent source of jobs and a triple-A bond rating that allows the city to borrow money from Wall Street firms at reasonable rates.

Bowser said based on DeWitt’s projections, serious decisions will have to be made regarding cuts in the present budget and the fiscal 2021 offering. She said her agency directors will have to look for ways to streamline operations and that “everything is on the table.

“Everybody has to give something,” she said.

Mendelson agreed with Bowser, but expressed relief that the District wasn’t hit as hard financially as other cities.

Council member Kenyan McDuffie (D-Ward 5) concurred that the city is in a recession.

“While that is certainly not welcome news, we all know that this pandemic had a devastating impact on our economy,” McDuffie said. “I believe the city should be able to navigate this crisis in both the long and short term with responsible policies and spending. However, there will be difficult decisions in the years and budgets ahead.”

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Revised D.C. Council 2020-2021 Budget Schedule

Due to the presence of COVID-19 in the District, the annual budget schedule has been revised:

May 12: Mayor Muriel Bowser sends her fiscal 2021 budget to the D.C. Council.

May 13-mid-June: The D.C. Council reviews the budget by holding public hearings. Council committees will hold hearings on the part of the budget that pertains to its subject matter. The public hearings are likely to be conducted virtually unless the mayor lifts the state of emergency. Council members will engage the public and the mayor’s executive team on the budget before changes are made.

Late June: The council holds its first vote on the budget.

July 7: The second and final vote on the budget.

Mid-July: The mayor signs the budget and transmits it to the U.S. Congress for review.

Oct. 1: The budget becomes operational.

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