The District has had years of economic growth that has produced budgets that saw surpluses, but with the coronavirus pandemic looming, city leaders say deep cuts in the upcoming budget are likely.
At an April 10 news conference, Mayor Muriel Bowser addressed concerns of some residents and advocacy groups that programs benefitting low-income and working-class residents will be cut more severely than others, stressing that “we have to make cuts.”
“We cannot operate in a deficit,” she said. “We can’t do everything. There are some things we did last year we will not be able to do this year.”
When asked about the possibility of raising taxes to balance the 2020-2021 budget, the mayor rejected the idea.
“This is not the time to ask residents to do that,” Bowser said.
Days earlier, Bowser, Chief Financial Officer Jeffrey S. DeWitt and D.C. Council Chairman Phil Mendelson (D) held another news conference to lay out the city’s dire economic circumstances. Bowser said that the onset of the coronavirus pandemic and the subsequent lack of economic activity will force District leaders to cut hundreds of millions of dollars from the budget.
“The D.C. fiscal situation is dire,” Bowser said at the April 6 conference. “A $607 million cut is due. We will work to achieve every efficiency possible. Therefore, I will order a freeze on hiring, salary increases and travel for city employees unless it is essential.”
DeWitt said the District’s projected losses stem from diminishing revenues from sales, business and income taxes receipts. He said the fiscal 2020-2021 budget, which Bowser will make public on May 6, will have approximately $600 million in reductions because of the severe decline in revenue coming.
DeWitt noted that the $607 million figure quoted by Bowser applies to the budget that the District operates under presently.
“I don’t see the city’s financial situation getting better,” DeWitt said. “On April 24, I will have a better sense of the shortfall the city faces and that figure will be used to make up the 2020-2021 budget.”
Before the coronavirus came to the city in March, the District benefitted from an economic boom with a thriving nightlife, businesses coming and being established in the city and a growing population, DeWitt said. The city financial picture looked good, DeWitt said, with months of tax receipts fueling economic growth.
DeWitt said that 60 hotels have closed in the District since March, including the Marriott Marquis Hotel linked to the Walter E. Washington Convention Center in Northwest. He said many restaurants have been forced to close and those that are open can only serve their customers by delivery and takeout, “which hasn’t proven to be profitable at this point.”
DeWitt said many organizations that scheduled conventions in the District this year have canceled due to the coronavirus spreading throughout the world. As a result, he said April tax collections and revenues are expected to be very low and may be that way for some time.
“When things get back to normal, it will take time for restaurants and hotels to ramp back up,” DeWitt said. He estimated that it might be the middle of 2021 for the city to be back near the economic activity of February.
DeWitt even speculated that the estimated $600 million shortfall figure for the 2020-2021 budget could ultimately balloon as high as $1 billion.
Neverthless, he said, the District has a much better financial situation than most jurisdictions.
“We are in the best possible position of any large city in the country,” he said.
DeWitt noted that the District has a healthy rainy day fund to tap into for emergencies and the city’s bond rating of AA-plus, according to Standard & Poor’s and Fitch, makes borrowing money from Wall Street much easier and at lower rates if city leaders need to go that route.
He said the District benefits from the presence of the federal government and its constant source of jobs that bolsters the city’s economy, as well as the possibility that the District will get $500 million from a fourth stimulus bill passed by the U.S. Congress that it didn’t get in the third bill because of the city being labeled as a territory.
Once the mayor presents the budget proposal, it jump-starts a process in which the council makes changes and ultimately approves it before it goes before Congress for review. Mendelson, as the leader of the District’s legislative body, manages the process.
The council chair said he doesn’t have a sense yet of what may be cut in the 2020-2021 budget.
“We need to get a better number to work with,” Mendelson said, adding that he will wait for the April 24 figure before commenting further on the budget.
But the chairman made it clear that cuts will take place.
“One thing for sure is that the budget will be much leaner,” he said. “Adding additional programs, that will be a hurdle. We should be thinking of priorities.”