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D.C. Residents Uneasy About Likely Budget Reductions

COVID-19 Forces City Leaders to Ponder Cuts, Tax Hikes

District residents are expressing concerns over how the D.C. Council and Mayor Muriel Bowser will deal with a budget deficit of hundreds of millions of dollars as a result of the coronavirus pandemic and whether deep cuts in spending for social and human services as well as tax hikes will be needed to balance the city’s finances.

“I really hope as our city leaders look at the budget they will try to make sure people have housing, food and jobs,” said Kelvin McQueen, who lives near Gallaudet University in Ward 5. “I think if keeping people out of poverty means raising taxes on the rich, then so be it. People are hurting out here. Nothing should be cut.”

On Sept. 30, Jeffrey S. DeWitt, the District’s chief financial officer, wrote in a letter to Bowser and Council Chairman Phil Mendelson about his financial forecast for the city. DeWitt said the District ended fiscal year 2020 with $222 million higher than his April estimate. However, even though the District closed the fiscal year with more revenue than estimated, the city will operate from a $334.4 million deficit compared to fiscal year 2019 and the fiscal year 2021 estimated deficit has been lowered to $212 million.

DeWitt blames the coronavirus pandemic, which has been in the District since mid-March and has forced the city to shut down schools ahead of schedule, to trigger the closing of businesses, including retail stores, hotels and restaurants and to strictly curtailed travel and social gatherings in D.C.

“This is a COVID recession,” DeWitt said at a news conference on Sept. 30. “We ended fiscal year 2020 not as bad as we expected. We are fortunate that 2019 was such a good year economically for the city and that has helped offset some of the financial damage. But we do have to balance the budget as required by law. Things may get better in 2021 if a vaccine emerges and people will feel comfortable coming back into the city to work.”

DeWitt noted 75 percent of the District’s economy functions well but ailing hospitality and tourism industries due to the pandemic fuels the recession. He said three factors — the District’s small business loan program, the one-time federal $1,200 relief checks to citizens and the expanded unemployment compensation of $600 per week to former workers in the public and private sectors — has kept the city from being in a worse financial situation.

Mendelson, at the news conference, said while the budget situation looks troubling, he said “the city is in a better position to weather what is happening.”

“We are doing OK compared to other jurisdictions,” the chairman said. “Other jurisdictions’ situations are more dire. In the next few weeks, we will work with the mayor for a supplemental budget that will be balanced.”

Bowser said her staff will work with members of Congress to make sure the District gets equitable funding from COVID relief bills at the level of a state, not as a territory, as she noted occurred in the March CARES Act legislation. Neither Bowser nor Mendelson would comment at the news conference on raising taxes to balance the budget.

Council member Kenyan McDuffie (D-Ward 5) said DeWitt’s “updates revenue projections indicate that we remain in a recession and the path to recovery will be much longer than anticipated.”

“COVID-19 has had a devastating economic impact,” the council member said. “With unemployment insurance claims in the District still rising it is critical that we prioritize replenishing our depleted unemployment insurance fund. As we look to maintain the District’s financial strength, we must balance increasing revenues to care for our most vulnerable and austerity measures to make our budget and operations effective and efficient.”

Council member Anita Bonds (D-At Large) agreed with Mendelson the District’s financial status is much better than other jurisdictions but said the unmet needs of residents must be resolved by the Council.

Former Council member Vincent Orange, a candidate for the independent at-large seat in the Nov. 3 general election, said DeWitt’s estimates of the District’s financial health may be slightly off.

“His assumptions are based on things that might not come true,” Orange said. “He is banking on non-residents generating sales taxes in the city. I think it is questionable whether people will come back to work in the city once a vaccine is found. Things could actually be worse than they seem.”

Orange said closing the fiscal year 2020 deficit could be done “in a reasonable manner” by reducing agency budgets and delaying the implementation and operation of programs. He said what could really hurt the District would be a second wave of the coronavirus, saying businesses shutting down again would be devastating.

In the meantime, he said, District lawmakers and the mayor should focus on restoring both the rainy-day fund designed to help the city in financial emergencies and the unemployment insurance program.

“If we don’t replenish the rainy-day fund and meet our other obligations under law, that will bring back the control board,” Orange said.

Orange rejected raising taxes to balance the budget and said if Congress allocates money to the District at the level of a state “it would make the city’s situation more manageable.” However, he said the elimination of one District program could wipe out the deficit.

“All we have to do is to erase the Universal Paid Leave program,” Orange said. “That program benefits non-residents primarily and we should take care of D.C. residents first.”

Cathy Young, a Ward 5 resident, said she agrees with Orange that District residents come first. She said Bowser and the council should have working-class people in mind when they formulate the supplemental budget.

“People need to eat,” she said. “People need money to pay rent and to pay their bills. If you don’t have a job, how can you survive? The mayor and the city council should think about that.”

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